The dangers of becoming desensitised to debt
With University Degrees now costing a maximum of £27,000, are students becoming desensitised to debt?
With University Degrees now costing a maximum of £27,000, are students becoming desensitised to debt?
We were recently delighted to have our article on students an debt in the National Association of Student Money Advisers (NASMA) student publication Student Money Matters. You can view the publication here (article is on page 103 when typed into the search).
Since 2012 English universities have been granted permission by the UK Government to charge tuition fees of up to £9,000 per academic year. The Sutton Trust has stated that those who graduated from English universities last year – under the £9,000 fees regime – owed an average of £44,000.
The size of tuition fees and the nature of the repayments aren’t in themselves an immediate concern as you only repay the loans when you’re earning above £21,000. However, knowing that you’ll be leaving uni with that much debt before you’ve even started your career may be causing you to look at other types of credit and think “Why not?”
The temptation to rack up debts is an easy one to understand. The cost of living has risen at a much faster rate than income anyway, but this will be felt much more by someone who is only able to work part-time and in generally low-paid positions. The impact of this is that outgoings represent a much higher proportion of your total income. If you’re a student, then your list of outgoings will also include college fees, books and equipment.
Whereas our grandparents paid for everything in good old cash, credit has now been around for generations and has become normalised. Buying what we want is almost considered an entitlement.
Over-indebtedness is reaching huge levels among the most vulnerable groups in UK, which includes students, and currently matches levels reached before the 2008 financial crisis.
According to Debt Advice Foundation CEO David Rodger, young people are in danger of embracing debt as a ‘way of life’.
“We’re seeing worrying signs that the greater availability of credit has meant that younger people have become "desensitised" to debt.
"Credit has blurred the lines between borrowing what you don’t have and spending what you do, which is a vital distinction." he said.
Despite being unable to access many types of credit since the banks became more stringent with their lending criteria, students can be targeted by credit card companies and those offering short-term “student loans” and it can be very easy to fall into the ‘credit trap’.
However, debts such as credit cards and personal loans run up during your time as a student should be looked at entirely differently to tuition fees, as you must repay them no matter how much you are earning. We advise people to view their student loan in the same way as they would tax and national insurance as you don’t pay it back until you meet the criteria and it is deducted before you get your wage.
Whilst financial pressure can cause a strain, there is no reason why it should threaten your academic success if you manage your money correctly.
No one wants to start their first graduate job with their first wage packet already spent on debt repayments. Making sure to plan and budget is essential in stopping this from becoming a reality. You can download our free of charge budget planner.
If you’re currently struggling to meet your debt repayments, please call Debt Advice Foundation on .
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