With students now well into their academic year, new data relating to students in the U.K. has revealed that 76 percent of them are worried about making ends meet at university and 4 percent have even considered dropping out because of their money worries.
This is based on new data compiled by credit management company Lowell. The analysis of these data explores how students are funding their time at university, as well as their attitudes towards money and spending habits that are causing long-term problems.
Overall, three-quarters of students (77 percent) go on to develop personal debt problems while at university.
The research shows that many students rely on credit cards (27 percent), Buy Now Pay Later schemes (15 percent) and payday loans (9 percent). These measures are more damaging in the long-run, effecting credit scores and putting people into extra financial debt on top of their student loans.
There are different outcomes around these forms of debt. While all forms are expensive, some cost more in the long-run than others. In the U.K. the average annual percentage rate (APR) on a payday loan (a short-term loan) could be up to 1,500 percent – compared to a typical 23 percent APR on a credit card. A payday loan is usually a short-term loan for small amounts of money with an extremely high APR. For example, if a student borrowed £100 with a 50 percent APR and agreed to repay it back in a month, they would owe £150 at the end of the month (an extra £50 on top of the original loan).
With Buy Now Pay Later products, these may seem like a solution for students, but this approach can leave students at risk of being charged if they are unable to pay.
A recent annual survey by Save the Student also found that 32 percent of students said they use their overdraft as a source of income. While many student accounts have credit limits that increase year on year, and with a 0 percent overdraft, after university, many banks will expect students to pay back their overdraft within 1-3 years, putting even more pressure on graduates to find a job in a competitive job market.
Students are also found to rely on their families’ support (42 percent) and savings (36 percent). The different sources are outlined in the following table:
| In addition to any student loans or grants you received, what source of income did/do you rely on while at university? | Percentage response |
| Supported by family | 42% |
| Savings | 36% |
| Credit cards | 27% |
| Overdrafts | 25% |
| Disposable income | 19% |
| Living at home | 17% |
| Buy Now Pay Later Services | 15% |
| Payday loans | 9% |
In terms of what triggers debt, student spending habits prioritise weekly food shops (56 percent), rent (52 percent) and bills (44 percent). The average amount of debt, excluding tuition fees and student loans, that each graduate ended university with was £2,332, taking an average of 3.8 years to pay back in full.
Furthermore, 15 percent of graduates ended university with over £5,000 of additional borrowing. Also, from all the people we surveyed, it took 16% of students four or more years to pay off the personal debt they accumulated while at university.
