In too deep?

Are your debts getting you down? Did you know that keeping up with financial commitments is a constant struggle for 1 in 6 students and that 1 in 20 students have serious financial problems?*

As nearly all students are in debt, how do you know if your debt is a problem? If you feel anxious or panicky about owing money does this mean that you have problem debts? Not necessarily. Financial control can be a very emotive issue for some people whilst others simply need practical advice. If you are having trouble making payments for bills and other living costs then you probably have debt problems and could benefit from some advice.

If you manage to graduate with student loans and a student (interest-free) overdraft as your only debts you are doing well. It’s impossible to live on nothing and as a student your earning capabilities are limited. Student loans and overdrafts are a very cheap way to borrow money. See Paying it all back for advice on how to repay debts after graduation.

This is not so much a debt problem as a funding / budgeting one. See Maximise your income for more advice.

Make a list of all the bills, including how much each is for and then prioritise the debts. Very large or very late bills are not necessarily of highest priority. Pay off priority debts first but make sure you contact all creditors so that they know you are not avoiding payment.

Priority debts - these are debts owed to creditors who can take strong legal action against you if you do not pay. These include:
Mortgage or rent arrears - the house could be repossessed by the bank or the landlord could have you evicted
Fines (eg for traffic offences) - bailiffs can be sent to seize possessions or you could be imprisoned
Fuel bills (electricity/gas) - you could be disconnected

Credit and store cards, bank loans and overdrafts, catalogue debts and money owed to family and friends, although stressful, potentially embarrassing and not good for your credit rating are non-priority debts as you cannot be imprisoned or made homeless or without heat and light. This doesn’t mean they can be ignored - eventually your creditors will take you to court if you fail to make contact with them or make some offer of payment.

The most important way to deal with debt is not to ignore it and hope it will go away. Letters from creditors should always be opened and dealt with as soon as possible. If you don’t reply to the letters, at worst the bank could ‘freeze’ your account and refer the debt to their collections / debt recovery department. This would mean losing both your account and your overdraft facility. At best they will be charging you high interest on an “unarranged” overdraft (the excess borrowing on top of your normal overdraft if you are still over your limit).

Speak to the bank and explain your difficulties. Check when your next student loan payment is due and see if the bank can wait until then for repayment of the unarranged overdraft. If you are paying high interest charges and can’t negotiate with the bank to reduce them, you should try to put some money into the account to get back within your overdraft limit - pay in your wages, try to get a temporary loan from friends or family, ask your student welfare service for advice - they may be able to offer an emergency loan or hardship payment.

Get advice from your University or Student Union Advice Centre - or from the Online Advice Clinic. You can find out more about each in the 'Getting Advice' part of this website (menu at the top right hand side of this page). 

A student advisor may be able help you to negotiate repayments and get onto a debt management plan. They will draw up a financial statement with you (a sheet detailing your income and expenditure) and calculate how much available income you have. An offer based on this will then be made to each creditor and a request made for interest and charges on the account to be frozen. If you have no or very little available income token offers of say £1 can be made. An advisor may negotiate with creditors on your behalf as well as checking your entitlement to hardship funds and benefits. If you do not have advisors at your instituition that can provide you with this service the Online Advice Clinic will be able to do this for you.

*The National Student Experience Report 2006 commissioned by UNITE and conducted by Ipsos MORI