All entries for Friday 15 April 2005

April 15, 2005

Student debt – Not Unreasonable

BBC News yesterday ran an article on student debt. According to surveys, the average student will leave university £13 501 in the red. Featured, was an interview from one such highly indebted student.

Debt is a worry for Gemma Tumelty as she approaches the end of four years at Liverpool University.

She expects to leave owing £18,000 and admits she does not know how she will pay it off. Student loans make up most of her debt, borrowing £3,000 in her first year and £4,000 each year since. But she also owes about £900 on her credit card and last summer had a £1,000 overdraft, which she has since paid off.

"It does scare me about how I'm going to pay off the money," says Gemma, who will earn about £17,000 when she goes to work full-time for the NUS in the summer. "I'm 24 and I can't see me getting a pension or being able to afford a house," she adds.

Full article here

The fatalistic attitude of Miss Tumelty is puzzling. Did she not think about how her debt would be paid off before embarking on a university education? Didnít she sit down and create a realistic budget?

A university education is no less of a serious investment than a car, or mortgage. At the age of 18, one is perfectly capable of looking ahead and deciding what job opportunities a given degree provides. If a degree opens no more opportunities than are available to someone with good A-levels, then common sense states itís probably not worthwhile financially.

If a degree permits a career in law, medicine or engineering for example, then £13 501 of debt is negligible given oneís earning potential over a lifetime. Thatís not to say degrees in English/Theatre/whatever is of less value from an intellectual viewpoint. They just donít open as many high-paying Ďdoorsí.

In fairness, even those who donít respond in the predictable NUS fashion may be put off a worthwhile course if credit is unavailable in the short run. The maximum loans available under Labour seem small in comparison to accommodation, tuition and living costs. This contributes to growing credit card debt with their high interest rates. Iím not sure whether commercial loans are available with special rates for students Ė any info appreciated. In any case, more credit should be made available, as promised by the Conservative education manifesto . Grants for particularly poor families wouldn't hurt either.

If you want to pay £13 501 for the Ďuniversity experienceí, or to read about stuff you find interesting, then go for it. Just donít complain if you leave with nothing but a piece of paper and an angry bank manager Ė the costs were clear beforehand. If £13 501 is too much to pay, drop out.

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