Students understanding of debt is seriously lacking

Posted by Ben Ryland in Dealing with Debt on 29 November 2016 - Ben is a Senior Credit Analyst at checkmyfile.

Christmas is an expensive time of year. Though for many students, this is just as relevant for most other times of the year too.

Now Future Finance has revealed that a third of UK students are reliant on credit to fund their education while at university. The credit is in the form of credit cards and payday loans. With the notorious high levels of interest on payday loans, this is a worrying state for students to find themselves in. More importantly a very costly one.

Of the 1,000 UK students polled, 31% explained they have used payday loans, credit cards and their student overdraft to pay for educational expenses.

While university may be teaching students anything from forensic science to the law of the land, it doesn’t appear to be teaching students the dangers of over-using and being reliant on credit. In fact, 25% of the students surveyed said they don’t even see payday loans as a form of debt, or the financial implications.

The cost to students of furthering their education has led many to turn to these loans and credit cards as the government funded loans just aren’t covering enough expenses.

Part of Future Finance’s research tested students’ knowledge of finance, including what the term APR stands for, and surprisingly only 60% of those surveyed knew what it stood for. APR stands for the annual percentage rate, which is the amount of interest you’ll pay annually.

While university life is all about new experiences for students and enhancing their understanding of the world, many would have hoped to not fall into a debt spiral so early on in their lives. Brian Norton CEO of Future Finance confirmed this thinking by saying, “It is worrying that significant numbers of students rely on credit cards, payday loans and overdrafts without even seeing them as debt.

”For many students, going to uni is the first time they’re required to stand on their own feet financially. It’s a big change in their life and it can be a steep learning curve.”

Students’ finances have never been as strained as they are today. The cost of a degree in England is at its highest level, and findings from the NUS showing that the cost of accommodation has also increased for students over the last 5 years by 23%.

With students now having to turn to expensive forms of debt just to get by, many have called on the government to do more to help students furthering their education. Though ultimately, better financial management should be taught by parents and schools to children before they reach university. It seems this may be the only way to get a grip on the situation as students’ incomes are unlikely to match their expenditure for many years to come.

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