Students fear financial misery as debts mount

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Written by Mark Burton
Know Your Money editor

Students are growing increasingly concerned about how to effectively manage their finances during their time at university, with one study indicating that students in Scotland are particularly worried about commercial debt.

According to a comprehensive annual survey carried out by the National Union of Students (NUS) in Scotland, young and mature students alike share a common fear of commercial debt, with more than half of the 6,000 people polled currently owing money to commercial lenders.

Meanwhile, two-thirds of students were indebted to friends and family, indicating that the bank of mum and dad may also be feeling the strain.

And with thousands of students set to return to university or enrol for the first time next month, concerns about such debt are only likely to grow in the coming weeks, leaving many to wondering where to turn for advice.

Overstretched, overdrawn and unsupported

Although the NUS Scotland report, entitled Overstretched and Overdrawn, has highlighted that commercial debt has become the biggest concern for students north of the border, new figures from the Money Advice Trust have shown that across the country, students could find themselves short of desperately needed advice in the months to come.

The organisation has warned that, faced with a rapid growth in the number of the calls received by the National Debtline, the telephone support service is in danger of being overloaded.

A report obtained by This is Money has shown that the number of people calling the service has increased 93 per cent in the first six months of 2009, with a total of 60,000 calls going unanswered during this period as the organisation struggled to find advisers to man the phones.

Money Advice Trust spokesperson John Elwes commented: "It's always difficult to predict demand, but there's definitely more demand than supply across the range of services on offer in the UK."

Meanwhile, NUS Scotland president Liam Burns called on politicians to do more that poorer sections of society are not left high and dry without financial support to fund university costs.

The group's report revealed that students from poorer backgrounds are considerably more likely to be concerned about avoiding commercial debt, while mature students were also found to be worried about racking up debts on credit cards and personal loans.

Where to turn

For students who are worried about their ability to fund themselves through university, taking the time to select the most competitive student account could be an effective way to avoid falling into debt unnecessarily.

With the UK job market being in such an ill state of health, prospective students who are concerned about their ability to jump straight into a job once university is over may do well to pay particular attention to the interest-free overdraft period offered on graduate accounts.

Opting for a student account with an extended interest-free period may provide vital breathing room to find employment once mortarboards have been thrown and degree certificates have been received.

Phil Cook, head of student banking at NatWest and RBS, advised: "Don't necessarily go for the biggest - look for interest fee overdrafts that start at realistic amounts and then increase over time. Look for accounts that offer guidelines on what you would possibly be able to manage at different stages of your studies."

Meanwhile, for students who are already enrolled and are struggling under the weight of mounting debts, visiting a local Citizens Advice Bureau (CAB) may be an effective way to share the emotional burden and develop a strategy for tackling repayments with the help of a qualified advisor.

Recognising the drastic effect that debt difficulties that can have on young people, the Citizens Advice Bureau has launched a new web campaign offering encouraging people not to ignore their financial problems and to seek help as soon as possible.

The campaign was developed as part of the Changing Young Lives project, which provides free and impartial advice to people aged between 16 and 25.

Among those to benefit from the initiative is 22-year-old Adila, who urged fellow students who find themselves struggling with debt not to ignore the issue and seek help from the charity as soon as possible.

"It was such a relief to talk to the adviser at my local CAB. They are there for everyone regardless of age or how big your issue," she said.

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