Reporter Magazine

The Power of Plastic
Robert D. Manning on Student Debt

Monica Donovan, December 2, 2005

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Robert D. Manning
The Power of Plastic
Robert D. Manning on Student Debt

If you're reading this, you could win a trip to Cancun over spring break. All you have to do is apply for a 0% introductory APR Visa card. Never mind the 19.99% APR after six months. Forget the increased late payment APRs, the balance transfer fees, the exorbitant cash advance APRs, and the membership fees. You could go to Cancun!
Sound familiar? If you're like most college students, you have at least one credit card with a four-digit balance. You have student loans in the five-digit range. And, like most of your peers, you're probably losing an unnecessary amount of cash because you never learned how to manage it all. Robert D. Manning, a professor of finance at RIT, takes a good hard look at students today and their debt issues.
Manning is the author of the acclaimed book on consumer debt Credit Card Nation. As a specialist in consumer finance, socio-economic trends, and retail banking deregulation, Manning has testified before Congress numerous times on behalf of citizen consumer rights. His most recent work is a study financed by Lending Tree, Living with Debt, which analyzes changing attitudes towards debt across the span of life stages. In a nutshell, he's the man to talk to about personal finance matters.

Cramming Doesn't End After College

Manning reflected on how he came to write Living with Debt. "I got a phone call [from] Lending Tree asking if I had gotten a letter, and I said no," he said. After that, he recalls with an amused smile, Lending Tree proceeded to file another letter to the wrong address. He eventually accepted their offer to organize and prepare a report on changing attitudes towards debt. "It was a nightmare because I didn't have much time to do it," he said. At the time, Manning still had teaching and other projects to do on top of Living with Debt. "I did the study and wrote the book in less than six months," he said. The study was released at a press conference in New York City on October 26.

The Cultural Shift

The study highlights a number of key reasons for the accumulation of student debt: the inability of families to adequately save for their children's college expenses, soaring costs of higher education, the failure of traditional Puritan values to pass on to our generation, "competitive consumption" pressures and easy access to consumer credit, and a serious lack of personal finance education.
Life cycle, according to Manning, is key in debt trends. "The assumption is that you try to stay in debt your whole life," he said. "That's why it's so revolutionary that people are going into debt before they even have a job." Borrowing, in previous generations, was considered a privilege. People had to show their worth to borrow money, and prudent spending was encouraged. "Today," explained Manning, "your generation is encouraged to borrow on the future." Now, he said, people deserve to get money whether they are budgeting well or not. This is the result of an enormous cultural shift - and students are getting the short end of the stick.
According to Manning, part of the solution is just feeling that you can get in control of your finances. Students aren't being taught how to do it, and "the absence of this education unfortunately benefits the banks." The first crucial step is sitting down with your parents and looking at your debt. He encourages students to look at the Budget Estimator on his website. The student selects their major, which brings up the projected income for a graduate working in that particular field. The student then enters their relevant expenses. If your budget is balanced, you are rewarded with a display of fireworks. If it's not, the Estimator candidly informs you in red that your budget is unbalanced and to try again. Manning devotes an entire section of his website to various aspects of financial education. Manning also explained the importance of setting up investment accounts as soon as possible. Starting with mutual funds, he said, is a student's best bet, since there are thousands of dollars in tax deductions upon graduation.

GPAs and Credit Scores

"My argument has been that students with a good credit report are going to have an advantage on the job market," said Manning. "A good credit score could be more important than a good GPA." He pointed out that President Simone has been focusing on internships and co-ops so that students are better prepared to get a good job. "By the time they get to an interview, everyone has work experience," he said. But if a student has a poor credit history, he noted, it could be harmful to their potential to get the job they want. Manning wants to help RIT students achieve their financial goals, giving them a huge advantage over other schools. As a part of First Year Enrichment, he has been giving lectures on finance management. He hopes to continue this by creating a series of workshops for students throughout the school year and starting classes in personal finance management.

Future Projects

Manning has a plethora of projects on his plate. He's editing and contributing to a book for Senior Seminar classes, entitled Globalization and Democracy. His next major book is entitled Give Yourself Credit, a follow-up to Credit Card Nation. On the public policy side, he's putting together a program which he hopes will be an alternative to Chapter Seven Bankruptcy, and is also working with United Way on an alternative to anti-predatory lending programs. The list goes on.
By the time you're done with Manning's Budget Estimator, that trip to Cancun might not look so appealing after all. Check it out at .

Dr. Manning's Top Ten Tips for Surviving in the "Credit Card Nation"

  • Repeat after me: I don't pay membership fees. If you paid a membership fee last year, call your friendly customer service representative and insist that the fee be waived. Otherwise, there are a lot of better deals out there.
  • If you are a "revolver" (someone who doesn't pay off balances at the end of the month), reduce your number of bank credit card accounts to a maximum of two. Keep a high interest card that has many useful benefits, such as free rental car insurance, and pay these charges in full each month. The second credit card should be a no-frills, low interest credit card where you maintain a monthly balance.
  • If you are a "convenience" user (meaning that you pay off all your balances at the end of the month), be sure that the "grace" period is at least 21 days.
  • Call your friendly customer service representative and demand a lower interest rate. Believe it or not, you can bargain over the phone.
  • Now is the time to lock in on a fixed rate account,pronto. Interest rates are so low that banks have established a "floor" so that your finance charges will notfall anymore.
  • Look out for the classic "bait and switch" maneuver. Make sure that the credit card you received is the one you applied for. Banks are not obligated to inform you that they changed their minds or explain why they will not honor their previous "pre-approved" offer.
  • Monitor the low "fixed for life" interest rate that was the reason you signed up for the credit card. It is not unusual for rates to jump.
  • Check for "tiered" interest rates on your account balances.
  • Cancel all of your unused bank and retail credit accounts.
  • Don't even think about a credit card insurance


This story ran on Reporter Magazine on December 2, 2005.