New students face greater financial struggles

By UK CreditCards.com

It's hard enough for uni students to balance their budgets while earning their degrees. With tuition increases going into effect this year, that challenge is about to get more difficult, according to research from Lloyds TSB.

"The rise in tuition fees will be a concern for a lot of students starting university this year and many will already be thinking about how they might fund their time studying," said Jatin Patel, director of current accounts at Lloyds TSB, in a news release. "With low average earnings, increased tuition fees may mean new students in particular face greater challenges in meeting monthly outgoings and this could affect their level of debt upon graduation."

Cost of uni going through the roof
Universities are allowed to start charging up to £9,000 per year (up from 2011's limit of £3,465) beginning with this year's new starters. While current students won't face those hikes, they sympathise with new students' pain, a September 2012 survey by Lloyds TSB reveals.student-debt

For the survey, researchers asked students who entered school last year and are returning this year what they'd have to change about their lifestyles and budgets to thrive under the increased financial pressures facing new students.

Among the findings:

  • Just under one-third (32%) said they would need to take out a loan or increase their existing credit lines to survive while in school.
  • One in five (21%) said they would need to seek employment during their time at university, even though it can be difficult juggling a job and studying commitments.
  • A further 10% said they would need to increase the hours they work in their existing jobs.
  • For 22%, financial help would likely lie in asking family and friends for financial support.
  • Seventeen percent said they would have to increase their overdraft.

Options for struggling students
With most students receiving student loans and many also eligible for grants and bursaries, the question is how to make that money last between these payments, which tend to come at the start of new terms.

Patel recommends that students open an account specifically designed for them. Many major banks offer student accounts, which tend to feature an interest-free overdraft as well as budgeting tools that help account holders stay out of debt. Some include student-friendly discounts as well.

"There are now more ways than ever for students to take control of their finances and opening a student account should be high on their list of priorities," Patel said.

If students feel the need to get a credit card for emergency purchases, they should try to get one with an introductory 0% interest period, so that they can pay for essentials for as long as a year  before interest kicks in. Such lucrative perks are often unavailable to students, however, because, being young, they tend to have limited credit histories. Fortunately, several card issuers have credit cards designed for students -- often paired with their student chequing accounts. Although these cards' interest rates tend to be on the higher side (and their credit limits on the lower side), they can help students through rough patches while at university -- and set them up with a good credit history after graduation provided the bills are paid on time.

See related: Young bloggers share the money lessons they've learned, The 10 credit card commandments for students

Published: 1 October 2012