New YouGov research commissioned by Equifax *, the credit information provider, shows how much students rely on short-term debt, particularly overdraft facilities, to get them through university
Exceeding the overdraft limit without approval can cost £100s or £1,000s a year warns Equifax (1). With tuition fees costing up to £9,250 (3) per year for students in England, 29% of students describe their overdraft as an essential that they rely on every month.
2 in 5 of students (42%) said that they have an overdraft on a bank account held in their name, whilst the cost of arranged overdraft facilities can be managed, more worrying is the fact that 18% of students have gone over their agreed overdraft limit without the lender’s approval.
A further 14% have asked to increase their overdraft limit. It’s perhaps not a surprise then that a separate survey found that 41% of students are concerned about meeting their financial commitments over the next two years (4).
“Overdrafts are a debt like any other credit agreement and they need to be well managed. A £1,000 agreed overdraft can cost up to £20 a month totalling to £240 per year (5), if the person is found exceeding an overdraft limit it can cost up to £6 per day or £25 per transaction.
“These costs can soon mount up”, explains Lisa Hardstaff, consumer credit information expert at Equifax. “Not managing finances well whilst at university can affect an individual’s ability to obtain credit after graduation. It helps for students to think about a credit report as a financial CV that illustrates the history of their financial behaviour.
Whilst it’s encouraging to hear that the government is looking at ways to ease the financial burden for students, it is important to recognise that poor financial management at university can impact negatively on future financial decisions.”
Websites like The Money Advice Service offer detailed advice on student loans and student finance, how and when to make repayments and what the law says.
References:
(1) https://www.moneysavingexpert.com/banking/cut-overdraft-costs
*All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2122 adults. Fieldwork was undertaken between 2nd – 3rd January 2018. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).
(4) All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,136 adults. Fieldwork was undertaken between 16th and 17th October. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).
(5) https://www.moneysavingexpert.com/banking/cut-overdraft-costs
(6) https://www.moneysavingexpert.com/banking/cut-overdraft-costs
