41% of the students have considered dropping out of their studies due to money worries
A new study by credit management firm Lowell found that more than three-quarters of college students (77%) develop personal debt problems during college. But are students being educated on the potential consequences of short-term borrowing?
In the UK, the average annual percentage rate (APR) on a payday loan (a short-term loan) can be as high as 1,500% – compared to a typical 23% APR on a credit card. With nearly one in ten college students relying on payday loans, Lowell took an in-depth look at how students experience their attitudes towards money in college and how it might affect them.
Research also found that 76% of college students worry about making ends meet, and 41% of college students have considered dropping out of college because of money concerns. 
Students rely on credit to fund their educational experience
A payday loan is usually a short-term loan for small amounts of money with an extremely high APR. For example, if you borrowed £100 at 50% APR and agreed to pay it back in a month, you would owe £150 at the end of the month – an additional £50 on top of your original loan.
High interest rates and APR rates like these can have a huge impact on student finances, especially when students who take out these loans rely on student loans and grant payments to pay them back. Loans and grants tend to be paid out only three times a year — not monthly — so students could end up borrowing more than they can pay back in a short amount of time, potentially leading to more lingering debt problems.
Since 15% of college students also rely on “buy now, pay later,” Lowell wanted to shed light on this payment method. BNPL can help spread the cost of shopping, sometimes interest-free. When managed properly, it can provide a helpful way to make larger purchases and manage income and expenses.
While buy now, pay later products may seem like a solution for students, you risk being billed if you can’t pay. Similar to any form of borrowing, you must understand the terms and conditions that you agree to when making a purchase with Buy Now, Pay Later products.
A recent annual survey by save the student also found that 32% of students reported using their overdraft as a source of income, but it’s worth noting that student account credit limits are increasing every year, and with 0% overdraft, many students are attracted to what can feel. free money. However, after graduation, many banks expect students to pay off their overdraft within 1-3 years, adding to the pressure on graduates to find a job in a competitive job market.
Students also depend on family support (42%) and savings (36%).
What sources of income do students depend on during their studies?
|Apart from any student loans or scholarships, what source of income were/are you dependent on during your studies?|
|Supported by family||42%|
|To live at home||17%|
|Buy now, pay later||fifteen%|
The spending behavior and indebtedness of students
Similar to most Brits, students’ spending habits prioritize weekly grocery shopping (56%), rent (52%) and utility bills (44%).
Despite the financial constraints, more than a third of students (34%) were still likely to spend their money on nights out, takeout or dining out.
The average amount of debt, excluding tuition and student loans, with which each graduate left university was £2,332, which took an average of 3.8 years to pay back in full.
15% of graduates left university with an additional loan of over £5,000. Additionally, of all the people we surveyed, 16% of college students took four or more years to pay off personal debt they accumulated during college.
Lowell CEO John Pears commented on the results: “University should be an exciting and rewarding experience, but for young people moving away from home and not dependent on their family’s money, it can also be a costly one.
“Getting into debt while in college can be a concern, especially if you don’t have a steady income or secure job after graduation. We want students to know that they are not alone when it comes to struggling with debt during college.
“If you are worried about your situation, there is help and support. A list of independent organizations that can offer support can be found on our website: https://www.lowell.co.uk/help-and-support/independent-support/”