The rising price of student debt

Drug-running. Theft. Now loans and fees are forcing graduates to take ever-more desperate steps.

Hannah Thompson's four year jail sentence for smuggling pounds 500,000 worth of cocaine into Britain earlier this week, sent ripples through our universities. The spectacular fall from grace of this former Young Musician of the Year semi-finalist was set, so she told the court, against a background of student debt and hopeless addiction, further underlined by her gaunt appearance as she stood in the dock of Isleworth Crown Court.

Thompson, the 25-year-old daughter of a Roman Catholic deacon, told how she became involved in a cocaine-smuggling racket worth pounds 500,000. She described how alcohol and drug addiction catapulted her into an increasingly "chaotic lifestyle" which left her suffering from depression and anorexia.

Lurking in the background of Thompson's account of her wasted youth was pounds 7,500 of student debt. This, she says, was one of the reasons why she agreed to do the Brazilian drugs run which now leaves her facing a prison sentence.

Last week, Helen Eckstein, a nanny from Bexhill, East Sussex, was in court. The 22-year-old was ordered to do 80 hours' community service and pay pounds 170 costs after she was caught stealing from her employer's handbag. In her defence, Eckstein said that she had incurred pounds 5,000 of debts while studying at Wolverhampton University and that she had taken the money to stave off creditors.

Both these stories are extreme examples of the plight of graduates - as are the cases of students turning to stripping or lap-dancing or even prostitution to make ends meet.

Students making money by dodgy strategies is nothing new. Neither is student debt. But since the introduction of student loans eight years ago, the nature of both has changed.

It is well documented that the current batch of undergraduates and recent graduates are experiencing an unprecedented level of debt. The National Union of Students estimates that, on average, graduates owe between pounds 6,000 and pounds 8,000 by the time they are awarded their degrees.

Gwenda Thomas, author of Student Money Matters, believes that it is overdrafts with banks, rather than student loans, that are the greatest perpetrators of debt misery.

"Banks are quite happy to give up to pounds 7,000 worth of loans without charges on the understanding that they are paid back six months after a student gets a job," she says. "The charges soon start mounting up if payment is not made."

With the introduction of tuition fees this autumn, some higher education analysts fear that students will be unable to cope with their new financial commitments. Peter Robinson, a senior economist at the Institute for Public Policy Research, a left-leaning think-tank, believes that, although the recent court cases are extreme examples of debt, students will suffer during the introduction of the income-contingent pay-back scheme.

"What is clear," he says, "is that students in this transition period will probably be the ones who find it the hardest to cope. The Government hasn't really done a good job of explaining how paying back student loans is linked to how much a graduate earns. And until the system gets into full swing, many students are going to have a hard time of it."

In America, where students pay their own course fees and living costs, leaving university with tens of thousands of pounds' worth of debt is expected.

"There is a higher employment rate among American students than among their British counterparts," says Robinson. "Having a part-time job in America is second nature to students, as is having a massive debt."

Whereas the economy of most American university towns is built around their part-time student labour force, many British students struggle to make ends meet. The few low-paid casual jobs on offer operate without the structures of the American system, which gives students regular work and reasonable pay.

Robinson admits that one of the current traps for students encountering significant levels of debt for the first time is the lack of official guidance on offer. "Most students are given very little training or information on how to handle their finances," he says. "And I'm in no doubt that this contributes to the debt problems they face."

Susan Blackmore, a senior psychology lecturer at the University of the West of England, in Bristol, also believes that the next few years will be difficult ones for many students. "I do not see why it should get any better for students dealing with debt in the short term," she says. "At the moment things are pretty dire and they will no doubt suffer in the transition stage."

Free education is a British tradition, and it is, analysts argue, a way of thinking that many find hard to let go of. So it comes as no surprise that students who are the first to experience the change will find it the hardest.

Professor Alan Smithers, director of the Centre for Education and Employment Research, at Brunel University, says that pressures on students are increased because they get paid so little per hour. "Students have to work very long hours and that often gets in the way of their studies," he says. "Many miss lectures because of work commitments.

"Things will get better as it becomes more usual to take out student loans to finance degrees. Only when debt becomes an integral part of a student's lifestyle will things improve. There will be a difficult interim period, and you will find some people doing extreme things for easy money."

Students are changing their mindset and expectations. Many of them are already doing significant amounts of paid work while studying for A-levels. They know that debt is inevitable; they know that even with a part-time job they will still owe thousands of pounds. But, for our first generation of hocked-up-to-the-eyeballs graduates, knowing this doesn't make things any easier.