Student Debt and its Aftermath

Statistics released by the government reveal that attending university now costs a staggering average of £11,000. The cost is broken down into £4,125 for tuition fees and up to £6,897 in living costs (this includes rent, food, travel and entertainment to name some of the included expenses). In 2004 the cost of studying in the final year of a degree was averaged at £8,666; in 2007 the cost has increased to £15,000.

These debts built up during studying must be paid off once a student has found employment. With the current social climate there is no guarantee that graduates are going to find employment once they have a degree and even if they do they will have other considerable costs to pay such as rent or mortgages, personal loans, car costs etc. which could mean that paying off such a large student loan proves difficult.

If this is a situation you or anyone you know find themselves in it is advisable to meet with your personal banker or account manager. You should explain your financial situation to them, your prospects and try to arrange a payment plan that you can afford with the salary you may be paid. If you cannot get help from your bank there are other options you can consider.

The first thing to find out is your credit rating. The Consumer Credit Act 1974 placed in law the right of any consumer to gain access to a copy of their credit report.

The credit rating score takes into account a consumers past ability to repay loans, make monthly bill payments and service their other debts with the resulting score aggregating their financial history.

The credit score is then used as a guide by lenders to decide whether or not they feel you are a suitable candidate to lend to. If your score identifies you as a high risk then it is likely you will be refused any borrowing requests. Even if you are accepted there is a good chance you will have to repay your loan at a higher rate of interest than people with a better credit score.

As with most assessments involving money you will be looked upon favourably if you are employed. This also helps to show that you are trying to get capital to pay off your debts and may get you further than if you are unemployed.

Another, yet less desirable, option is to take out another loan to pay off existing ones. It should be noted that you may not even get the opportunity to do this as many lenders will be uncomfortable offering a loan to someone who is unable to find the means to pay it back. If you do get approval, lenders such as Natwest loans are likely to offer very good deals for graduates.

If an unsecured loan is the option for you it is vital that you think about repayments; can you comfortably afford them? Will you be able to keep up with them on a monthly basis? To assist you in working through these decisions it is a good idea to utilise loan calculators to work out how much your loan will cost you and the payment period you will be contracted to. Many lenders, RBS loans and Asda Unsecured Loans for example, provide loan calculators on their websites.

Independent financial website Beatthatquote.com offers useful advice on all aspects of finance and especially loans comparison.