The debt debate

By Jenny Little
Updated: 10:10 EDT, 26 September 2006

Student life is dictated by money - tuition costs, undergraduate borrowing and how much young people have to earn to pay their way through their degree.

Financial Mail, the sister newspaper of This is Money, looks at some of the key money issues affecting the 2.3 million people in higher education. And we start by talking to students and graduates to hear about their experience of the highs and lows of university.

Ravinder worries about getting the most from her degree. Matthew wishes he had moved away from home to broaden his choice of university. And Lilly hopes to learn how to budget as she goes into her third year.

They are typical students with typical worries. And they formed part of a group of undergraduates and recent graduates who talked to Financial Mail this month at a round table event organised by Lloyds TSB.

Ravinder Shinji, 23, from Southall, west London, is in her third year at the University of Hertfordshire, studying marketing. This year, she will be taking up a placement job in the university's marketing and communications department before completing her degree next year. Like most students, this is not her first experience of paid work.

She says: 'I worked through my first and second year as a sales assistant for the mobile phone company 3 and earned enough to avoid taking out a student loan.

'But as I'm paying for tuition, I want to make sure that I get my money's worth, academically and socially.'

Work, both during and after university, remains uppermost in most students' minds. It was notable that almost everybody in the circle had chosen their degree with a view to the job they would get in the long term.

But Carly Bishop, 22, from Dudley, West Midlands, and Jade Spence, 22, from Cardiff, said they struggled in the job market after graduating from Staffordshire University this summer in accounting.

Jade ended up working for her father's business, which manufactures bus shelters, until she found a job recently at accountant BPU in Cardiff.

Carly also found opportunities were few and far between and is now working as an accountant for the NHS, but only on a 12-month contract.

Lilly Bungay, 20, from Oxted, Surrey, is on the same course as Ravinder and is also starting a year's work placement at the university, in her case in the Press office.

Though she won't graduate for two years, she already has an eye on the job market. 'I was aware marketing would be useful when it came to getting a job,' she says.

But Lilly admits her short term goal is to create a budget and stick to it. 'I owe money in the form of student loans and overdraft,' she says. 'I do worry sometimes about how much I spend and keep meaning to start budgeting.'

Marcus Banks, head of student banking for Lloyds TSB, who chaired the discussion, says: 'Students face an uphill financial struggle and their future is perhaps more uncertain than was the case for any other student generation. When university days are over, the reality of debt, increased competition for graduate jobs and escalating house prices starts to bite.'

Matthew Leavesley, 20, from Stourport-on-Severn, Worcestershire, is in the third year of a business management and psychology degree at the University of Worcester.

He planned from the outset to keep his student finances under control and chose a university near his home so that he could commute.

As a result, and because he works part time at PC World, he took out his student loans only to invest them. 'I work 20 hours a week and living at home is cheaper,' he says. 'But sometimes I think if I could do things again, I would have moved out and gone to a different university and got more involved.'

One point that all the group agreed on was the lack of personal finance education they had received at either school or university. However, most of them appeared to understand the workings of loans, overdrafts and credit cards, though most said that this was only thanks to their parents.

Jim Finucane, 20, from Kinver, Staffordshire, who started his course in journalism, film and media at Cardiff University last September, says: 'My parents explained most of the things I've had to deal with - household bills, landlords and borrowing. But budgets were never mentioned at school or university. You must learn for yourself.'

However, critics warn that many parents are not financially literate themselves and often struggle to give their student children good advice.

The Financial Services Authority this month launched a pilot programme in 17 universities using student mentors as 'money doctors' to advise their peers on tackling debt.

But the FSA also has a website - moneylaidbare.info - that offers advice in plain English on money, borrowing and investments. But student finance, with its loans, tuition fees and grants, is complicated. The websites - uniaid.org.uk, aimhigher.ac.uk/student-finance and dfes.gov.uk/student support - provide clear information on university related costs and borrowing.

But though money and career prospects are a great cause for concern, when our students were asked whether university was worth it, the answer was a resounding 'yes'.

Research reinforces their positive view. The Organisation for Economic Co-operation and Development announced recently that on average, British graduates earn 58 per cent more than those who did not go into higher education - a greater differential than in Germany, France or Japan. Only five countries have graduates who do better.

And despite top-up fees and escalating costs, UK graduates get a 9.8 per cent return for the rest of their lives on the money they spend on doing a degree. As Matthew says: 'You have to take everything with both hands - there are so many opportunities while you're at university. I'd say that the effort pays off.'