Let College Students Get Into Debt

Most of the provisions in the new credit card bill are unobjectionable. Indeed, most of the provisions in the new credit card bill are unobjectionable and slightly redundant, since they would have become law anyway as new Federal Reserve Board credit rules a year from now. (Before that happened, Congress just wanted to get some credit of its own.)

But there is one feature of the new bill that I do find odd: It restricts people under the age of 21 from getting a credit card unless they have a co-signer or an independent source of income that they can use to pay off their balance. But why on earth don't we want college students to take on debt?



Part of the issue here is good old horizontal fairness. What, so our country's 18-year-olds can fight and die and vote, but can't even declare personal bankruptcy or default on a subprime mortgage? I am all for society drawing semi-arbitrary lines between adults and kids -- that's just an intractable problem for a democracy. But we can at least do it consistently.

The second problem is more specific: if the the point of credit-based consumption is to bring lifetime consumption more in line with lifetime income -- as I believe it is -- then college students more than anyone else should be getting into debt. They have the largest gap between between desired present consumption and expected future income. That is a gap society can and should try to regulate, but it also one society should try to close.

More to the point, college students actually seem to use credit cards for educationally useful things like textbooks and tuition.

(That information is from Sallie Mae, so it's a bit like the foxes reporting on the henhouse. Take it for what you will!)