Money: After the Post-Finals Party, the Debt Hangover Kicks in ; Clare Francis Surveys Graduate Accounts in the Last of Our Series on Investing for Children
Francis, Clare, The Independent (London, England)
Once the euphoria has died down, the day of reckoning will arrive for students who have just finished their finals. A new survey from Barclays reveals that those graduating this year will be an average of pounds 12,000 in debt.
On a more positive note, the survey also shows that students are becoming far shrewder in their financial planning anOd many are well prepared for the prospect of repaying debts.
The levels of student debt have doubled over the past few years as a result of the abolition of the grant system and the introduction of tuition fees. The prospect of such a financial hangover can be daunting.
"The knock-on effect of no grants and having to pay tuition fees continues to take its toll on this year's graduates, with the survey predicting record levels of debt," says Debbie Shipley, manager of student and graduate banking at Barclays. "But the research shows [they] are not burying their heads in the sand, with over half of graduates making it their top priority to repay the money."
According to a recent survey from NatWest, it can take between four and 10 years to clear student borrowings. The key is efficient debt management and a sensible repayment structure that lets you chip away at what you owe, while still being able to afford to live. Borrowings with the highest rate of interest, such as credit or store debit cards, should be cleared first. If you can't repay the full balance immediately, consolidate them on to a lower-rate credit card or a graduate loan.
Over the past few years, the big banks have greatly improved their graduate accounts. Most now give preferential rates for up to three years after finals.
It is a common misconception that to benefit from graduate terms, you have to stay with the bank where you have your student account. In fact, banks are prepared to take on the debts, and if you can get better terms elsewhere, you can switch without forfeiting your entitlement to graduate terms.
NatWest's graduate account offers an interest-free overdraft of pounds 2,000 in the first year after finals, pounds 1,000 in the second year and pounds 500 in the third. …