When Nicky Hylands decided to go to university, she knew she'd probably leave with debts, but she didn't think she'd be so broke that she wouldn't be able to afford to see her friends. "It never occurred to me that I'd owe £20,000," says the 24-year-old, who graduated in 2003. "I've managed to get that figure down to £15,000 now, and I feel I'm in control of paying it back - largely because I've got a good job at Pareto Law. But I feel annoyed because I worked hard at university, and I don't feel I can even reward myself by visiting the friends I made while I was there."
Students leaving university owe an average of £13,500, according to a recent Barclays Graduate Survey and many graduates, like Nicky, borrow a great deal more. From this Autumn The top-up fee generation has an additional £5,400 to £8,400 added to their university bill and Barclays Bank has estimated that, by 2010, the average end-of-study student debt could reach a colossal £33,700. There is a little comfort for this class of 2006: from this year there will be many more bursaries on offer. But these are mostly for people from low-income families. For those not in that category, finances are likely to be a struggle.
The student loan forms the bulk of most students' debt and according to one new study by the debt solutions consultancy Thomas Charles, 64 per cent of students also have an overdraft of up to £700. Meanwhile, 57 per cent have credit cards, with 15 per cent of them owing between £500 and £5,000.
Even when graduates enter the world of work, it doesn't necessarily mean they're able to watch their debts decrease, says James Falla, managing director of Thomas Charles. "They find themselves living and working with others who are themselves earning good salaries with high-cost lifestyles. Trying to keep up with these lifestyle expectations, combined with existing student borrowings, means that many graduates just get further into debt."
Veronica King, vice-president of welfare for the National Union of Students (NUS), says she is "massively worried" about the situation. "We know for a fact that there are proven links between levels of debt and mental health," she says, adding that high numbers of students in higher education are seeking counselling to help with both their credit problems and the psychological stress of coping with debt.
But not everybody is so pessimistic. "We believe the new system is better and fairer by far," says a spokesperson for higher education action group Universities UK. "With the student loan, students are only required to repay nine per cent a year of the excess of their salary over £15,000. So £18,000 and you only repay £5.19 a week. Earn less than £15,000 and you don't pay."
Director of the Office For Fair Access, Sir Martin Harris, adds, "From 2006 just over half of the students expected to apply to higher education are likely to benefit from over £350m a year of extra money set aside by institutions in the form of bursaries or scholarships - that's on top of full or partial grant support from the Government."
Angharad Little, 23, says that graduates themselves are finding ways to adapt to rising debt. "I moved home after graduating for a while because I didn't have enough money to survive living independently. It helped enormously with paying off debts," she says. "My parents have been very supportive financially."
Perhaps not surprisingly, parents are willing to do what they can to help, according to the latest NatWest Student Money Matters survey. Almost a third were found to give their children regular amounts of money to fund their university education.
But it doesn't help that many don't even feel they can turn to their parents. According to a survey by Lloyds TSB, four out of 10 students lie to their parents about their financial situation, with more than a third hiding their bank statements from them.
The situation needn't appear so gloomy. There are plenty of examples of young people adapting, for instance, by postponing going to university in the first place. "I decided to save up some money first and go to university later," says Mark Perrott, 27, who is now in his first year at Birkbeck College, University of London. "I also decided to study my degree part-time so that I could earn while I learn."
For graduates lucky enough to get on top graduate recruitment schemes, the picture is brighter still. "We offer a £7,000 interest free loan when students join to help them with debt," says a spokeswoman for the financial services company Deloitte. "In fact, £1000 can be taken as soon as a graduate accepts an offer at Deloitte."
Carl Gilleard, chief executive of the Association of Graduate Recruiters (AGR), adds that some graduate employers offer golden hellos, while graduate wages can be impressive too, with a recent AGR survey revealing the average graduate starting salary to be £23,011. "At that rate, with some decent financial management skills, most graduates could probably cope with paying off their debt," he says. "But of course not all graduates start their working life in graduate jobs and so there's every chance they'll earn quite a bit less - £17-18,000."
The four per cent drop in applications so far this year indicates that some young people are deterred from going to university in the first place. John Golding, professor of applied psychology at the University of Westminster, adds, "We found that the stress caused by student debt can lead to students seriously considering dropping out."
Meanwhile, Emily Taylor, 22, says there are ways that students can optimise their career opportunities. "Having graduated from Sheffield, I wanted to work in London, but when I applied for jobs, most companies wouldn't consider me because of my lack of work experience. But then through the agency Pathfinders, which specialises in graduate recruitment, I got a two-week work placement where I seemed to impress my bosses enough for them to offer me a full-time position. With £17,000 worth of debt, it was a relief. Today's graduates have to be prepared to make sacrifices, like working for nothing for a while, to get a good job that will help them pay off their debts quicker."
