In a survey of over 1000 students, research from Future Finance has found over 30% of these have turned to payday loans, credit cards and overdrafts to cover financial expenses while at university.
This suggests a third of students are relying on money sourced outside of student grants and loans. 70% of students admitted that Government funded loans did not cover the cost of their expenses and were therefore turning to other sources of money.
A payday loan is a relatively small money loan, however it is often accompanied by a high interest rate. They are called ‘payday’ loans as they are most often used by workers who need to briefly borrow some money on the run up to payday.
The real cost of payday loans come with missed repayments and extra fees. Many of these loan companies, such as Wonga, have attracted negative attention from the press for their exploitation of borrowers.
Furthermore, a quarter of students did not think of payday loans and credit cards to be forms of debt. Recent research has also found that millennials are far more likely to have taken out loans such as payday loans and credit cards of a higher cost, due to poor credit scores, which only gradually get worse the more loans that are taken out.
The research has raised concerns that students have a poor knowledge of finance, with 40% of those surveyed not knowing what an APR (annual percentage rate) was. Future Finance CEO, Brian Norton, told The Telegraph that handling your own finances at uni can “be a steep learning curve.”
This also furthers concerns that student loans are not enough to cover student expenditure, as according to Natwest’s student living index, university costs are higher than ever before. Housing prices have also risen too, placing a further strain on students. As the maintenance grant is no longer available as simply a grant, this may cause further worries for students as well as parents, who may not be able to support their children financially, forcing them to look for alternative forms of income.
Shelly Asquith, NUS officer for welfare, was quoted as saying, “We need urgent action to reinstate grants and control the growing costs associated with study.”
(Image: University Herald)