Over the past few years I have come across more and more graduates who have found themselves with significant debt problems after leaving university. Having spoken to many young people I believe that university students are often oblivious of the difficulties they will face trying to pay off debt once they graduate from university.
While studying most students have to live within relatively small budgets. Nevertheless, credit is widely available. All students have access to Student Loans Company loans. In addition it is relatively easy for students to take credit from their bank in the form of overdraft facilities, credit cards and personal loans. Many students feel it is perfectly acceptable to borrow while they are at university. I agree that borrowing is now a fact of modern student life. However it is important that students be realistic about how difficult it will be to repay their debt once they graduate.
Living Expenses increase significantly after Graduation
In general Student living expenditures particularly accommodation costs are relatively low. Given this many students fall into the trap of thinking that once they graduate and start working they will have money to burn and repaying their debt will be easy. Unfortunately life after graduation often does not work out quite so simply.
Once a student graduates and finds work they may have a starting salary of £15,000-£20,000. This is significantly more than the income they had as a student. However their lifestyle and particularly their living expenses will also significantly change.
They will often have to relocate for work and find accommodation which is significantly more expensive than they have been used to (especially in London and the South East). In addition once in a work environment recent graduates are likely to make friends and socialise with people who are earning far more than they do. As a result the amount spent on social activities will be far higher than they were used to as students.
After Graduation Debt often increases
Because of the increased cost of living and socialising more often than not many graduate’s debts significantly increase when they start working. Banks seem all too happy to extend credit facilities to graduates who they see as a lucrative customer base for the future.
As a result, I have come across many graduates between the ages of 25 and 30 who are yet to make any inroads into the repayment of their debt taken out when they were students. Given this, I believe it is very important for students to think very carefully before borrowing to supplement their lifestyle while away at college or university. The result of extravagant borrowing while studying could be many future years living with and repaying the burden of this debt.
Awareness of this situation is not only important for students. Banking organisations should also be concerned at growing levels of debt within their younger client base. As I have discussed in a previous article I believe that young people are far more likely to declare bankruptcy now than ever before. If this happens then significant amounts of debt may not be repaid to the banks.
