CATHERINE KINCADE/Photo Editor Auburn graduate Billy Groves talks with Bill Dorsey, director of development for Consumer Credit Counseling Service, a company that offers free credit counseling every Wednesday in Langdon Hall Annex.

Quite often, students can feel sense of false security when they receive a credit card. Believing they can go on a spending spree and pay their debts at a later date is a nearly irresistible proposition. Unfortunately, credit balances do not disappear on their own. 

When students don’t pay off their monthly balances, they get into serious financial trouble. When students find themselves in a world of debt, credit counseling agencies offer solutions to their financial woes.

Students who pay off their credit balances each month incur no fees, over-the-limit fees or high interest rates. Put simply, credit card companies are not making a profit off of these people. 

However, anyone who carries a balance on their credit card can end up with fees as high as $40 per month, before they start to put money into the balance instead of the pockets of creditors, according to Rod Huddleston of Community Credit Counseling, a nonprofit credit counseling agency sponsored by the United Way.

The Catch

Credit vendors on the Concourse in front of Haley Center only tell students about “low introductory rates.” However, according to Paula Backscheider, a Pepperell Eminent Scholar with the University’s Retention Committee, the service providers of these credit cards immediately impose fines, raise interest rates and cut the credit limit when students miss just one payment. 

She explained these vendors never give students all the facts about variable interest rates and high fees. “I believe that credit card vendors should sign an ethics statement and students (should) be given more information,” she said.

The Facts

Students still build up hefty debts on credit cards, even when parents help foot the bills. When such an instance occurs, credit counseling agencies are available to help students pay off their debt and avoid future debt.

Huddleston said students who seek his services owe an average of $2,000 to their creditors. In addition, he explained, “One out of five students in our debt management program owe $10,000 or more.” His company provides credit counseling and debt management programs to students free of charge.

The Solution

Students who build up massive credit debts have two major options, according to Bill Dorsey, director of development for Consumer Credit 

Counseling Service of Alabama. They can enter budget counseling or debt management. 

CCCSA, in cooperation with the Human Resources Department of the University, provides free credit counseling services to all Auburn students, faculty and staff. 

Dorsey is available in Langdon Hall Annex each Wednesday and can be reached at (800) 662-6119. Budget counseling is a fairly straightfoward process, Dorsey said. The student’s “bottom line” is determined to help establish a monthly budget. 

Monthly income and expenses are determined, and all extraneous expenditures are removed so the client doesn’t live beyond his or her means. 

According to Mike Reynolds, interim financial aid director at Auburn University, the idea is to “get by with the least amount as possible.” He explains that students should try and limit their expenses to a bare minimum so that they will not build up any additional debt. Dorsey explains that budget counseling is simply “living off of cash” instead of credit.
Debt management is a more serious form of credit counseling. First the debtor must go through budget counseling because credit counseling agencies “exist to help people pay their debts, not to give them another loan,” according to Ms. Linda Smith, President and CEO of Alternative Financial Resolutions, Inc., a non-profit counseling service located in Columbus, Ga. Since loans are not an option, Smith emphasizes that “we work with [clients] to develop a workable budget to cover living expenses and pay off their debts.”

Dorsey explains that once an individual enters a debt management program, all credit cards must be cancelled, and the debtor must not apply for any additional credit. When a debtor enters the program, credit counseling agencies such as Consumer Credit Counseling Service of Alabama will contact all of the individual’s creditors and arrange for reduced fees and interest rates. By eliminating the fees, the debtor is able to pay directly on the debt instead of giving “free money” to the creditor.

Smith says when her clients enter a debt management program, the amount of time needed to satisfy the entire debt is generally three to four years. 

Alternative Financial Resolutions encourages its clients to “pay their way out of debt as quickly as possible.” When an individual establishes a monthly budget, any additional or unexpected income should go directly to the debt repayment instead of spending, she says.

The Consequences

According to statistics provided by Community Credit Counseling, a local credit counseling service, Auburn students who carry a credit balance owe, on average, about $2,000. Students build up such lofty debts not because they’ve actually spent $2,000, but because late fees and interest rates have inflated the balance, Smith explains. 

There is a growing need for credit counseling in the Auburn-Opelika area,” says Dorsey, because students don’t pay attention to how quickly their balances can build up. Reynolds says that the financial aid service at Auburn requires students who apply for loans to view videos which describe the importance of paying off debts as quickly as possible. He says, “we really push for (students) to know the consequences of borrowing and not repaying.”

For students, Dorsey emphasizes that the most important action a student can take to avoid credit debt is to stay aware of the balance at all times. It a student must carry a balance from month to month, he explains, than spending is disproportionate with income.

In a university setting, it is easy to lose track of how much money is being spent. For students or faculty members who are in debt, Consumer Credit Counseling Service of Alabama offers weekly counseling services in the Langdon Hall Annex. Additional services, such as Alternative Financial Resolutions, in Columbus, and Community Credit Counseling, in Auburn offer free credit counseling to students who are looking for a way to reduce and eliminate their credit debts.

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