What can you do if you get yourself into debt at University?

graduation-caps-thrown-in-air

 Hello Dear Reader,

If you are struggling with debt after graduating from university, you are not alone. On top of tuition fees and maintenance loans, which are now estimated to average £44,000 in the UK, many students graduate with other significant debt.

 

Poor money management is considered by the media to be one of the main issues, with research by the University of Sheffield and comparethemarket.com discovering that ‘students will blow just over £2,700 of their loan in the first fortnight’. However, misleading student bank accounts also account for debt, as they add significant interest to overdrafts after students have finished university. Initial low interest rates, that rise significantly later, on credit cards are also a common cause for overspending and debt.

 

Whatever the reason for your debt, it’s important you seek help straight away, and here’s what you can do:

 

Talk to your family

If your mum and dad didn’t know about the loan or credit card you are struggling to now pay off, you perhaps don’t want to tell them. However, they may be able to help. If the debt is relatively small they could pay it off and set up an arrangement whereby you pay them back. While it might feel like an awkward solution it removes any interest accumulating on the amount owed and ensures you are debt free from creditors straight away.

 

Do not take on any further credit

It’s very important that you refrain from obtaining any more credit while paying off existing debts. If you’re struggling to make ends meet while repaying your debts it can be tempting to turn to credit but borrowing more money escalates the problem and increases your debt level. Debt is a slippery slope so if you’re struggling to make ends meet, look at ways you can make cutbacks or seek further help. Don’t take on any further credit.

 

Seek expert advice

There are numerous free debt advice companies out there offering help and support on clearing debts. Get in touch with someone and find out what options are available, you’ll feel better for talking and you could put down the phone with a clear point of action in mind.

 

Take on a debt solution

There are various debt solutions available, so it’s important you take time to weigh up your options. A Debt Management Plan is an effective solution when it comes to clearing debts, as it involves you paying one monthly payment based on what you can afford. This is usually a reduced amount however so while a DMP is more affordable, it may take you longer to repay your debts. Creditors can still add interest and fees to the amount which will also expand your plan.

 

An IVA (Individual Voluntary Arrangement) is another example of a solution that may be suggested. You pay a set monthly amount based on what you can afford but as this is a formal solution you pay what you owe for a set period of time, usually five to six years, and at the end of the agreement the rest of your unsecured debts will be written off. Interest and charges will also be frozen in a DMP. You can read more here about IVAs or take a look at the differences between them and a DMP. If you are in debt and struggling it is recommended you talk to a debt expert. They will be able to look at your personal finances and circumstances and explain what options are available to help you.

Until tomorrow,

Love Froogs xxx

This is a sponsored post. Of course, not all students get into massive amounts of debt and lots of students get family financial help. However, it’s more the case that students are finding college life increasingly expensive and some students, like some people, find debt of any kind a spiral. I always invite comments but let’s not be too judgemental of anyone who found themselves with tricky student debt. There is help out there.

Advertisements

15 thoughts on “What can you do if you get yourself into debt at University?

  1. My youngest daughter finally graduated last year after a financially gruelling 4 years! Her student debt is nearer the 60k mark. Student Loans Company also add interest to the debt after graduating so even though it’s taken from her teacher salary, it never decreases much. Crazy! I doubt she will ever be able to repay it in full.

    Liked by 1 person

    • With new students, they add interest from day 1. Under the old system, the amount of the loan was just indexed in line with inflation. Now it actually increases the debt in real terms. But at least you don’t have to struggle to repay if your earnings are below threshold. It would be a disaster if it was like a mortgage which keeps on having to be paid even if you lose your job

      Liked by 1 person

  2. My education would be unaffordable now. Poor kids. Unless parents are rich the students will be in a financial pickle. I do think fewer students are going to university now and that will affect our economic growth in the future. Scary Times. I am glad that I have access to this site and others to find ideas to save and extremely fortunate that it was cheaper for me in the olden days.

