Everyone knows how expensive university and college have suddenly become. Across the United States, Canada and the United Kingdom, students are tens of thousands of dollars in debt by the time they leave the post-secondary institution and receive their piece of paper. And this debt doesn’t just include tuition, it also includes textbooks, food, the cost of living and so on. It’s tough to be a student these days.
It turns out that university students, at least in Great Britain, are turning to payday loans and credit cards in order to fund their studies, says a new poll.
According to a new study by Future Finance, a specialist offering legitimate loans, nearly one-third (31 percent) of university students use payday loans, credit cards and overdrafts to cover their expenses. This makes sense considering that 70 percent of students said their government loans don’t help.
The numbers are concerning, but what may be even more worrisome are these three statistics:
- One-quarter of students don’t think credit cards and payday loans are forms of debt.
- 63 percent of students say they have a good understanding of finance.
- 40 percent of students admit to not knowing what APR (annual percentage rate) means.
Ultimately, students are utilizing alternative financial services without understanding finance.
“It is worrying that significant numbers of students rely on credit cards, payday loans and overdrafts without even seeing them as debt,” said Brian Norton, CEO of Future Finance, in a statement. “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.”
He added that governments, universities and parents need to do more to “support students” and “help nurture their financial awareness.”
In England, the average student loan debt is approximately $55,000.
This isn’t the first time that a study has reported the financial difficulties that students face.
In October, a report came out that found nursing students and National Health Service (NHS) nurses take out no credit check payday loans so they can stay afloat and cover their day-to-day living expenses. The same report also discovered that many nurses took on a second job, took out a second mortgage and used debt to maintain their lifestyle.
“These figures paint a shocking picture of the effects of pay restraint on hard-working NHS staff,” said Unison’s head of health, Christina McAnea, in a statement. “They’re having to sell or pawn their belongings, move house or ask relatives for financial help while doing critical and life-saving jobs in our health service.”
Despite the ubiquitous use and dependence on payday loans, the federal government has taken a stern approach to the industry.
In recent years, new rules, regulations and enforcement have prompted about 70 percent of payday loan stores out of the market. The Financial Conduct Authority (FCA) has been diligent in combating the payday loan companies that violate the laws in place to shield consumers from debt.
Because critics have chastised the payday loan industry of trapping millions of borrowers into vicious cycles of debt, public officials have taken action by limiting or restricting the payday loan industry. Proponents argue, however, that payday loans are necessary alternative financial products because banks do not provide short-term, small-dollar loans to their customers.