Colleges still receive $73 million from credit card companies

The CARD act required credit card companies to quit giving out free pizza for applying for credit cards. Image: Flickr / pinkstockphotos / CC-BY

A recently released report from the Federal Reserve shows both good and bad news about colleges and credit cards. Since the 2009 CARD Act put limitations on how credit card companies can market to students, the number of applications has gone down significantly. Despite this drop, credit card companies are still providing $73 million per year to schools whose students have credit card debt.

How the CARD Act changed credit cards for students

For students, the 2009 Credit Card Accountability Responsibility and Disclosure Act made significant changes to the availability of credit cards. Rather than considering “household income,” which included parents’ income and credit ratings, credit card companies were required to either get a cosigner or consider only the student’s income. Credit card companies are also not allowed to offer incentives like free pizza for signed credit card applications.

Sponsored credit card applications from organizations like schools or alumni associations are also significantly limited. These sponsored credit cards pay money back to a particular school or organization based on the amount of debt the card holders carry.

The latest numbers on student credit

In the last year, the number of credit cards issued to students and the amount of money given to schools did decline. Colleges and alumni associations received 17 percent less income from credit card companies. Credit card marketing agreements with schools have also dropped 4 percent since 2009. The credit card marketing kiosks or tables that used to appear on almost every college campus have disappeared, though many are setting up just feet from the edge of college campuses.

Colleges still benefiting from credit card debt

Despite the decrease in credit cards being offered to students, many colleges are still getting a significant amount of cash from agreements. All told, colleges and alumni associations got about $73.3 million in 2010 from credit card companies. These agreements, for the most part, pay out based on the number of new cards and the amount of debt carried on those cards. For example, the Cornell Alumni Federation received more than $900,000 in 2010 for marketing credit cards to newly graduated students.

Sources

Business Insider
USA Today
DNJ
Card Ratings

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