Jan 28, 2007

More students leaving college for financial reasons

Academics come second in local survey

By Kristina Peterson / Daily News Staff Writer

Over one third more students drop out of college due to financial pressure than because of academic problems, according to a survey released this week by a local company.

In a nationwide study of 14,500 students enrolled in 15 colleges, Palo Alto-based company Duck9 found that 38 percent of college dropouts left for financial reasons, while 28 percent left because of academic disqualification. In the survey, 19 percent of four-year college undergraduates dropped out of school.

Larry Chiang, founder and chief overhead officer of Duck9, said his company originally surveyed 3,000 students and was shocked to find that nearly 40 percent of college students who left school did so because of credit or loan problems.

"So we polled another 12,000 people and that number still sticks," said Chiang, whose company offers free advice and bill-paying reminders through text messages to students.

Erica Sandberg, communications advisor for the Consumer Credit Counseling Service of San Francisco, said that the combination of student loans and credit cards often proves too much for students.

"Many students run up credit card debt and use student loans to pay off that debt. That makes it hard to pay the rent or buy textbooks, which is what those loans are intended for," Sandberg said.

Keith Troup, vice president of operations at the Stanford Federal Credit Union, said students are approached differently than adult customers.

"We wouldn't extend students as much debt as we would normal adults," Troup said, citing a $2,500 credit limit for students, versus a $30,000 limit for adults.

But he said high tuition bills can be problematic for students.

"There's a thin line between making credit available and making too much credit available. Tuition at Stanford is not cheap," Troup said.

At Menlo College, three financial aid counselors work with students to investigate funding options to pay for their education.

"The majority of our students here are working at other jobs to fund the tuition," said spokeswoman Cathy McDermott.

She said there are many sources of grants and loans, but adequate time to investigate the options is essential.

"There are ways you can do it - you just have to do the research," McDermott said.

Chiang said maintaining good credit is especially important for college students because with such a short credit history, a few mistakes can quickly leave them with ruined credit scores.

"A junior on a year abroad forgets a payment and his score drops below 700 in a minute ... a traditional adult with 30 years of credit reporting doesn't want to pay a bill on time and their score will never change," Chiang said.

Sandberg advises students to live frugally and stay away from credit card offers.

"This is not a time to live luxuriously," she said. "This is the time to live on rock-bottom finances."


E-mail Kristina Peterson at kpeterson@dailynewsgroup.com.