Money: Enrol Here for a Postgraduate Course in Tackling Your Debts ; in the Last of Our Series on Investing for Children, Sam Dunn Checks the Deals on Offer to College Leavers Struggling with Overdrafts

Article excerpt

New suit, new full-time job, new payslip - same old overdraft. Graduates may be excited about leaving their studies behind and entering the world of paid employment, but they'll find some things take longer to change.

While your salary should help you chip away at some of your debt, it may do little more than that. Research from the Association of Graduate Recruiters reveals that the average graduate starting salary is pounds 21,000, yet one year after leaving university, nearly two-thirds of former students will still have an average overdraft of pounds 1,057, according to HSBC. This is quite apart from the government-backed loans that most students need to pay their way through university, which are likely to run into thousands of pounds.

"Dealing with debt is usually the most pressing issue facing graduates," says Rebecca Stephenson, head of personal customer marketing at HSBC.

Even three years after leaving university, more than four in 10 graduates will still be overdrawn by at least pounds 925, the bank reveals.

As debt is expensive, it's essential to reduce it as quickly as possible and keep charges to a minimum in the meantime. Most of the major high- street banks offer a staggered interest-free overdraft over three years on their graduate accounts. This will be a maximum of either pounds 2,000 (NatWest, Abbey, Lloyds TSB) or pounds 1,500 (Barclays, HSBC) in the first year, before, in most cases, dropping over the next two years to pounds 500.

"It's all about getting back into the black," Ms Stephenson adds. "Your interest-free overdraft won't always be that way."

Thankfully, banks don't demand overnight repayment of an overdraft, but they will expect you to whittle it down. …