'It's unfair that some people can't do a postgraduate course because of money'
Since graduating from New College Oxford, Joe Atkins, 24, has been studying an MA at the Royal Academy of Music. So far, he has accrued £37,000 of debt.
I took out the full student loan for £12,000 for my undergraduate degree, which feels a lot. If you want to do an MA, like I did, you're looking at having to borrow a great deal more too. In my case, I have borrowed the £12,000 tuition fees from a family friend and, in addition, I've had to borrow another £10,000 for living expenses from the bank. I do feel quite a bit of anxiety about how I'll pay it back. When you commit to that amount of money, it does bear heavily on your mind. But it was such an opportunity to be offered a place at the Royal Academy of Music that I decided to go for it.
Even now, I'm struggling financially and I think this month's rent may have taken me into an overdraft. So I'm not surprised that some people I know who got offered places on postgraduate courses felt they had to turn them down because of the amount of debt they'd have to get into.
Fortunately, my bank loan isn't up for repayment until 2008 and I also have some time before I pay back the family friend and the student loan, so I don't feel pressurised in terms of time. But it's a lot to have hanging over you and I think it's really unfair that there are some people who desperately want to do a postgraduate course, but they can't because money gets in the way.
How to manage debt
When you're a student...
* Think before you borrow
Many banks offer interest-free overdrafts, while credit card companies tempt you with an instant solution to your financial problems. But remember you will need to pay back the money when your course ends - often at high interest rates.
* If you must borrow, always opt for the Student Loans Company first
The government ties the interest rate to inflation and you don't have to start paying back the loan until you are earning a certain amount.
* If you do apply for credit, be careful
If you find you have to borrow from banks or on credit cards, only apply once you've decided on the best deal.
* Get a part-time job
According to the Association of Graduate Recruiters, employers tend to be impressed with graduates who can demonstrate good time management and financial management skills. But don't let your studies suffer.
* Don't forget your family
Despite debt increasing and part-time work becoming a necessity, the good news is that almost a third of parents are now giving their children regular amounts to fund their university education. A quarter of students get money from their parents. On the other hand, 29 per cent get no assistance from them at all.
When you're a graduate...
* Set up a detailed budget
Work out how much you bring home each month after tax and National Insurance. Then make a list of everything leaving your account each month - including your credit card bill, rent, bills etc. Add to this the amount of money you need for food and travel costs. Deduct this from the amount entering your account, and set yourself a realistic goal of how much you can pay towards your debt each month.
* Prioritise your debt
While your biggest debt is likely to be your student loan, the interest rate on this is favourable. This is not the case for credit cards and some other loans. Work out which debts are costing you the most in terms of interest rates and pay off the most expensive first.
* Consolidate your debts
You want to pay the least interest you possibly can. Often the best way to do this is to consolidate your debts into one single loan. But don't enter any credit agreements you can't afford and always compare interest rates and read the small print.
* Set up direct debits
The benefit of this is that the money will leave your account automatically, meaning you don't get a chance to spend it first. If you're struggling with any repayments, let your lenders know immediately. Sometimes, they may let you reduce your payments for a while.
* Get help earlier rather than later
There are many organisations providing free advice including the National Debtline (0800 731 7973), the Citizens Advice Bureau ( www.citizensadvice.org.uk) and the Consumer Credit Counselling Service ( www.cccs.co.uk).
'Credit card companies should be more responsible'
Kim Bithel, 23, graduated from the University of Central Lancashire two years ago with debts of £17,500.
Obviously, I expected to owe a bit on a student loan and perhaps have a slight overdraft, but I actually left university owing £12,000 on my student loan, £3,000 on my overdraft and £2,500 on credit cards.
Leaving university was the scariest time because I missed some payments and defaults on my credit cards and I am only now really getting my head around it all.
In fact, I feel quite strongly that credit card companies should have more responsibility when it comes to students. When I went to university, they were biting my hand off for me to take credit and, of course, being young and away from home for the first time, it's hard to resist. I ended up with three credit cards pretty much maxed out within a very short period of time. Although I choose now not to have credit cards, I would find it very difficult to get one anyway because of my poor credit rating.
I'm still in £12-15,000 worth of debt now. But I'm not too bothered about my student loan because I see that as an investment and there was no way I could have avoided it. Also, you can pay it back over a long period.
For the others, I sought advice from a debt help company, who helped me set up a manageable way of budgeting and starting to pay money back, and I feel much more organised and in control now. It helps that I have a secure job.