57% of UK students are worried about their level of debt when leaving university

While Freshers’ Week is winding down for many, it seems that from tuition fees to textbooks, the cost of studying is leaving many scholars facing concerns over debt. Indeed, Mintel’s Student Finance UK 2017 Report reveals that nearly three in five (57%) students in the UK are worried about the level of debt they will have when leaving university, rising to 63% of women.

And it’s not just when the mortar boards have been thrown that students are plagued with fears over funds. Three in 10 (30%) students say they are worried about their level of debt at the moment, with those in their 3rd year or above the most likely to be anxious about this (34%).

While many face worries over debt alongside the stress of studying, the majority of students say they expect to give “credit” a miss after they finish their studies. Over three in four (77%) say they intend to avoid using credit, such as overdrafts, credit cards or loans, when they leave university and nine in 10 (89%) say they would prefer to save up to buy something expensive rather than borrow money from a bank to pay for it.

Rich Shepherd, Senior Financial Services Analyst at Mintel, said:

“The high cost of tuition means that students who pay for their university courses with tuition fee loans and maintenance loans graduate with tens of thousands of pounds of debt before they even begin their careers. Incurring such high debts as standard, and at an early age, appears to make students wary of building up further debt in the future. The fact that students are so strongly against the idea of using credit for expensive purchases can, at face value, seem to conflict with the high importance placed on the provision of overdrafts in student current accounts. However, this is more a reflection of how students see credit as a last resort rather than an available source of funds for luxuries.”

Indeed, while the majority are worried about the level of debt they have, today’s students largely exhibit responsible traits in financial management. Nine in 10 (90%) say they regularly check their bank balance, while 71% say they always shop around for the best deals before taking out any financial product and just two in five (39%) say it is hard to stick to a budget.

What’s more, many already are keen to prepare themselves financially for life after work. As many as 44% of students say they plan to start saving for retirement as soon as they graduate or finish studying, rising to 48% of men.

“Starting to make provisions for retirement as early as possible is key to giving consumers the best chance of a comfortable retirement. However, persuading consumers to actually make these savings has proved to be easier said than done. Campaigns aimed at Millennials and students have raised this issue among young people, but planning to start saving for retirement and actually doing it are two different things. Upon graduation, the reality of paying for bills and essential living costs, as well as maintaining a desired lifestyle, can easily push retirement saving down the list of priorities.” Rich adds.

Currently, 68% of students own a student current account and 54% have a standard account. Of those that have either of these account types, over half (55%) say they looked for an interest-free overdraft when choosing their account, while the same proportion (55%) looked for an account which gave them the ability to manage their account online. Meanwhile, a tech-savvy 43% hunted for an account which gave them the ability to manage their account via a smartphone app.

Many were also interested in the perks which came when opening student accounts. Indeed, around half (51%) looked for an account which offered a free railcard or other travel benefits, while 30% looked for an account with a large overdraft facility.

“Student current accounts offer a rare opportunity to attract customers who are likely to be more valuable than the average consumer, so students remain a key demographic for banks to target. The exclusive benefits offered by providers are popular among students, chiefly free overdrafts and non-financial benefits such as travel discounts. However, students can be a demanding group. Young, educated and tech-savvy, students demand engaging online and mobile banking services. The innovative platforms offered by digital challengers are therefore a threat to major banks with less interactive services. High street banks need to ensure that they focus efforts to improve in this area, as well as offer popular perks.” Rich concludes.

Finally, Mintel research reveals that a financially savvy 18% of first year students have an ISA, rising to 34% of students in their third year or above. On the other hand, just 8% have home insurance.

Press review copies of the Student Finance 2017 Report and interviews with Rich Shepherd, Senior Financial Services Analyst at Mintel, are available on request from the press office.