According to financial technology company Intelligent Environments, three quarters (75%) of students polled that receive a maintenance loan feel stressed about the amount of debt they are accumulating while studying, the effects of which are wide reaching.
Over a third (39%) said their debt has prevented them from being able to afford their weekly food shop, whilst over a quarter (27%) have missed rent payments. A worrying 15% have even been chased by debt collectors, demonstrating the severity of the issue.
Psychologically, the debt-stress students experience has impacted various areas of their lives, including relationships (35%), friendships (34%) and exam results (32%).
The study highlights that almost three in five students polled (58%) run out of money before their next payment is due, with the average week for student loan funds to run dry being week six.
Defying stereotypes of drunken nights and time spent socialising, the top three items students spend their money on were revealed to be rent (78%), food (69%) and utility bills (47%).
To get by, a significant proportion of students with a maintenance loan surveyed now rely on additional sources of income to get through the term, with two thirds (65%) turning to parents or other family in times of need. Others rely on their student overdrafts (58%), dip into their savings (27%), incur further debts on credit cards (6%) and even take out payday loans (9%) to help tide them over.
NUS research also shows that almost 60% of graduates still have existing debts left over from their degree, most commonly bank overdrafts, credit cards and loans from friends and family.
Given the impact of debt-stress on students, Intelligent Environments is calling on banks to provide their younger customers with tools designed to help them better manage their finances to help them stay out of debt where possible.
The call to action is supported by the research, which states that over a third (34%) of students polled cite their bank as an organisation that could do more to help. Two thirds (66%) say debt would be less stressful if their bank offered access to a digital money management tool or app to help them manage their maintenance loan incomings and outgoings, and almost half (48%) believe they would be less likely to go into debt in the first place if they had access to this type of tool.
David Webber, Managing Director at Intelligent Environments, said: “The fact that students are taking on further debts such as credit cards, overdrafts and even payday loans to repay the money they already owe, is worrying. Debt can have a devastating effect on people, impacting everything from exam results to relationships with partners, family and friends.
“Banks need to be doing more to assist students in managing their finances responsibly to help them get through university without having to resort to more forms of borrowing. As younger generations look for digital solutions to keep on top of their spending and debt repayment levels, banks need to adapt and provide students with the digital tools to improve their relationship with money. This will help them keep on top of outgoings and monthly budgets. Greater visibility around spending habits will make people more aware of their bank balance, making it harder for them to go into debt unnecessarily.”
Shelly Asquith, National Union of Students (NUS) vice president (welfare), said: “Students are being mounted with colossal levels of debt that are increasing year on year. NUS is concerned about the impact this has on the likelihood of working class students to apply to university. We also believe that increased poverty and debt is a major factor in the sharp increase of students experiencing mental ill health.”
“NUS research also shows that almost 60% of graduates still have existing debts left over from their degree, most commonly bank overdrafts, credit cards and loans from friends and family.”