Half of students are surviving on plastic

Published on Sunday 9 August 2009 21:59

MORE than half of Scottish students have been forced to take on credit card debts or personal loans to cope with the cost of higher education, a survey has revealed.

The study shows students are increasingly turning to high-cost commercial debt while 70 per cent are working more than the recommended ten hours a week to make ends meet.

The National Union of Students Scotland report Overstretched and Overdrawn shows more than half of university students, 56 per cent, have been forced to turn to expensive commercial debt with high interest rates to supplement cheaper student loans.

And 54 per cent of students feel they are worse off because of the recession.

Overall, the vast majority, 88 per cent, are in some kind of debt.

The survey shows half of Scotland's students have jobs, with 70 per cent doing more than the ten hours a week maximum.

In the 1999 report Student Finance: Fairness for the Future, Dr Andrew Cubie recommended students should work no more than ten hours a week to ensure their job did not interfere with their studies.

A large number, 67 per cent, of those surveyed also said they increasingly depend on friends and family to lend cash.

The report says: "Degree level students are more likely to be in all forms of debt, especially student loan and debt to family and friends.

"However, they are also more likely than other groups to be in commercial debt."

It warns: "The current economic recession has hit students in a big way.

"The fundamentally flawed assumptions our student support system is based on, namely that students will be able to secure part-time work during term time, a job during the summer vacation and will receive parental support throughout, will be seriously tested this academic year, and we are positive that no-one will like the results."

NUS leaders call in the short term for the minimum loan to be increased to all students and more cash to be made available to the poorest students in a mix of loans and grants to prevent them slipping into poverty or being forced to drop out.

In the longer term, NUS Scotland wants a minimum income of 7,000 and the loan to be gradually decreased as grants are increased to reduce student debt.

Claire Baker, Labour's further and higher education spokeswoman, said the survey made for very depressing reading and warned the effects of debt would probably damage academic performance.

She said: "With student support levels in Scotland almost 2,000 less than elsewhere in the UK, it's clear that our most talented people are being forced to turn to commercial credit to get them through their degrees due to lack of support from government.

"It's clear that it is those from poorer backgrounds that are struggling the most which I find very worrying indeed. It's clear that tackling commercial debt and student hardship must now be the priority for the government.

Murdo Fraser, Conservative education spokesman, backed NUS Scotland's calls to increase student loans.

He said: "Alex Salmond's SNP will never be forgiven by Scotland's students for breaking their promise to wipe out all student debt.

"The least they should now be doing is adopting Scottish Conservative proposals to help the poorest students and those most vulnerable to commercial debt."

The report concludes with the warning that graduates are, comparatively, the lucky ones.

It says: "Our focus remains with those who have to drop out, or worse never arrive on our campuses, because of the fear and reality of the ever-increasing commercial debt that has meant Scotland's students are overdrawn, overstretched, and well and truly at crisis point."

In total 6,217 students across Scotland were questioned on their finances by NUS Scotland for the survey.

Aileen Campbell, SNP MSP and member of the parliament's education committee, said the Scottish Government's decision to scrap the graduate endowment had cut 2,300 from the debt burden of each student.

She said: "To tackle student debts the SNP has restored the principal of free education, increased hardship funding, reintroduced grants for part time and post graduate students and has invested support in independent learning accounts to help Scottish learners fulfil their potential.

"Alongside Government action to reduce debt it is important that the big banks who used extensive overdrafts and loans to students as a way to attract customers for life, treat students responsibly as they make the transition to from study to work in a difficult market."

PAYING THE PRICE OF EDUCATION

THERE are two types of student loan which each have different rates of interest.

Pre-1998 "mortgage" style loans have the interest rate adjusted each September so currently remain at 3.8 per cent.

New rules introduced in 1998 mean the interest rate on student loans taken after that cannot be more than 1 per cent above the Bank of England base rate.

Therefore it has come down as soon as the base rate has fallen and is currently at 1.5 per cent.

In contrast commercial loans from banks or other sources attract at least a 6 per cent interest rate.

Credit card rates are higher and can reach 24 per cent.

SUPPORTING ROLE FOR STUDIES

THE maximum support a student in Scotland can get is 4,510 per year through a student loan – 2,000 less than in England and nearly 2,500 below the poverty line.

NUS Scotland is calling for a 7,000 minimum income guarantee for Scottish students through a combination of grants, loans and parental contribution.

Their call is also backed by the Liberal Democrats and Labour.

In the short-term the survey of more than 6,000 Scottish students on financial hardship support also puts the final nail in the coffin of the Scottish Government's election manifesto pledge to return to grants from student loans.

Liam Burns, NUS Scotland president, said: "Simply moving from loans to grants is not what is needed.

"Far worse is the social injustice that would be reinforced if commercial debt is not dealt with, as poorer students are more afraid of commercial debt than those of a luckier background."

However, in the long term NUS Scotland would like the government to reintroduce grants and reduce student loans in a bid to reduce the overall student debt burden.