Students Taking On More Debt to Pay for Tuition; Credit Cards Tapped Out

I.I.I. Offers Financial Tips to Help College Graduates Manage Debt and Build Good Credit

INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org
Washington, D.C.: 202-833-1580

NEW YORK, June 13, 2007 - Today's college graduate is taking on increasing amounts of student loan and credit card debt, says the Insurance Information Institute (I.I.I.).

Of the 1.5 million students attaining college degrees this spring, an overwhelming majority will have at least one credit card in their wallet and 32 percent of students will have four or more credit cards, based on a 2005 study done by student lender Nellie Mae.

According to the U.S. Department of Education, nearly 25 percent of college students may be relying on credit card debt to help finance their tuition. On average, by the time students complete their bachelor's degree, they will be $19,300 in debt. Twenty-three percent of students from private nonprofit colleges and 14 percent from public four-year colleges will graduate with $30,000 or more in debt.

"Learning how to manage student loans, credit cards and other debt is more important than ever before fro college students," said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. "Establishing good financial skills early on and working to build a good credit standing will affect their lives in a surprising number of ways both now and in the future."

Linda Golodner, president of the National Consumers League, pointed out that young people are frequently unaware that their bill paying history will affect their credit history. "Many graduates don't think they need to worry about their credit score until they need a mortgage to buy a house," cautioned Golodner. "It can come as a shock when they find out that employers routinely access credit scores as part of the application process."

Good credit can help savvy graduates save money in a number of ways:

• Applying for a Job
  Potential employers routinely check a person's credit history as part of the hiring process. With many applicants vying for the best positions, a solid credit history may provide a competitive advantage in the job market.
• Renting an Apartment
  Landlords will generally rent to the person or couple with the best credit history. In many urban areas, available housing is at a premium. Those with a good credit history will find an apartment to rent and may avoid a larger security deposit and/or the need to have the lease co-signed by a parent or employer.
• Signing up for Utilities
  Local phone, cable, electric and gas companies will waive cash deposits for those with a solid, established credit history.
• Securing Loans
  With a better credit history, it is easier to get a car loan or mortgage, and often at a more competitive rate.
• Purchasing Auto or Homeowners Insurance
  Increasingly, insurers are using credit-based insurance scores to decide who gets auto and homeowners coverage and how much they pay. All else being equal, a person with a good insurance score will pay less for insurance than someone with a poor score.

"An insurance score is different from a credit score," explained Salvatore. "An insurance company uses credit information, together with your driving record and insurance history, to predict whether you are more or less likely to file an auto or homeowners claim. This allows insurers to provide insurance to more people and to offer it at a lower cost. This can be important to college grads since they are part of a group that generally pays more for auto insurance."

The I.I.I. suggests that graduates work to build a positive credit history in the following ways:

• Use credit responsibly
  It is a good idea to establish a good credit record while in college. The longer and more stable your credit history, the higher your credit score. But don't keep more credit cards than you need and avoid spending up to your credit limit. Use cash instead of plastic whenever possible, and try to pay off your credit card balance in full every month.
• Set up a budget and stick to it
  As a graduate, you should sit down and determine exactly how much money you are earning and how much you owe. Too often people make financial decisions based on how much they think they will earn, rather than what they are currently making. Many graduates also underestimate the cost of day-to-day living-try writing down all your expenses for a month or two to get a realistic sense of what you are spending, and where you may be able to cut back if necessary.
• Pay bills on time
  Promptly pay all bills, including payments due on loans and credit cards. This will help to build a strong credit history. A pattern of late payments not only lowers your credit and insurance scores, but late fees and interest payments can add up and make it harder to pay down the balance.
• Keep in touch with creditors
  Graduates are often in transition, so once credit accounts are opened, do not forget to tell financial institutions if you are moving. You don't want to have a credit card bill that was lost in the mail affecting your credit record.
• Monitor your Credit Report
  Check your credit reports at least once a year. If there are mistakes, get them corrected quickly. If your report is less than stellar, take positive steps to improve your credit standing.
• Consider credit counseling
  If you find yourself in a financial bind, consider credit and money counseling. Information is available from the National Foundation for Credit Counseling at http://www.nfcc.org or the American Center for Credit Education at http://www.acce-online.com/ .

For additional information regarding credit, contact the Consumer Data Industry Association at http://www.cdiaonline.org or access http://www.myfico.com to get a copy of your credit score .

For more information about insurance, go to the I.I.I. Web site at http://www.iii.org .

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.