Financially 'harder than ever' for students
Wednesday, 20 Sep 2006 08:49
Cash is thin on the ground for students this year
Students are facing a harder time now than ever before with their finances, experts have warned.
Credit reference agency Callcredit calculates that students going to university this autumn are set to graduate with collective debts of more than £5 million, at an average of £15,000 each.
This is more than double the £6,161 average figure for graduating students seven years ago.
To try and help students get through these years, with the minimum of debt, Callcredit has released a financial guide for new undergraduates.
"Life is financially harder for students now than it has ever been and the decisions people make about their borrowing while they are studying will impact on their finances for years to come, so it‘s important they have the information they need to make the right decisions for them," said Callcredit director Mel Mitchley.
Student loans still form the bulk of student debt. These are paid back automatically when graduates begin earning more than £15,000. Payments are capped at nine per cent of earnings over this amount.
But increasingly, students are declaring themselves bankrupt to clear these debts, with 899 students taking this route in 2005 compared with eight in 1992.
"Bankruptcy is not an easy option and changes in the law in 2004 mean that any student who went down this route would still be liable for their student loan," warns Mrs Mitchley.
"And quite apart from this, bankruptcy has serious consequences in terms of current and future assets. Any hopes of future home ownership may be ruined and even something as simple as opening a bank account may become difficult."
Financial health guide for students:
Get a part-time job to supplement your income.
If you need credit, use your student loan facility.
Choose a bank account which extends student benefits as long as possible after graduation to allow overdrafts to be paid off.
Check your credit file regularly – as well as giving you an overall view of your credit commitments, this will help protect you against ID thieves – a particular risk for students who have various addresses while studying.
Check your credit score – the higher your credit score the better rates you can expect if you do apply for a credit card – you do not have to accept uncompetitive rates just because they are targeted at students.
Join the student union and take advantage of travel, food and shopping discounts.
Avoid store cards – they are typically more expensive than credit cards.
Be cautious when entering into a joint credit agreement with flatmates, e.g. to buy a fridge or a television – this means you will become financially associated and if they choose not to pay you will be wholly liable for the debt.
Take utility readings and inform the suppliers every time you move into or out of accommodation – otherwise you might be liable to pay for services you have not used.
Make sure you can afford any credit commitments you enter into. If you do not pay you could receive a county court judgement (CCJ) which will affect your ability to gain credit for up to six years.
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