Whilst the government, banks, companies and most consumers are cutting back on borrowing, over half a million students are heading off to university this year with the prospect of taking on an average debt of £53,000.
Whether that’s right or wrong, this amount of money comes with a great deal of responsibility. Here are five reasons offered by student money website Save the Student! as to why students deserve an education in managing their money (or lack of it).
“Educated into debt but not about debt”
If students are expected to take on unprecedented amounts of debt to further their education then, as the money education charity Credit Action argues, they need to be better educated about both personal money management and the implications of the new student finance system.
Getting into debt is something we’re told to avoid at all costs by our parents, peers, the government, the media and those terrible daytime television ads. Yet debt is something thrust upon students who are then left to ponder how to free themselves from this ball and chain.
The obvious solution is to clamber on to the career ladder as quickly as possible, but at a time when jobs in this country are scarce and competition fierce, the burden can appear to be unmanageable to some.
Misinformed students put off from applying to university
There is another side of debt education which also needs to be brought to the attention of prospective students. Whilst many types of debt should be seen as ‘bad’, the debt students are left with from university is quite different.
Unlike commercial borrowing, student loans are structured to be affordable in that minimum repayments are only due in small amounts proportional to earnings, above a certain salary and over a long period. They also have no effect on a graduate’s credit rating and are written off after 30 years.
Unfortunately students have been let down by a failure to get all the facts across. With tuition fees almost trebling for this year’s intake, the confusion is greater than ever.
A lack of understanding about the new student finance system has already put some bright students off from applying for university at all. According to UCAS, total applications are down by 7.7% this year. This is despite the fact that a university education, whilst being more expensive overall, is actually more affordable for most students under the new system because of more favourable repayment conditions.
Missing the small print
A student survey by Save the Student! earlier this year revealed that 68% of current students are worried about having to repay large sums of money borrowed from banks during university.
The majority of undergraduates rely on bank overdrafts to supplement the growing costs associated with higher education. Without such a facility, 45% of students surveyed believe that they would have been put off from attending university.
However half of students are unaware of their bank’s repayment conditions on interest-free student overdrafts of up to £3,000. Banks typically require students to repay a large proportion of their overdraft within a year of graduating to avoid high interest charges, catching some graduates out.
The survey highlights the need for more financial education for students in this country who, like most consumers, can often overlook the important details confined to the small print.
The same mistakes are made every year
Leaving the security of home for the first time is a big step for any young adult. There is a lot to deal with, not least having to understand, sort out and manage personal finances.
Common tasks such as setting up a current account, arranging an overdraft facility, budgeting and paying bills on time are skills which are picked up either at the point of need or in the aftermath of an easily made but costly mistake. Every year the cycle of confusion and worry about money among new students needlessly repeats itself.
Parents of course have an important role to play in ensuring that their children can support themselves financially and manage their money effectively throughout their degree. However this kind of education should also be the responsibility of the very institutions which hold our professional teachers: colleges, universities and schools.
Personal finance is not taught in schools
Despite its growing importance, the subject of personal finance is still yet to feature in the national school curriculum. Understanding the value of money, how to budget and spending to your means are incredibly important lessons which need to be taught from a young age. You could argue that if these lessons had been taught in schools already, our country today would not be in so much of a financial mess.
The emphasis for those in the education system is on getting good grades to land a well paid job. Ok, fine, but what if things don’t work out so smoothly? Getting a job is just one side of the equation. Knowing how to spend what we earn in a responsible way is the other, and this deserves much more attention. Whether children end up going to university or not, the teaching of money management as a life skill would be invaluable and ultimately lead to a population that is much better off.
Where can students learn about money?
All the information is out there but it needs to be made more accessible for students and pitched at their level. In a determined attempt to correct the balance, the team of students and graduates at Save the Student! have written The Essential Student Guide to Finance for 2012.
The free eBook provides new students heading off to university with all the important financial information and practical advice that they need in one concise publication. Topics include budgeting, student finance and funding, student banking, understanding debt and money saving techniques. The writers are confident that the information in the book can reduce the debt of some students by as much as £7,000 a year.
The book is now available for free download from
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