College freshmen get first taste of financial freedom

Academics. Social life. Roommate drama. Food. (Lots of food).

Amid all that's crammed inside the cranium of a college freshman, there's one priority that's often overlooked: Money.

As in how to save it, spend it, budget it.

Many students - and their parents - are getting a first taste of financial independence.

Dealing with finances - particularly for freshmen away from home for the first time - is a big deal. For many students - living on their own, managing their money without parental oversight, distracted by school and social activities - it's easy to pile on debt.

Yuba City, Calif. resident Tracy Titus, whose daughter Leah starts her freshman year at UCLA on Thursday, figures college will cost their family about $25,000 a year. Leah will pay for part of that, mainly her personal expenses.

"She's got some scholarships, (graduation) gifts and her summer savings that have to last her all school year," said Titus. "Since she's committed to helping pay for school, we're really hoping she'll be wise with her spending choices."

One of the biggest potential pitfalls, say financial experts, is plastic, whether it's a debit or credit card.

About 75 percent of college undergraduates had a credit card with an average balance of $2,169, according to a 2005 study by student lender Nellie Mae. A more recent study commissioned by TrueCredit.com found that nearly one in four students leaves college with more than $5,000 in credit card debt.

At many U.S. campuses, students can't walk across the quad without getting hit up by credit card companies dangling free T-shirts, Frisbees and other goodies just for signing up.

"Young people are still very much targeted," said Elena Larson, CSU Sacramento's assistant director of university collections. "It's kind of like cigarette companies: Get 'em hooked while they're young."

Dan Kadlec, a financial writer for Time and Money magazines, admits he's tossed in the trash dozens of credit-card solicitations mailed to his daughter, who recently started her freshman year at an East Coast university.

Speaking from his New York home, Kadlec said that given the lack of financial education, "the vast majority of high school and college students are unequipped to handle money."

Before they ever grab a diploma, they're already bogged down by high amounts of debt, which can tarnish a fragile young credit score. At CSUS, for instance, the average student loan debt for a graduating senior is $17,000.

To avoid flunking out of Finances 101, here are some pointers:

- Keep a budget: It may sound old-fashioned, but keeping track of how much comes in and what goes out is essential.

"It's a life skill," said CSUS' Larson, whose department launched "Your Money Matters," financial sessions that are presented to students in dorms, classrooms, clubs and at freshman orientation. (It's at www.csus.edu/sfsc-ymm).

Plenty of Web sites offer student budget calculators, typically for an eight-month school year from September through April.

Tracking your spending can yield surprises. Often it's the little things - eating out, fast-food meals, lapping up lattes - that creep up.

"You can still have fun, just find ways to do it less expensively," said Katy Maloney, interim financial aid director at University of California Davis.

- Take a class. In his recent "Letter to Lexie" column (at www.money.cnn.com), writer Kadlec urges his college freshman daughter to take at least one economics class "to open your eyes to how money works in the world" and acquire "practical skills you'll use the rest of your life."

Mind the plastic. No one is saying credit cards are evil. Paid off monthly, they're one of the best routes to establishing a solid credit history, which can pay for itself after graduation when students start shopping for car loans, mortgages and other big-ticket expenses.

UC Davis' Maloney said it's about getting the right mindset. "If you just look at a credit card for emergencies, it's good to have one. But when you start using it with a buy-now mentality, it's easy to get out of control. It's really simple: don't spend what you don't have."

Regardless of whether it's a credit or debit card, don't jump at the first offer and always read the fine print. "Be sure to read the terms and conditions. Some of the fees can eat you alive," said Bill Hardekopf, CEO of LowCards.com, a national credit card rating company in Birmingham, Ala.

When deciding debit vs. credit, it's helpful to know your kid. "If yours is responsible and will pay off the monthly balance, a credit card is fine," said Hardekopf, the father of three college-age students. "If not, a debit card can be better so at least there's a cap on what they can spend."

Titus' daughter has a debit card tied to a checking account, which she started using while in high school.

"We want her to get the hang of how money comes and goes (with a debit card)," said Titus. "Then eventually get her a credit card so she can start (establishing) a credit history."

Similarly, Kadlec said his daughter will eventually get a credit card, mainly to establish a clean credit rating. How to do it: A credit card that's paid off every month and never carries a balance greater than 30 percent of the credit limit.

Like most students, he said, "I'm sure she'll make mistakes and get hit with a $300 bill occasionally, but it's a start to building her credit history."

And that's what college is about: getting started, academically, socially and financially.

E-mail Claudia Buck at cbuck(at)sacbee.com

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)