Students using credit cards and payday loans to fund education
We commissioned a survey so we could better understand UK students’ financial habits. We were shocked by some of the results – not least, that almost a third of students turn to credit cards, overdrafts and payday loans to cover their living costs at university. These can be very damaging for students as the interest rates can be high, especially if they’re unable to repay the debt in the short term. This survey was performed by Yougov.
According to the NUS, students face an average annual funding gap of more than £7,600 when factoring in their living costs on top of tuition fees. Our survey certainly backed that up as 70% of students admitted they do not think their government loan is enough to cover all of their expenses at university – perhaps accounting for their reliance on riskier forms of funding, such as credit cards. Worryingly, almost a quarter of students we spoke to (24%) do not even consider credit cards, pay day loans and overdrafts as forms of debt.
There’s education. And then there’s financial education
We found there is a stark knowledge gap when it comes to financial understanding. Although 63% of those surveyed consider themselves to possess a good grasp of finance, 40% of them admitted they do not know what APR stands for. (It’s ‘Annual Percentage Rate’).
We also spoke to students’ parents. Our survey results suggested that the parents should be doing more to impart a positive financial example to their children. 81% of parents believe they are qualified to financially educate their children – yet just 39% of students cite their parents as their main financial influence.
Students need support
Brian Norton, CEO and founder of Future Finance, said: “It is worrying that significant numbers of students rely on credit credits, payday loans and overdrafts without even seeing them as debt. These products are typically not tailored to students or to the lifecycle of higher education and we would encourage students to research all financial options available to them before choosing which form of credit they need to help them through their university life.
“For many students, going to uni is the first time they’re required to stand on their own feet financially. It’s a big change in their life and it can be a steep learning curve. Schools, universities and parents alike have a duty to support students and help nurture their financial awareness.
-31% of students using credit cards and payday loans to cover university living costs
-24% do not think of credit cards, overdrafts and payday loans as debt
-70% of students admit their government student loan does not cover expenses