As students return to university this term, there are fresh warnings of predatory payday lenders lurking, hoping to tempt unsuspecting scholars into debt.
Hard-up students can be prime targets for high-cost lenders who know they can make a quick profit by encouraging them to borrow. And evidence suggests most students are not using cash to fund a party lifestyle, but simply to get through each month.
According to the 2013 Student Money Survey, by savethestudent.org, the average student spends £763 a month. However, average maintenance loans (for those outside London) only cover £458 of living costs each month. This leaves a major shortfall that many students have to make up. It's these who can be easy prey for lenders.
Recent research by the student finance website suggested that one in five students are turning to gambling to help with their finances while 2 per cent are resorting to payday companies.
But one university has decided to curb the activities of predatory payday firms. Northampton banned lenders' advertising from its campus in June, but has now launched a much more positive move.
It has set up the country's first credit union for students – The Changemaker Credit Union – with the help of Northamptonshire Credit Union.
Nick Petford,vice-chancellor at the university said: “The creation of the Changemaker Credit Union demonstrates our strong commitment to ensuring that all students have access to ethical, responsible, and affordable financial services. It should ensure that students are able to manage their finances without having to resort to payday lenders and other expensive forms of credit.”
Other university campuses have also banned payday lender advertising following a campaign by the National Union of Students (NUS).
“Some payday lenders are targeting vulnerable students and the Government has so far failed to act, so it's important we do everything we can to limit their ability to reach our campuses,” said Pete Mercer, NUS national vice-president (welfare).
Jake Butler, editor of savethestudent.org, pointed out that there are other sources of finance for struggling students, including grants and bursaries, parental support, part-time jobs, student overdrafts and other forms of credit.
“But I think the risk lies in the 'other forms of credit'”, he warned.
“We've seen a rise in the number of students turning to payday loan companies which is worrying.
“I would recommend that if any student is having a serious problem with their money that they should contact their university's student services centre,” he added.
Research published yesterday by the Bureau of Investigative Journalism revealed that high-cost credit companies are cashing in on people's debt worries.
It showed that the 10 biggest firms offering payday loans had a total turnover of nearly £800m last year.
One company, Lending Stream, increased its turnover by 42 times in three years. Another, Wage Day Advance, has increased its profits 32 times to £20m since the beginning of the recession.Reuse content