The discount deals that let graduates manage their affairs

In the final part of our series on investing for children, Sam Dunn gives college-leavers a leg-up with their student debt repayments

Light years after graduating from Birmingham University, Chris Stewart-Smith is still paying £50 every month towards the debts he ran up as a student there.

"Thankfully, the last payment is due this time next year," says the 30-year-old software consultant and former arts student. He explains why it is taking him so long to pay his debts back: "I couldn't get a job for six months after I left university, and even then I wasn't earning enough to start repaying my debts."

Mr Stewart-Smith is in good company: nearly 90 per cent of graduates leave higher education owing money to the Student Loan Company, banks, credit card companies or their parents.

Six months after their finals, graduates can expect to earn an average salary of around £14,000 - or £17,000 in London - but since their average debt is £12,000, it's not surprising they can take years paying back what they owe.

Well-paid jobs may be scarce, too, which can mean that former students are often forced into temporary, lower paid work, making it even harder to pay off debts.

Penny Hollings, secretary to the National Union of Students, says that high expectations can soon be deflated: "Imagine studying for years, leaving university with all that debt and then finding that you have to temp to make money. It's the last thing you thought you'd be doing - it can be very dispiriting."

But it is still possible to manage your debt while leaving yourself enough to live on. Sharing a flat with friends will work out cheaper than renting your own place, and staying at home with your parents trims bills even further - although at the cost of independence.

Ann-Marie Blake, head of graduate banking at NatWest, advises recent graduates to start by drawing up a budget, keeping ATM slips so they don't lose track of their cashpoint withdrawals, and making a list of all outgoings.

If you earn more than £10,000 a year in your first job, you must start repaying your student loans - this money is deducted from your wages by your employer, at the rate of 9 per cent of any salary above this benchmark.

If you have surplus cash, you may be tempted to use it to pay off your loan early. But, given that interest charges on student loans are just 1.3 per cent, you'd be better off reducing more expensive debt on credit cards and overdrafts.

Your bank should be able to help you manage your debts. As a graduate, you are a valuable future customer, and lenders who bankrolled your student days won't demand swift repayment of loans for fear of losing you. Most banks will switch your student finances into a free graduate account and - with the exception of Bank of Scotland - offer you a graduate loan with repayment holidays.

These loans can pay for further education, consolidate different debts into a single, more manageable sum, or even be used to pay for a holiday. Importantly, banks are happy to extend your interest-free overdraft for at least a year after graduation - but remember that this cheap debt has a shelf life. For example, NatWest lets you run a £2,000 interest-free overdraft in your first year after university but cuts it to £1,000 in the second year and £500 in the third.

If you're not in a well-paid job, it can be difficult to reduce your debt by as much as this in the time available, so it is essential you check your bank's annual rate on both authorised and unauthorised overdrafts. Abbey National charges 8.7 per cent interest on arranged overdrafts above interest-free amounts, HSBC 14.8 per cent, Barclays 15.6 per cent, and NatWest 17.81 per cent.

Beware steep charges if you stray over your pre-arranged spending limit. While you'll pay 14.8 per cent on unauthorised loans from HSBC, Royal Bank of Scotland will charge you 29.84 per cent as well as a £10 monthly fee.

If grappling with your overdraft proves too much, you could pay it all off by taking out a graduate loan. Abbey National allows you to borrow up to £3,500, to be repaid monthly over three years with interest charged at either 3 or 8 per cent; the lower rate is available to those who apply within six months of graduating.

But if you use the loan to pay for professional qualifications, such as training as a solicitor, NatWest will lend you up to £20,000, spreading repayments over 10 years with interest charged at 0.9 per cent above the base rate. Lenders may also try to sell you loan insurance to cover any failure to meet repayments through illness or unemployment but there is no obligation to sign up.

While keeping an eye on your finances, don't forget to examine other lenders' graduate deals. Switching banks could enable you to consolidate several repayments into one, more manageable debt and get you a better repayment rate.

Online bank Cahoot's free current account comes with a £250 interest-free overdraft and an 8 per cent flat rate for agreed amounts above that. The bank also offers a personal loan, charging 6.8 per cent with a £50 minimum monthly repayment.

Although your future finances are likely to be a major concern, you shouldn't worry too much about pensions at this stage. Now is the time to concentrate on your immediate debts.

One radical way to eliminate debt is to declare yourself bankrupt but this carries huge risks. Margaret Hodge, the higher education minister, recently warned that bankruptcy could harm future applications for jobs and mortgages - something no graduate wants.