Whether this year’s A Level students are celebrating, commiserating or going through clearing, the latest survey from leading online instant credit information provider, Equifax, reveals that school leavers may be under-estimating the cost of living while at university and are considering bancruptcy as their way out. It’s a route Equifax is warning strongly against.
Every year the cost of education rises, yet it appears prospective students and parents aren’t taking heed of the warnings. 61% of students currently studying who responded to the Equifax survey*, claimed to save before university, but 64% of those saved less than £1,000. With tuition fees costing up to £3,000, Equifax is concerned that debt will be an issue for university students even before the first term has started.
The survey also revealed that 11% of respondents would consider taking advantage of the relaxed bankruptcy laws if they get into too much debt. However, Equifax warns that bankruptcy could close the doors on a wide variety of careers opportunities, from working in finance or law to running their own business, and will affect their credit rating for at least six years.
The cost of university is blamed for the high number of ‘twenty-somethings’ declaring themselves bankrupt. But a student loan still remains to be paid, even if the graduate declares themselves bankrupt.
Neil Munroe, External Affairs Director for Equifax, comments, “Students need to worry about more than just tuition fees. But our survey shows that many are in the dark when it comes to estimating the cost of living. Small things like travel to campus every day, TV License fees, phone bills and socialising all add up and spending can spiral out of control without proper planning. And what that means is they have a debt hangover well into working life.”
The National Union of Students (NUS) predicts that the cost of being a student in 2006/2007 will be around £8,000 a year. With potential income from a student loan of just over £4,400, the majority will suffer a shortfall of over £3,600 - far more than their savings of £1,000. NUS figures also estimate that students spend £100 a month on socialising alone, so once rent, bills, travel and other living expenses are paid for, students will often need much more than they think. Indeed, according to the Student Loans Company, former students have fallen £186 million behind with their debt repayments
Neil concludes, “Following the recent Government Survey of Student Finances, Higher Education Minister, Bill Rammel urged prospective students to find out and apply for financial support as early as possible. I would echo his sentiments. Financial planning is not something that students should put off and it is not something that should only be considered once students are at, or have left University. The earlier financial planning is started, the easier debts can be to manage and minimise. Bankruptcy should not be considered as a contingency plan after graduation but as an absolute last resort.”
