Students advised over debt

James Jones, Consumer Affairs Manager at Experian, advised: "If you are struggling don't stick your head in the stand and ignore it. Protect your credit report while you can. Seek free assistance from trained professionals who can help you get your finances back on track before you ruin your credit status and put your ability to obtain essential credit, like a mortgage or a car loan, in jeopardy for up to six years."

Financial advice for students
The NUS, Citizens Advice and Experian have teamed up to offer advice to students and recent graduates to help them structure their finances effectively and deal with debt.

"Dealing with debt can be a struggle for students and recent graduates. However, there are steps that people can take while still at university which will help them keep their finances in order for life." said James Jones.

Experian offers the following advice to students

• It is important for students to understand the credit granting process and to get into the habit of checking their credit reports from time to time. Your credit report is effectively your financial CV and you should look after it because it will not only affect your chances of getting credit but also the rates you pay. Furthermore, it can affect your ability to get a job or rent a property because landlords and employers can check the public information on your credit report, such as court judgments or bankruptcies. So, when you leave university, there will probably never be a more vital time in your life for your credit report to be healthy.
• While you study, if you take advantage of one of the special bank accounts on offer, don’t be distracted by free gifts make sure you choose the best account for you.
• Many banks will offer interest-free overdrafts to students, but remember that you will need to pay the money back when your course ends. Never go over your overdraft limit without permission. Always speak to your bank if you are struggling.
• If you are going to need to borrow additional funds, government-backed loans from the Student Loans Company usually provide the cheapest option as rates are set artificially low. But if you do apply for other forms of credit, such as a credit card, store card or personal loan, be very careful. Work out the real cost of any credit you get, including how much you will pay back in total. Draw up a budget to make sure you can afford the repayments.
• If you are struggling with any repayments, let your lenders know as soon as possible. If you keep in touch, they will try to help. They may let you reduce your repayments for a while. The same is true if your circumstances change suddenly, for example, if you become ill or your income drops. Let lenders know and get help from an organisation that provides free money advice.
• Speak to a Student Union adviser to make sure you are getting all the financial help you are entitled to.

There are increasing numbers of people opting for bankruptcy as a way of dealing with debt; however, it is important to seek advice if you considering it. Even though you may be able to come out of bankruptcy within a year, the bankruptcy usually stays on your credit report for six years. Student Loans Company loans are not wiped out by bankruptcy and will still have to be repaid in full. Even after a bankruptcy has been discharged, the fact that you were bankrupt is likely to stop you getting credit for some time – and if you are offered credit it is likely to be at less favourable rates because lenders are likely to see you as a high-risk customer. Even after six years, the effects of bankruptcy can still hit hard as mortgage lenders often ask if you have ever been bankrupt.

Key tips for dealing with debt from Citizen's Advice

• Don’t panic and don’t ignore the problem – it can seem tempting to stuff bills and threatening letters unopened into a drawer but they won’t go away.
• Avoid borrowing further to try and pay off existing debt – this is likely to lead to more problems in the long run.
• Talk to your creditors – don’t just stop payments without explaining why. They can sometimes be more understanding than you’d expect.
• Work out which debts and expenses are your priorities – mortgage, rent, council tax, utilities – and pay them first. Don’t fall into the trap of paying whoever shouts loudest first.
• Work out a budget that covers all your income and essential outgoings. Only offer to pay off debts at a rate you can keep up – it is easy to be panicked into offering more than you can afford.
• Think twice before paying for debt advice – Citizens Advice offers free advice. It has outlets all over the country and many years of experience helping with debt problems and negotiating with creditors.

Student debt – the statistics
According to Mintel ii, since the introduction of the Higher Education Bill, nearly all universities in England have announced that they will charge the maximum of £3,000 per year in tuition fees for UK and EU students, resulting in additional debt of £1,875 per student per year.

Student debt has risen rapidly over the past five years. According to a report from UNITE iii, over half of students (56 per cent) report varying degrees of difficulty with managing their finances. For a third (34 per cent) this means they struggle from time to time, for one in six (16 per cent) keeping up with their financial commitments is a constant struggle and one in 20 (six per cent) are either seriously falling behind or have real financial problems.

The UNITE report also revealed that, overall, UK students already in higher education say they currently owe an average of £5,865 as a direct result of being at university and anticipate owing £10,085 by the time they complete their studies. For the majority, this debt takes the form of a student loan. However, a third of students have an overdraft and one in eight owes money on a credit card.

For further information
For more information see www.citizensadvice.org.uk
Advice and information www.adviceguide.org.uk