Welcome to the real world

Graduates are unreliable and often in debt. So why are banks desperate for their custom? By Michele Harrison

The final exam paper took place earlier this week, the post-exam party was mental, the resulting hangover is being nursed delicately and a last-minute holiday has been booked, courtesy of an ever-patient bank manager or indulgent parent. Then what?

Tens of thousands of former university students will find themselves in a similar situation this summer. Freed from years of last-minute cramming and late-night essays, they will be venturing gingerly into the world of work, suits and ties and other boring commitments.

What kind of financial state will they be in? Not a good one, according to the National Union of Students (NUS). The NUS estimates that 300,000 students will be leaving college this June with an average debt of pounds 6,000 each. And in many cases their debts will have to go higher before they can start to repay them.

Darrell Pulver, manager of Barclays' graduate banking arm, says: "The cost of going to university has increased by over 100 per cent in the last five years. Graduates have had to deal with the realities of a reducing maintenance grant and the introduction of tuition fees. Levels of borrowing are expected to increase even further."

Sophie Turner, a Barclays Bank spokesman, says: "After university, graduates still need flexibility from their bank. In addition to their existing overdrafts, they'll have to spend money on clothes for interviews, travel to and from work, they may want to buy a car or a flat. They may even want some money to go on holiday after all that studying."

All students select a bank at the outset of their courses. But by the time they leave college, many will consider switching accounts. Sometimes it is because the high street offers different choices or there is a convenient bank just around the corner from their place of work.

The important point to note is that at the time they graduate - and find work - they become highly sought-after by banks. Brian Capon, spokesman for the British Bankers Association, says: "Banks want students and graduates as customers because they will go on to be the higher earners of the future."

Given the state of a typical student's overdraft right now, it may seem difficult to believe in their spending potential. The main proof of the banks' eagerness lies in the attractive packages, which they think are especially suited to students' needs and will win them over.

Each summer, the deals get better. Until last year, Barclays was the only major bank offering dedicated graduate managers. Ms Turner says: "We have 100 specially trained graduate managers who are dedicated to offering graduates advice about their finances, helping them choose the best solution to suit their financial circumstances."

This focus on students and graduates has paid off for Barclays, which currently boasts 460,000 student and graduate customers.

This year, NatWest has decided to follow Barclays' example and has hired 60 specialist advisers. David Bloomfield, head of student and graduate banking at NatWest, says: "Times are tough [for graduates] and our package, which features a three-year interest-free overdraft, a special graduate loan, preferential graduate mortgage and a service giving advice on finding jobs, aims to ease the burden."

All four major banks, Barclays, NatWest, Midland, and Lloyds, are offering a pounds 10,000 unsecured loan at APRs lower than the standard rate. However, students who need to borrow more can go to the Royal Bank of Scotland (RBS), which offers a loan of up to pounds 15,000 at only 7.5 per cent APR. Jayne Goodwins, head of RBS media relations, says: "Our package is probably the most generous. That's because we've looked in depth at the market and been realistic about students' debt levels."

It goes without saying that graduates should not borrow large sums of money simply because they are available - in any event, such high loans will only be granted if a bank believes its account holder is a worthwhile risk. Another characteristic of most student and graduate accounts is a free overdraft facility of up to pounds 2,000, with various levels of buffer zone in case the account holder inadvertedly goes into the red without clearing it first.

Not all banks offer specific graduate packages. For example, the Halifax and the Co-operative Bank simply extend their student package for one year after graduation.

Dave Smith, a spokesman at the Co-op Bank, believes that the bank's ethical stance is a big draw for students. And its Internet site was recently voted the best banking Internet site in Britain.

There are some institutions, such as Nationwide and Abbey National, which don't offer student accounts. Lorna Waddell from Abbey National explains: "Until now, we haven't had many student accounts as we have no campus presence."

For students who stay on in post-graduate studies (but only in medicine, law and accountancy), the Bank of Scotland offers a professional studies loan. Those on a one-year course can borrow up to pounds 6,000. Those on two- year courses can borrow up to pounds 8,000. They have seven and 10 years, respectively, to pay.

For former students, the deal to go for depends on personal circumstances. Do you need to borrow a lot? Do you expect to use your overdraft facility? What balance do you expect to keep in your account?

Richard Darlington, NUS spokesperson, says: "We don't advise people, except to say shop around, look at what's on offer, and make your decision based on the long term rather than short-term inducements."

Either way, deciding which bank to go with is likely to be the first in a series of tough financial choices. Sadly, it won't be the last. Meanwhile, have a nice holiday.

A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
Sean Abbott
cricketSean Abbott is named Australia's young cricketer of the year
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebookPart of The Independent’s new eBook series The Great Composers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: Java Developer

    £26000 - £33000 per annum: Recruitment Genius: An exciting opportunity for an ...

    Recruitment Genius: PHP Developer

    Negotiable: Recruitment Genius: One of the North West's leading digital agenci...

    Recruitment Genius: Supply Chain Manager

    Negotiable: Recruitment Genius: This company is a leading expert in immunoassa...

    Recruitment Genius: Online Customer Service Advisor

    £13000 - £15000 per annum: Recruitment Genius: A chance to work for an extreme...

    Day In a Page

    Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

    Auschwitz liberation 70th anniversary

    Woman sent to three Nazi death camps describes surviving gas chamber
    DSK, Dodo the Pimp, and the Carlton Hotel

    The inside track on France's trial of the year

    Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
    As provocative now as they ever were

    Sarah Kane season

    Why her plays are as provocative now as when they were written
    Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

    Murder of Japanese hostage has grim echoes of another killing

    Japanese mood was against what was seen as irresponsible trips to a vicious war zone
    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea