by Duane Craig

Created on: September 05, 2007   Last Updated: April 11, 2011

Credit cards and people who don't have jobs are not a good mix. The concept is actually quite absurd. Credit card companies have always used employment as a determining factor when deciding who gets a card in the first place. So it would be interesting to read the rationale they now use to allow people to have cards when they largely do not have long-term employment.

The sad fact of the matter is that most people emerging from college will already be in debt to student loans for years. If you add credit card debt to the mix, then some of these poor folks will finally have college paid off by the time they are ready to retire. It's only natural for people to be hopeful that the education is going to pay off in a high-paying job. But once again that isn't the norm. Most college graduates live at their income level, and that means living paycheck to paycheck just like most people who don't have a college education.

But perhaps there is something more insidious about this whole debate and that is the motivations of the credit card companies, and to a lesser degree the universities. The credit card companies have been trying to tap into new markets. This is a ripe opportunity, especially since this is a population that is young, energetic and wants things. Get them hooked when they are young, and make them customers for life. The colleges are finding that with the costs of tenure, they constantly have to have tuition increases. They are in danger of systematically pricing large segments of the population out of the college market if there isn't a way to make it easier for them to pay.

This is potentially the next savings and loan/dot com/home mortgage scandal. About every 10 years people who are creative with financing figure out a way to make some short-term bucks off of those who are NOT so savvy. It's just another massive transfer of wealth.

In the next 10 years you will see a rash of ex-students who can't pay their loans because they are hit with ever-increasing loan costs. How can credit card companies offer free money for four years without having to catch up on back interest sometime in the future? These ex-students will find the jobs will mysteriously never materialize that will pay them enough to meet the costs of their education and still have some money to live on.

Meanwhile, the colleges will have gotten their money, the lenders and investors will be making way above prime on the borrowers who can pay, and guess what? The FED will step in to bail them out on the ones who can't.

Higher education doesn't need this; it needs more courses in economics.

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