Almost a third (31%) of students turn to credit cards, overdrafts and payday loans to cover living costs while at university, according to new research commissioned by the UK’s first specialist student lender,Future Finance.
This comes as 70% of students surveyed admitted they do not think their government loan is enough to cover all of their expenses at university – perhaps accounting for this reliance on riskier forms of funding.
Worryingly the results from the survey also show that almost a quarter of students (24%) do not consider credit cards, pay day loans and overdrafts as forms of debt.
In fact, there is a stark knowledge gap when it comes to financial understanding. Although 63% of those students surveyed consider themselves to possess a good understanding of finance, 40% of them do not know what APR stands for.
It is also suggested that parents should do more to impart a positive financial example to their children. 81% of parents believe they are qualified to financially educate their children – yet just 39% of students cite their parents as their biggest financial influence. Parents should endeavour to raise awareness around financial education to ensure their children are prepared for an independent lifestyle.
Brian Norton, CEO and co-founder of Future Finance, comments: “It is worrying that significant numbers of students rely on credit credits, payday loans and overdrafts without even seeing them as debt.
“These products are typically not tailored to students or to the lifecycle of higher education and we would encourage students to research all financial options available to them before choosing which form of credit they need to help them through their university life.
“For many students, going to uni is the first time they’re required to stand on their own feet financially. It’s a big change in their life and it can be a steep learning curve. Schools, universities and parents alike have a duty to support students and help nurture their financial awareness.”
Future Finance is the UK’s first specialised private student lender providing undergraduates and postgraduates an additional way to fund their university education. With an uncertain economic period ahead, it is more important than ever for students to take control of their finances and avoid turning to riskier forms of credit.