ID card will teach bad habits

Colin Segercseger@mscd.edu

Are you responsible with your financial aid money?  When you get that big fat check do you throw it in the glove box and forget about it?  I personally feel like it is Christmas, or my birthday. 

It is like a weight has been lifted off my shoulders.  I can pay back the bills that are due, or past due usually, and start off the semester without the looming specter of bill collectors, statements or otherwise strongly worded letters.  I don’t have a credit card with which I can rack up huge amounts of debt, other than the financial aid loans themselves, so

I count myself amongst the moderately financially responsible people out there.  The debit card I have makes it hard enough to purchase without thinking about it, twice this week I realized I had no idea how much money I just spent at the self checkout at King Soopers, but at least I cannot spend money I don’t have.

The proposed combination ID and debit card that Metro is proposing seems to me like it is encouraging the irresponsible parting of a student’s financial aid funds from the student. Eliminating a barrier between a student and even the most basic of monetary responsibilities, smacks of encouraging and teaching irresponsible spending habits.  A card that would be your student ID and allow you access to your student loans the moment they become available removes the hard currency from your hand.  Simply holding a check with a number representing the exact amount of money you have creates a concrete limit and a known barrier to how much can and should be spent.  Removing this makes money more like an abstract play thing than a store of value.

Recently, a new field of research has confirmed the link between responsible spending and physical amount of cash.  Neuroeconomists study the human brain and spending habits.  Last September, George Loewenstein, a neuroeconomist at Carnegie Mellon University, outlined his latest findings in an interview for Scientific American magazine.  What he found is that the brain is highly irrational when considering purchases with plastic.  Not using real money can distort the buyers sense of how much can actually be spent.  Consumers whose desires to have the nice sneakers or the bigger TV, iPod or car, outweighed their own rational desire to save enough money to purchase these items without incurring unnecessary debt, were far more likely to have overburdened credit cards.  The ‘gotta have it now’ ethic of consumerism is encouraged by the use of money that does not seem like it is real, and does not feel like it has consequences.  But it does.

Loewenstein found that the same part of the brain that regulates purchases with credit cards, and the inherent false perception that there are fewer consequences because the money does not seem real, is the same part of the brain that regulates, and rationalizes, the purchase of lottery tickets.  The irrational brain that green lights purchases with money that does not exist, but does accrue interest, also makes impossible odds seem like they are worth taking.  Worse yet, Loewenstein found that more risk taking was rationalized when the subject was made to feel poorer.  I cannot think of a worse fit than a college student who has been eating ramen for the whole summer who suddenly has a card full of money.  Large irrational purchases will surely follow. 

Though certainly a debit card has limitations and does not extend credit, it can still be a tool of the irrational brain when a student has no experience with saving and planning.  The proposed bank account with US Bank that would accompany the ID/debit card targets those without a bank account and little or no experience with what other things there are to do with money besides spend it at Hollister or Abercrombie as soon as you get it.  Irrational consumption, when money does not seem like it is real, leads to overconsumption and a generation of college graduates who spend without thinking of the consequences and no eye on saving for future expenses. 

A combination ID and debit card that would automatically transfer student loans would facilitate this irrational behavior and teach bad spending habits.  Unfortunately the task force that has been investigating the ID/debit card has already acknowledged that predatory exploitation of college students is one of the goals of the program stating in a June 17th Metro State news release that the program is meant to “[further] the ongoing branding efforts underway at the College, [build] more bridges with the Denver business community through marketing partnerships using the card, and [make] the financial aid process more efficient.” 

Other ways to increase efficiency without exploitation should be explored before implementing such a program.  They might have better odds than the lottery.