From adverts plastered on beer mats to fluffy mascots roaming university campuses, payday loan lenders are certainly doing their best to appeal to the student market. And while it might be tempting to laugh off such barefaced branding tactics, it seems their efforts are, in fact, succeeding. According to a recent survey of 850 students carried out by The Student Room, one in ten had resorted to a payday loan to support themselves through university.
To make matters worse, the Conservatives' recent decision to scrap maintenance grants is likely to push students further into the pockets of payday lenders. Just last month, the Tories announced that they will replace grants with loans for half a million of England's poorest students.
Payday loans are financially risky, high-interest, short-term loans. They are billed as stopgaps until payday – or, in this case, student loan day – comes along. But if you miss repayments, charges can quickly clock up, and what starts as a minor amount of money can quickly snowball into a sizeable sum.
Rose*, 24, has first-hand experience of the perils of payday loans. While studying Media and Cultural Studies at London College of Communication, she found it difficult to support herself.
"I ran up £6,000 of debt over four years. The loans kept getting rolled over and kept increasing," she explains. "My husband was a student like me, and we were struggling for money. My parents kicked me out, so we had absolutely no way of getting any money. Student finance was either too delayed or not enough; it was either [take out] payday loans or literally starve."
Left with few options, Rose began to seek out payday lenders.
"I remember seeing Wonga adverts on TV. There were a lot at that time," she says. "It started with Wonga, but soon spiralled everywhere; Payday UK, Quid, Smart Pig and several smaller ones. You only pay interest, so the debt gets rolled over. We'd use the loans to pay for food and bills and other basics."
Despite the fact both Rose and her husband worked on and off throughout their degrees, they still struggled to support themselves, and the debt exerted serious stress on Rose's mental health. "It's something you push out of your mind, but towards the end I felt terrified because it was getting worse. It got really, really bad. I wasn't sleeping well. I was terrified of the bailiffs coming," she says. "It caused a lot of fights between me and my husband. At one point I really considered a divorce because I just wanted to escape."
Every day Rose would receive numerous phone calls from various companies. "It got to a point where they were threatening and harassing,"she recalls. "They were persistent. They sent letters. There were a few times there were calls at night. I wasn't happy. I wasn't concentrating on university like I should have. I was concentrating on finding work to pay it off."
It wasn't until her husband's parents helped out that the couple managed to break free of the debt. "My in-laws have lent us the money to pay it off. We're paying them back monthly, but it's not so terrifying," says Rose. "But it's still haunting us. We came very close to declaring ourselves bankrupt. We have no chance of getting a mortgage for a long, long time. I got rejected opening a bank account."
Rose is not the only student to have struggled with loan sharks. In 2013, 21-year-old Swansea University student Courtney Mitchell Lewis killed himself after seeing a £100 debt soar to £800 in the space of just three months. His was a rare and tragic case, and it would be irresponsible to suggest the debt was the sole reason for his suicide, but equally the added stress can't have impacted positively on his mental health.
All of this leads us to the question of why students are turning to payday loans in the first place. In a nutshell, it's because they're skint. A combination of snowballing tuition fees and rising rents has meant that increasing numbers of students are now facing a cost of living crisis. And with the average tuition fees in England now "the highest in the world", it should come as no surprise that 50 percent of all undergraduate students regularly worry about meeting basic living expenses like rent and utility bills.
If this wasn't bad enough, one in ten students are using food banks to survive. Rising housing costs are a massive problem, too. After all, the average student rent amounts to 95 percent of the maintenance loan available, leaving a meagre 5 percent for everything else.
Shelly Asquith, the vice president at the National Union of Students, is well aware of the ever-intensifying problem of payday loans. "At different times of the year, payday loan companies particularly target students. They're clever – they know when the loans are about to run out at the end of term," she says.
Of all the payday loan companies, Asquith is most wary of Smart Pig. "They try and package them up as 'student-friendly', but look behind the nice branding and it's just like Wonga or any other payday lender," she explains. "We need far more regulation on these companies."
Over the years, Smart Pig has become notorious for their cunningly "quirky" advertising tactics. From plugging loans on beer mats to fly-posting nightclubs with loan adverts, it's hardly surprising that they've come under fire from the Advertising Standards Agency.
Set up by two students in 2011, Smart Pig were supported by the government-funded Start-Up Loans scheme. Unlike the broke students they lend to – who have been known to be charged up to 1,089 percent APR – they had to pay a far more economical, subsidised interest rate of 6 percent for their start up.
Of course, it's hardly a secret that payday lenders aren't exactly the good guys. But deliberately preying on students' vulnerability during a cost of living crisis, when conventional student loans hardly cover food and shelter, seems like a step only the most morally bankrupt of companies could take.
*Rose's name has been changed to protect her identity.
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