    Liked by 1 person

  3. At uni we were supposed to top up dd’s maintenance loan by just under £2k per annum, as she wasn’t eligible for the full amount (the maintenance loan is influenced by parental income even though the loan is in the student’s name). However DD just doesn’t like alcohol (can she really be our daughter?) and so never did drinking marathons, and said we need not give her the top up cash. She never went overdrawn. She said most of her mates were struggling with money and we guesstimated they were spending at least £30 on drink per night out, and of course loads o’ dosh during freshers’ week. I have to say, the first term was a permanent state of hangover for some of her flat mates in hall which probably means any budgeting went out of the window. I have to say though that as there is no rent element in student loans, we were told by the local college’s finance officer that ‘parents paid it’ …. and students could live on baked beans. Like most students DD took holiday jobs but she earned nowhere near enough to pay a year’s rent, and she knew many people who’d put off uni for a year, to have enough in hand to pay, but it was a struggle. I don’t know, but, I think may be rent problems are a fair size source of student debt.

    Liked by 1 person

  4. Finding a deposit for their second year rental property is a big cash flow hit. And letting agents are about as tricksy as it gets and very few of them get their deposit back in full. Certainly not in time to pay the deposit on a different property for third year – which many of them have to do because for one reason or another they can’t carry on with the same group of flatmates in the same property

    Liked by 1 person

  5. Thankfully in Australia our student loan is government run and always capped at 3% interest for the lifetime of the loan. You start paying back when you start earning $58,000 and then pay an amount reflecting what you earn.

    Liked by 1 person

  6. It must be a dilemma for parents if they’re asked/expected to stump up a fair whack of childrens university costs, as the only chance their adult child will get of buying a house will probably be if the parent stumps up another fair whack for a deposit. The parents still have to retain enough money for their own future retirement and possible social care/nursing home fees. There isn’t a limitless pot of money unless you’re one of those fabled cash-rich-time-poor people!
    I think in future a lot more young people will be exploring other avenues than the traditional university degree started straight after A levels. Apprenticeships, studying part time, O.U. courses, joining as a ‘mature’ student when you’ve got some earnings in the bank. I certainly won’t want to be a new graduate now, saddled with all that debt and a hugely uncertain job market.

    Liked by 1 person

  7. Yes, this is very true. It was a huge financial strain on us, the parents, for 2 out of 3 children. Apart from being good universities and good degrees, I don’t feel it was value for money based on the actual learning time. Some weeks they’d have just one day in uni. Luckily my son got in when the tuition fees were round about 3k per year. By the time my daughter went a couple of years later they’d tripled to 9k per year. Just another political mistake by giving universities the option to increase -of course they’d choose to increase!!!

    Liked by 1 person

  8. In the US everyone pays for college, so you either finance yourself through it by taking part time jobs while you study or saving from birth. It’s not unusual to take more than 4 years to graduate, can’t students do that in the UK? Also people take degrees while working full time, through online, weekend and evening classes.

    Liked by 1 person

    • University fees and accommodation fees have to be paid in advance, that means paying about £20,000 a year upfront. There are no scholarships in the UK and part time jobs pay about £6000 a year, so that leaves them £14,000 short. They have to borrow the money for fees and living expenses. They leave college in a lot of debt.

      Liked by 1 person

  9. I think it is really important, especially as interest is now being added from day 1 that all students should be made aware of the consequences of the application of compound interest. All students should be encouraged to pay their annual interest every year. This is especially important for those graduates who will not meet the earnings threshold for some years or even decades. They will have a very nasty shock in store. Paying the interest means that your capital loan amount will not increase. For those parents who are able to assist their student offspring this is a really effective way of doing it. A better birthday or Christmas gift than any amount of stuff.

    Liked by 1 person

  10. Great post! Very relevant as so many people are just buried in debt. Being from the US is interesting to hear the perspective of those from the UK. Its really just the same problem all around the world of too much debt. Its a terrible thing. Thanks for posting this! I wrote an article on this topic from the millenial perspective it might be worth a read! https://yourfinances.blog/2016/12/17/a-millennials-perspective-on-debt/
    Thank you for posting this!!

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s