In 1992, young adults carried almost $1,500 on their credit cards. By 2001, their debt grew to nearly $3,000
As borrowing increases among college students and teens, a task force teaches the consequences of getting in too deep

Chris Berdik, May 22, 2005

In 1992, young adults carried almost $1,500 on their credit cards. By 2001, their debt grew to nearly $3,000

As borrowing increases among college students and teens, a task force teaches the consequences of getting in too deep

Every year, Joan Feeney, chief judge of the US Bankruptcy Court in Boston, saw more young people come before her in crisis, already at a dead end, and as she puts it, ''pleading for time."

In Massachusetts, as in the rest of the country, the debt carried by young adults is mounting, college students are hooked on credit cards, and surveys show that teenagers lack financial savvy. In light of more stringent federal bankruptcy laws passed last month, this doesn't bode well for a state where filings are up nearly 40 percent from a decade ago, reaching about 18,000 in 2004, according to the American Bankruptcy Institute, a research group.

Hoping to put young adults on better financial footing, Feeney and the Boston Bar Association formed a financial literacy task force and designed a curriculum for high school students. The task force is affiliated with Credit Abuse Resistance Education, a program started in 2002 by a bankruptcy court judge in Rochester, N.Y. Massachusetts officials are also introducing a voluntary financial literacy curriculum, known as ''Hi-Fi," that they hope will be used in 136 high schools this fall.

Feeney and the Boston Bar Association are running a monthlong pilot of their curriculum this month at Dorchester's Academy of Public Service, and will move on to several other schools this fall, covering topics such as credit cards, budgeting, and financing a car. Bankruptcy attorneys will volunteer as teachers. There's also a field trip to Feeney's courtroom tomorrow.

''When these kids go out and go to college and get jobs, it's going to be a whole new world for them," said Robert Oliver, a math instructor who is teaching an Academy of Public Service course on financial literacy, one of the few offered in the state. The task force is integrating its lessons into the course.

With credit cards being offered to 16-year-olds, it's even more crucial for teenagers to learn about money, says Harvard Law School professor Elizabeth Warren, a critic of consumer lenders and author of ''All Your Worth: The Ultimate Lifetime Money Plan."

Teenagers ''are faced with the opportunity to ruin themselves financially before they are old enough to vote," she said.

In the early 1990s, credit card companies started to drop the parental cosignature requirement in a bid to woo young consumers, according to Robert Manning, a finance professor at the Rochester Institute of Technology and founder of Credit Card Nation, a Web-based financial literacy group at By charging a high interest rate, credit card firms found they could cover the risk of signing up customers with little credit history or income.

Between 1990 and 2001 the percentage of college students with at least one credit card rose from 50 percent to 83 percent, according to a 2002 study by Nellie Mae, a national student loan corporation. The same study noted that by graduation, students had more than doubled their debt, on average, and tripled the number of credit cards in their name.

Joe Feeney, who is not related to the judge, is a freshman at Boston College. Feeney says student mailboxes are stuffed with credit card offers, and solicitors set up shop at football games, offering free beach towels and T-shirts.

''As soon as you get to college, it's right upon you. It's all around you," said Feeney, who is a ''credit card chronicler" for CARE, posting updates about collegiate finances to

According to a 2004 report by Demos, a nonpartisan think tank in New York, the average credit card debt for 18- to 24-year-olds jumped 104 percent to nearly $3,000 between 1992 and 2001, compared with a 38 percent increase across all age groups.

A few weeks ago, credit card debt was the first lesson from the task force's curriculum at the Academy of Public Service. Attorney Tom Bean, one of the volunteer teachers, asked the class of 16 students if they knew the interest rate of a typical credit card.

One student called out, ''2.9 percent," drawing a smile from Bean. ''That's an introductory rate, what's known as a teaser rate," he said, which usually lasts for a few months.

''Ten percent," suggested someone else, and Bean shook his head. ''That would be wonderful. But we're heading north. More typically, it's about 18 percent."

Another teacher, attorney Janet Bostwick, who cochairs the task force with Judge Feeney, explained that a student buying a $1,000 computer with that rate and making the minimum monthly card payments would owe money for more than seven years and rack up an additional $800 in interest, a tally the class greeted with a collective ''whoa."

Feeney describes most young debtors as ''honest and unfortunate" and recounts several cases in which people faced more than $100,000 in student loan debt, became seriously ill without health insurance, and were unable to work. As a result, they used credit cards for living expenses and racked up tens of thousands of dollars in additional debt.

''Any bad luck whatsoever -- they lose their job or somebody gets sick -- and the whole house of cards just falls apart," said Feeney.

People generally file for personal bankruptcy when they can no longer pay their creditors and meet their basic needs. During a bankruptcy proceeding, the debtor's assets and property are sold for cash that goes toward paying off the debt. What remains is either wiped away under a Chapter 7 filing or incorporated in a court-ordered repayment plan under Chapter 13.

Judge John Ninfo II, founder of CARE, sees access to credit cards as the culprit, allowing young people go on spending sprees. ''The kids of today want everything right now," he said. ''They have no savings, and so they crash and burn."

While most of the students at the Academy of Public Service don't yet have credit cards, many of them have part-time jobs and are making spending decisions.

Dionne McLaughlin, the school's headmaster, says students spend a lot of money on cellphones and clothes. Food is another big expense, she added, with some students doling out $30 a day for meals and snacks.

Senior Dermoth Blake says food is where most of his cash goes. Blake's mother works late, so after school he goes to Burger King, or the food counters at the FleetCenter, where he works concessions. Another senior, Jessica Amado, said taking a personal finance course made her realize ''how easy it is to mismanage your money, fall into a trap, and go into debt."

And debt can hurt a young person long before bankruptcy. Landlords, loan officers, and employers can turn people down due to a bad credit rating. ''Bankruptcy is the last stop on the train," said Bostwick. ''We want to stop them before they even get on the train." 


This story ran on on May 22, 2005.