Student debt tops £2.46 billion

British student debt is now in excess of £2.46 billion, Barclays Bank has reported.

The majority of those now leaving university will graduate with an average debt of £13,501, the eleventh Barclays Annual Graduate Survey has claimed – an increase of 12% from 2003.

The rise has been attributed to a number of factors, Barclays say, including rising living costs and a “more resigned” attitude to debt.

Jeremy Law, head of student and graduate banking at Barclays, said: “If this trend continues, students starting a three year course this September could be graduating with debts of almost £20,000. Graduates will find themselves with debts for years to come, which may affect their ability to buy homes and invest in pensions. Prince or pauper, these levels of debt may act as a deterrent to some people considering going to university.”

The Barclays report found that over half (53%) of those involved in the study borrowed an average of £4,142 from their main bank or building society, while nearly a quarter (24%) borrowed an average of £2,428 from parents, relatives or friends.

However, the report found that the number of graduates leaving university in debt is starting to fall, dropping to 73% in 2004 from 80% in 2003. Most students are also choosing the cheapest options for borrowing cash, with the majority going to the Student Loan Company first – Barclays found that 86% of those surveyed owed money to the Student Loan Company, with the average owed amounting to £10,646.

Less than a quarter (24%) of students are feeling “concerned about their financial situation, Barclays also found, and 77% still believed it was worth while going to university, in spite of increasing debt.

Mr Law said: “I would encourage graduates to seek expert advice if they are experiencing any financial difficulties. Graduates should consolidate their borrowing and pay off the debts with the highest interest rates first by making use of the cheapest borrowing options, for example, interest free graduate overdrafts or graduate loans. Where possible graduates should keep a tight reign on their finances to help set them up financially for the future.”

Barclays advice for debt management includes: drawing up a personal budget; organising direct debits for repayments; dealing with bills and statements as soon as they arrive; and reviewing borrowing on a yearly basis.

(KMcA/GB)