NEW YORK -- Heading off to college during some of the worst economic times in years means students will learn lessons about living on a budget, says the Insurance Information Institute.

Seventy-six percent of all incoming freshman will have a credit card when they arrive on campus, according to Nellie Mae, a leading provider of student loans. Most undergraduate students will have four or more cards by the time they graduate. In fact, most students carry an average credit card balance of nearly $3,000 during their final year of college.

Parents and students should work together to develop a financial plan for college and a budget. Specific educational expenses, including tuition, room and board, books and fees can be viewed as "good debt" and covered through student loans, grants and the like. Day-to-day college expenses, including personal needs, transportation costs, telephone and other incidentals, are the types of expenses that students more often than not charge on credit cards.

Consumer debt is more expensive and should be carefully monitored. Carrying high, unpaid balances is one of the quickest ways to incur too much debt and fall behind in payments. If college students plan to use a credit card regularly, they should have limits and know ahead of time where the money will come from to pay the bill at the end of the month.

When deciding on a credit card, students should read the fine print and shop around for the best terms. Look for cards that:

* Have an annual percentage rate at or below 15 percent

* Offer a grace period of at least 25 days

* Feature no annual fee

As students use credit cards and start paying other bills, it is important to check credit reports. By law, consumers are entitled to free copies of their credit reports once a year from the three major credit reporting agencies.

Free annual credit reports are available from the only online authorized Web site, AnnualCreditReport.com, or by calling 1-877-322-8228.

To develop good financial habits, the I.I.I. suggests that students:

* Learn to stick to a budget.

* Pay bills on time.

* Use credit responsibly.

* Keep in touch with creditors.

* Consider credit counseling.

For more information regarding credit, contact the Consumer Data Industry Association at www.cdiaonline.org or go to Fair Isaac at www.myfico.com to get a copy of your credit score.

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

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