David Lei | Bursaring away our futures

One of the first lessons we all learn as freshmen is that you can bursar an iPod at Computer Connection, then have your parents unknowingly pay the bill for it later. Devious, aren't we?

"Bursaring" - the practice of getting billed by the University for a wide variety of on-campus purchases instead of paying for them up front - has always seemed a unique aspect of the Penn culture to me. While other schools have similar credit systems, it seems ingrained into the Penn-tality.

The topic came up earlier this semester over dinner at Pod with a friend. As we were getting ready to pay, she told me she wished it were possible to bursar her frequent meals at the pricey restaurant and bar. If that were the case, she could tell her parents that "Pod" was actually the name of the campus bookstore.

It was a joke, but I thought it really reflected a prevailing attitude about personal finances at Penn. It's well documented that this attitude isn't endemic to just our campus. Students' poor financial responsibility is a growing problem across the country.

According to a report released last week by student-lending giant Sallie Mae, credit card ownership and use among undergraduate students has risen to an alarming high.

The company found that 84 percent of students own at least one credit card, and half own four or more. The mean balance was a whopping $3,173. All of these figures, which were recorded in Spring 2008, increased significantly over the prior four years.

Some students were using cards to pay for unnecessary spending. But most are just struggling to pay for tuition, textbooks and other "direct education expenses" - not those iPods or digital cameras. Nonetheless they are still living outside of their means. Moreover, they might be making a big mistake by disregarding cheaper forms of borrowing they have access to. Sallie Mae is, of course, the biggest originator of federally guaranteed student loans, which offer lower interest rates and more favorable terms, and would benefit from students' increased awareness of using such loans instead of credit cards.

For the past year, it's been quite trendy for The New York Times, The Wall Street Journal and other news organizations to run profiles of "out of luck" young college graduates saddled with enormous amounts of debt and facing the prospect of personal bankruptcy. But these sympathetic glimpses into the sad lives of humanities (or now, business) majors often fail to recognize that the students bring about their own undoing through personal-finance ignorance.

Given the root causes of the recession, this is a bit worrying. Bankers, auto company executives and students all - we are the bailout generation. And it is crucial that we learn to assume personal responsibility for our circumstances and accept accountability for our decisions.

For what it's worth, the bills on our Student Financial Services accounts carry a significantly lower interest rate, 1.5 percent, than a typical credit card. Moreover, bursar payment is only accepted around campus, a practical limit on your ability to make reckless purchases. And the penalty for failing to resolve your bill on a timely basis is being placed on financial hold by the University - a strong disincentive, I would imagine.

This habit is clearly driven by an overreliance on the support of our parents. We bursar only because we know someone else will pay up later. If a student is living off the means of his or her parents anyway, perhaps it doesn't really matter.

But there's a huge moral hazard in condoning this behavior. After all, everyone should live within the constraints of a budget, even if that budget is quite large.

A little bit of transparency in the billing process might go a long way toward the attitude adjustment needed. For example, if iPods appeared on billing statements as such instead of unspecified purchases made from Computer Connection, parents might decide to be less generous.

In the larger context of student indebtedness, hopefully this recession - particularly with its attendant job-market anxiety - will be a wake-up call to students that now might be the time to think twice before swiping the plastic.

David Lei is a Wharton junior from Brooklyn, N.Y. He is the former Executive Editor of The Daily Pennsylvanian and is the executive editor of the College Republicans. The Lei-bertarian appears on Mondays. His email address is lei@dailypennsylvanian.com.

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