Student Debt – How to Avoid The Pitfalls

Posted: 7th Sep 2016

by Rory McGimpsey

We’re heading into the start of September and that can only mean one thing. No, not the end of the summer holidays, but exam result season. Millions of young people throughout the UK have been anxiously awaiting that dreaded brown envelope these past few weeks – I assume results still come by post, but have heard a rumour they can even be received by text these days! It’s been a long time since I got mine, although I remember that feeling of stress!

Even when good results are confirmed, though, a new worry is created. What to do about the future? With record numbers of students seeking places in university and higher education courses, the age-old problem of student debt is more than relevant than ever. In this era of tuition fees and student loans, many students acquire their fair share of liabilities before they even enter the workplace.

I was lucky. In my day, there were no fees and student loans had yet to be conceived. In fact, believe it or not, we even got grants in those days to subsidise our socialising, sorry I mean studies! It was a simpler time. Young people today face a much trickier path in trying to avoid unnecessary debt. As well as essential student loans and substantial fees, students often fall back on other forms of personal credit such as loans and credit cards to get by.

While such measures are effective short-term ways to alleviate the pressure, these obligations can cause future difficulty in the management of personal finances. Temporary cash flow remedies can lead to long term indebtedness if left unchecked. While it’s tempting to put off money worries for another day, such inaction often means that many young people enter the workplace saddled with unnecessary and avoidable debt.

Students living with substantial debt is a relatively modern phenomenon and one created by the introduction of student loans by the government. Government loans have provided much needed support to millions of students, many of whom would have been unable to enjoy the benefits of college life otherwise.

As with any form of financial incentive, however, there is a downside. Studies have revealed that British students are among the most indebted, with debt levels comparing unfavourably with American counterparts. In fact, British students typically graduate with higher levels of debt than their equivalents in any other English-speaking country:

This study reveals that British students, on average, face debts of £44,500 following graduation. Worryingly, this figure is almost double that faced by students studying at American non-profit universities, including some Ivy League colleges! To make matters worse, research also indicates that graduates often earn less than peers who entered the workplace directly after school.

None of this is intended to put anyone off university, by the way! Student life is a wonderfully enriching experience, but there’s no harm in going to college with eyes open. Like most financial commitments, preparation and good research/advice is the key to coping. There are also practical hints and tips that can help avoid student debt and mitigate its effect if it arrives. UCAS has some helpful info here.

Unpalatable as it might seem, moving back in with the folks post-graduation to save on expensive rental costs can be a great money saver. Rumour has it the bank of mum and dad has excellent interest rates! Other tips include: opening a graduate bank account, prioritising credit card repayments and planning a weekly budget. Money Advice Service have a great list of tips too.

Student debt can become a problem if it spirals out of control, but with good planning, there’s no reason why it should upset anyone’s student experience. Going to college is an exciting time and money advice is simply one more factor to consider when planning your bright future!

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