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For immediate release: Thursday, 11th May, 2006
STUDENT LOANS, HIGH BORROWINGS AND LACK OF JOBS SEND MANCHESTER GRADUATES INTO DOWNWARD SPIRAL TOWARDS INSOLVENCY
Thomas Charles and Accommodation for Students research unearths parlous state of recent students’ finances, even worse than London counterparts
- 51% of recent graduates in Manchester have unsecured debts of £10,000 and over
- 72% say that over half of their debt is due to a student loan • 39% believe there is some likelihood they will become insolvent
- Two-thirds (67%) say it will take over 3 years to pay off their current debt Half (49%) have found it difficult or very difficult to find a suitable job
(Manchester, 11/5/06) Thomas Charles (www.thomascharles.com), the leading debt solutions consultancy, and Accommodation for Students (www.accommodationforstudents.com), the UK’s No 1 student accommodation website, have carried out research among 180 recent graduates in Manchester to measure the impact of student loans on their current unsecured debt situation and assess the potential threat to them of personal insolvency. 91% of the graduates were under 30 and 79% had graduated since 2004.
Debt Levels and Student Loan Legacy
51% of respondents have unsecured debts of over £10,000. Surprisingly this is higher than the 42% figure in a similar recent survey done on their London counterparts. 70% have at least one credit card and 29% a personal loan. Only a fifth (21%) of all surveyed believe they will pay off their current debts within a year and two-thirds (67%) believe it will take upwards of three years (compared with 48% in London survey).
A staggering 72% of recent graduates in Manchester attributed more than half their current debt to their student loan (compared to 58% in London). 31% regretted taking out a loan and 42% blamed their student loan for their current debt situation.
Concern about Personal Insolvency
A third of graduates interviewed are having problems meeting the repayment requirements on their debts. 11% believe it likely or very likely that they will never be able to repay their debts whilst a further 28% think it quite likely that they will become insolvent and have to resort to bankruptcy or an IVA (Individual Voluntary Arrangement), a total of 39% in some danger of personal insolvency.
James Falla, Director of Thomas Charles, commented:
“This latest research shows the impact of student debt legacy and how quickly matters can worsen even when they get a job. Even though many students may go on to earn a good salary, in the world of work their money does not stretch as far as they thought it might. They find themselves living and working with others who are themselves earning good salaries with high cost lifestyles. Trying to keep up with these lifestyle expectations, combined with existing student borrowings, means that many graduates just get further in debt, often to a critical extent. Many of our younger clients at Thomas Charles clearly fall into this category.”
Finally, to compound matters even further, a concerning 49%, nearly half, of all graduates say that it has been difficult or very difficult to find a job within their area of study. This disappointment in income generation is the last piece of the graduate debt equation.
The research surely indicates the beginning of a long term trend: initiated by the need to borrow money to support higher education; fuelled by easy access to borrowing via credit cards and personal loans; finally culminating in dire consequences when suitable employment is difficult to find and therefore insufficient income is forthcoming to finance debt repayment.
Simon Thompson, director and co-founder of Accommodation for Students who helped conduct the research, said:
“Student loans and debts are a now a fact of life for students. On the Accommodation for Students website we do as much as possible to ease our student visitors’ financial burden. Our website shows, by area in Manchester, the cost of student accommodation so that they can select the best value areas and not get overcharged. As well as accommodation, the website also features deals on travel, insurance, pc/laptops, mobile telephones and other retail discounts. So we are doing what we can to make a student’s financial plight as painless as possible!”
Suggesting that all the blame is not on the borrower’s side, nearly three-quarters (74%) of graduates interviewed said they thought banks and credit card companies lend money in an irresponsible manner, a view interestingly reflected in the recent decision of the Banking Code Standards Board to strengthen the Banking Code to encourage more responsible lending.
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TOP TIPS |
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Key stats 8M or 1 in 5 adults have unsecured debts of over £10k
4M adults have unsecured debts of over £20k
4M adults owe more than £5k on their credit cards
2M adults have secured debts of over £100,000
73% rise in personal insolvencies over past year £1 trillion of debt
USEFUL CONTACT
CCCS: 0800 138 1111
IVA Helpline: 0800 197 48 38
IVA Wizard: iva.co.uk
CAB: citizensadvice.org.uk
Debt help: debt-help-uk.org.uk
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- Don’t bury your head in the sand. Work out your financial position (try debt-help-uk.org.uk debt wizard).
- Consider transferring credit card debt to a 0% card while you deal with more pressing bills, such as any council tax or mortgage payments. But don’t use this as an excuse to run up more debt elsewhere.
Don’t take out other loans to pay off the original debt or use a consolidation loan. If you must do this, be disciplined and don’t use the new loan money for anything else.
- Talk to your creditors about structuring a realistic repayment plan; the CCCS can help (0800 138 1111).
- If you cannot do a repayment plan and you do not want to go bankrupt then try an IVA, (see iva.co.uk for more info on IVAs). The IVA helpline can help (0800 197 48 38).
- If you want to consider bankruptcy then try the CAB (citizensadvice.org.uk)
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- Ends -
Notes to Editor
This research was conducted online with 180 graduates in Manchester in May 2006. Charts, tables and further analyses are available on request.
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