Photo by Emily Bowler
I remember the year 1999. Our teacher took the class out onto the big field and we planted a millennial time capsule to be discovered in a thousand years. My culturally significant Kurt Cobain fanfic was spurned for some bullshit poem about horses. (In retrospect, this was a very optimistic activity from Miss Howard as it’s probably since been dug up by hedgehogs or fracked for oil.)In reality, what the cyborgs will actually find in a thousand years are ancient scriptures on Student Loans Company-headed A4 paper. “£50,000,” they will read. “Still due.” We are never going to pay off our student loans. We know this. The government knows this. The companies the government sold the loans off to know this. “They just spend it all on avocados, posh coffee and gym memberships anyway,” the privileged cry from their mortgage-free houses, “and that’s the problem!”
It’s the age-old Tory proverb: make everything incredibly expensive and then call people lazy if they can’t afford things or reckless if they can. The reality is some students are now in a situation where they might need to take out an extra loan on top of their existing student debt to cover the cost of living – in fact, a recent survey found that 26 percent of students admitted to using payday loans at uni.Now, obviously it’s worth saying that you 100 percent should not put yourself in any debt unless you have absolutely exhausted all other options. (Top tip: Ask your uni if you can apply for any hardship funds – these used to be known as an Access to Learning Fund.) But if you do find yourself in a position where you need to take out a loan, here’s what to do to make sure you don’t get fucked over.
Have you ever left a tenner in the pocket of a jacket that you never wear, only to find it six months later when you’re totally skint? Best feeling ever. Getting a loan is kind of like that, but the tenner in this scenario is a turd. Future-you doesn’t like turds. Or being in debt.Check what you’re eligible for before applying for a loan. There are loads of different comparison sites that won’t affect your credit rating. The trick is to compare the Annual Percentage Rate (APR). If there’s a grace period where it’s a zero percent interest rate, what’s the rate after that? You don’t want to be in the money while you’re studying, only to get stung when you’re job-hunting after graduation.
LOOK AT THE FACTS
There are now plenty of private loan companies that explicitly target university students. They’re capitalising on two things: the first is that it’s expensive to live with a job in this country, let alone when you have to focus on studying. The second is that a lot of students haven’t made serious financial decisions before and are more likely to take a risk for short term gain.
WATCH OUT FOR MARKETING
These companies offer low-interest loans till you graduate and then they hit you with a fat APR every month from then onwards. Most recently, Future Finance was in the news after its services were promoted in UCAS emails – it charges a whopping interest rate of 16 percent APR after you graduate.“The important emphasis on these companies is clarity,” explains James Welland from The Money Charity, a financial capability nonprofit. “If they’re marketing in a ‘this will take all your problems away and you never need to think about it again’ way, that’s clearly a wrong approach.”
Let’s say, you did decide to borrow £6,000 with Future Finance to help pay for your halls. You would pay around £5 a month for nine months, £130 for 84 months and then a one-off payment of £130. That’s nearly £11,000. This is literally an example I’ve taken directly from their homepage. They might as well just write “do you mind pinging us five grand over seven years, mate?”
DO THE MATHS
You need to make sure the lender is credible before you even think about taking out a loan. “One thing we would say to never do is to borrow from someone when you can’t verify that they’re legit, because that’s straying into really dangerous territory,” Welland explains. “Make sure you’re covered by legal protection.”In short: make sure your loan is monitored by the Financial Conduct Authority or you could find yourself telling the story on a Channel 5 special about cowboy money lenders – or worse!
LOOK OUT FOR RED FLAGS
Kinda goes without saying, but don’t borrow more than you need to.
BORROW THE MINIMUM – NOT THE MAXIMUM
Try to pay off as much of your loan as you can. If you’re in the fortunate position to have savings, use them to shift what you owe as the interest rate is much lower in savings accounts than on loans. If you have a regular and secure source of income and know that you’ll be able to pay off the loan in the agreed increments, sometimes this can work in your benefit over paying it off in a lump sum. Sticking to an agreement with a debtor and paying off the exact amount will help your credit rating, which can help you get a mortgage in the future.Struggling to meet your payments? Rachel Boyd, Head of Information at the mental health charity Mind told me: “There are organisations that can help people; that can help you untangle that debt. A lot of people don’t realise that if you phone banks or the people who are chasing you for bills, actually they can pause things, they can help you.”At the end of the day, it’s a tough world out there and it can be difficult to know who has your back and who doesn’t – especially when it comes to money. Do your research and just hope that one day, a government gets elected and wipes all our debts. Till then, try not to eat avo toast around any Tory homeowners.@rossy