If you ask the average graduate of 2 years how much debt they have, you should not be surprised if they tell you that this is upwards of £20,000.  The average graduate who has studied for 3 years at university will have taken student loans of c£3000 per year – that’s £9000. They will also have borrowed c£2000 on a credit card and c£2000 on their overdraft. On getting the first job, many graduates will take a loan to get them started – find accommodation, appropriate clothes etc. This could easily be £7000 including interest. Credit card spending does not automatically stop and so over the next 18 mths – 2 years the amount on credit cards may be up to £5000. That’s a total of over £20,000 and a mill-stone around the neck of someone starting their working life. 

When I speak to Students and graduates, I learn that they often take on more debt than they need because they feel that they will be able to repay this easily once they are working. Clearly as a student living on £3000-£4000 a year, it is easy to think that when you get your first job paying £16,000 how could repaying your debt not be a simple?

This is a big mistake. When you graduate and get your first job, this will often mean moving away from home and finding expensive accommodation. If you are bringing home £1000 per month after tax, accommodation costs and bills could easily eat into 50% + of this. Then you have to think about your increased cost of living. You will not be drinking in the Student Union bar with your work colleagues. The cost of socialising for many young people particularly in our cities is extremely high. This all add up to a situation where instead of repaying debt, young graduates find themselves getting deeper into it. The message here may sound boring and sensible to someone still having the time of their life at university. However my recommendation is start to live within your means early. Minimise the debt you take on while a student as much as possible. Once you start work you will be far better off.

The londonstockexchange today reported that UK banks should take a level of responsibility in the amount of money lent to students.

UK banks have a responsibility not to lend excessive amounts of money to students who will find it difficult to make repayments, amid concerns that excessive lending contributes to debt problems ahead.HSBC puts forward this view on the basis that students need financial support, with large amounts of lending paving the way for unaffordable repayments ahead.This has been spearheaded by HSBC with the spokesperson commenting that ” One of the things which students need to factor in now is borrowing huge sums for other areas”

Interesting that HSBC is making such statements in the light of the recent cancelling of the interest free graduate overdraft however it showcases the importances of students taking responsibility of their finances earlier rather than later.

We shall wait and see if other banks will follow suit in taking more measures to ensure responsibe lending to students