Students driven to payday loans

The rising cost of living and soaring rents in Scotland’s biggest cities are driving students deeper into debt than ever before, charities have warned. They are calling for students to be given greater access to support and advice as payday lenders come under fire for targeting university campuses.

Almost a fifth of full-time students don’t have enough money to get through the month and another 48 per cent are only just in control of their finances, according to research published recently by Lloyds TSB.

More than half of students expect to leave university with debts of over £10,000, even though a similar proportion have taken on paid work during term time.

Now new figures from StepChange show that the average debt of students in Scotland that have sought help from the charity has hit £18,325, compared with an average client debt of £13,798.

Those debts have forced more students into the arms of payday lenders, leaving many even deeper in financial difficulties. The proportion of StepChange Debt Charity Scotland student clients with payday loan debts more than doubled in 2012 to just over a fifth.

That jumped again in the first six months of this year, with almost three in ten student clients taking out payday loans.

Sharon Bell, head of StepChange Debt Charity Scotland, said: “Student days are an exciting and wonderful time, but we would urge all young people to think carefully about what and why they borrow – rash decisions now can impact on future borrowing and even career prospects.”

Bell spoke out weeks after the National Union of Students warned that payday lenders were targeting students by advertising on and around campuses. Several universities have banned payday loan firms from advertising in their premises, although it is believed payday lenders will have a presence at some freshers’ events this month.

That won’t include the University of Edinburgh. “We don’t have payday lenders advertising on campus and, as such, they were not a presence during freshers’ fairs,” a spokesman said.

She added: “The university has the best bursary provision in the UK for students from  the lowest household incomes and also provides a number  of hardship funds to assist  students who encounter financial difficulties during their studies.”

The University of Edinburgh said it had no evidence of students turning to payday loans and that it would discourage them from doing so.

However Citizens Advice Scotland (CAS), which is investigating the activities of payday lenders, said a number of its bureaux had seen students with steep payday loan debts.

One east of Scotland bureau recently helped a full-time student with a part-time job who had debts of £4,700 from six different payday loans, all of which he had defaulted on.

In the west of Scotland a full-time law student went to CAS for free advice after taking out four payday loans to pay off other debts. The student said a payday loan had been the easiest option for  him because it was easy to get his application accepted online.

Margaret Lynch, chief executive of CAS, said: “Our evidence shows that young people, including students, are amongst those most likely to get into debt – particularly with payday loans. Many payday lenders know this, and so will be advertising strongly in and around universities over the next few weeks as freshers start to arrive.”

She urged students to think carefully about the long-term impact of payday loans on their finances, even if it seems an easy way to secure short-term cash.

“The trouble is that it really can put you into a nightmare debt that will last for years and impact on your health and relationships as well as your finances.

“If you are a student in real financial trouble, talk first to the welfare advice service at your college or university. They have emergency funds available for students who are in real crisis.”

For more information go to www.stepchange.org/portals/0/documents/info/stepchange-student-debt-guide.pdf