What Happens When Washington Becoms Hyper-Intrusive?

by Pejman Yousefzadeh on December 29, 2009

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Well, among other things, college costs become less affordable for students and their parents:

When Daniel Ottalini entered the University of Maryland in 2004, his family had an array of choices to cover the cost — cheap student loans, a second mortgage at low rates, credit cards with high limits and their own soaring investments.

By the time his younger brother, Russell, started at the University of Pittsburgh this fall, the financial crisis had left the family with fewer options. Russell has had to juggle several jobs in school, and the money he could borrow came with a much higher interest rate that could climb even further over time.

[. . .]

Lenders have raised rates and tightened standards, dramatically limiting the availability of home-equity loans and private student loans. College savings accounts, known as 529 plans, had acute losses in the downturn. And a new law, set to take effect Feb. 22, will bar students younger than 21 from getting credit cards on their own.

[. . .]

And no longer can students count on the credit cards once available so freely, often by salespeople who lined campus walkways, offering free T-shirts and coffee mugs with their plastic. Many students used the cards to pay for books, meals and more.

Lawmakers passed a bill in May that dramatically curtails the issuance of credit cards to anyone younger than 21. Most consumer groups support the measure, saying credit card lenders have been taking advantage of naive youths, charging them hidden fees and exorbitant rates. Currently, about 84 percent of college students have credit cards, carrying balances of more than $3,000 on average, according to a study by Sallie Mae.

But some students said the law will cut off a critical source of credit for everyday expenses.

After Shauna Stuart, a senior at the University of Maryland, was denied student housing, she had to drive to campus and counted on her credit card to pay for gas and other costs of maintaining her car. She also used the card to buy food and cover unexpected expenses. One semester, when money was especially tight, Stuart bought her books with the card.

“It would be really difficult to not have it,” she said.

Obviously, the financial crisis did not help matters. But why compound the pressures that students and their families face by preventing students from having credit cards until they turn 21? It is ever-so-charming that lawmakers and consumer groups want to make sure that students are not taken advantage of, but all they have done is work to make students and their families poorer.

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