Press Room

The £20,000 degree - school leavers concern over university debt
(12 August 2003)

• NatWest 2003 Student Money Matters Survey - the definitive guide to sixth form, undergraduates and graduate finances

Sixth form students expect to pay £20k

With A-Level results days away, sixth formers are facing up to the harsh reality that University could leave them with debts of over £10,000, according to the 2003 NatWest Student Money Matters survey. Average anticipated debt is steadily rising year on year, up £1,300 from 2002, whilst this year's freshers believe they will have to find £854.88 a month to cover essentials such as rent, food, and books to beer and cigarettes. That works out at a staggering £20,517 required to cover living expenses over a three-year degree *.

Real cost of university life

The actual cost of a three-year degree offers scant relief for anxious sixth formers and their parents but does show them to be amazingly on-the-ball, as the anticipated figure virtually mirrors the actual. According to spending figures given to NatWest by those already at University, the actual cost stands at £19,408 once three years of tuition fees (currently £1,000 per year) are added on.

Reflecting the current doom and gloom surrounding this cost, students already on their degrees anticipate graduating with debts of £11,365, up £1,648 from those asked last year.

Graduate debt and starting salaries start alarm bells ringing

The average graduate debt figure of £8,125 has risen by a worrying £2,489 from 2002 and a fifth believe it will take them more than 10 years to pay off. Again, an increase (11%) from those surveyed last year. Perhaps most worryingly, around a third of graduates (up from 9% in 2002) left University with debts of over £10,000.

A reduction in this year's average graduate starting salary to £12,659 (£13,422 in 2002), an 8% decrease in graduates finding work before their course finishes (28% in 2003) and a 14% increase in the number of graduates living with their parents to save money (64% in 2003), paints an even bleaker picture.

Part time work increasingly critical

Not surprisingly, over two thirds of school leavers starting University this year are worried about potential living costs and the prospect of debt. Concern has mounted since 2002, with a third (up from 21% last year) now planning to shun popular halls of residence and live at home with their parents to save money instead.

However, school leavers looking to start University this September are determined to meet the debt challenge head on, with 91% prepared to roll up their sleeves and get a part time job to help get by. Expecting to spend an average of 14 hours a week outside of their studies working part time, just under a half of sixth formers (41%) will look for work in a shop and over a third (36%) will head straight for the pub, to find a job.

The reality for those already at University is slightly different from school leavers' expectations, with only half of undergraduates in part time work, earning an average £2,240 per year **. For those who do have a part time job, three-quarters believe that they will not be able to afford University and pay tuition fees without the extra income. Worryingly, this pressure to earn money does have a real impact on studies as nearly half (43%) of those in part time jobs admit to skipping lectures to turn up for work, and nearly a fifth (18%) have considered dropping out of University to make their part time job a full time one.

Worthwhile investment - University not all doom and gloom

However, despite rising costs and debts, 67% of those who graduated last year are in full time employment, 56% are not worried about their debts, around a half (46%) believe they have gained a good career, 42% think they have got a healthier bank balance, and 35% have a healthier liver!

Although University is clearly a financial challenge, it is still seen as a worthwhile investment. 70% of graduates do not regret going to University and only 9% ever considered dropping out of their course to get a full time job. Recent statistics show that the benefits are considerable. Graduate Prospects found the UK average national graduate salary to be just over £18,411 and that University graduates earn on average around 50% more than those who did not go to University. This is backed up by The Office for National Statistics (ONS) Labour Force Survey which also reveals that graduates working as managers or senior officials earn 46% more than non-graduates in the same occupations.

According to Ann Marie Blake, Head of Student and Graduate Banking at NatWest: "It seems that school leavers are becoming more and more financially savvy in their budgeting before starting University. Their anticipated costings for University life although high, are on the right side of caution. Whilst real escalating costs and debts are forcing them to be more aware, it is encouraging to see that the lessons learnt by students at University from not burying their heads in the sand to avoid financial worries, may have had a knock on effect on this year's school leavers. Significantly, our research once again re-affirms that, although debt figures look scary, most graduates do not regret the experience and see it as a worthwhile investment."

NatWest has dedicated student and graduate banking managers in place to help advise school leavers, students and graduates worried about their immediate finances or the prospect of debt. They have put together the following tips for school leavers and students about to graduate on how to try and avoid the debt trap while at University, and how to cope with the transition between student and graduate life:

NatWest Tips for School Leavers - Top Ten Tips to Try and Avoid the Debt Trap

• Think about staying in university accommodation for as long as possible - it can be cheaper than renting privately.
• Shop for food with friends - buying in bulk can save money and lets you can take advantage of 'buy one get one free' offers.
• Claim discounts. Make sure you use your NUS or ISIC card and also look in your Student Union for one-off deals.
• Don't rush out and buy every book on your reading list on the first day of term. There will be lots of opportunities to buy second hand books.
• If you do work, check whether you have to fill in a form P38(S) so that tax will not be taken off your earnings.
• Ask other students how much you will need to pay for bills. Complete a budget planner and regularly review it to see where your money is being spent and if it is deviating from the budget.
• Record all transactions as you spend them so that there are no surprises when your bank statement arrives.
• Work out how much you can afford to spend per week and draw it out on a set day rather than keep visiting the cash machine for a tenner here and a tenner there. If you do the latter it can quickly build up and take you to your financial limit.
• If you do find yourself struggling, talk to your bank as soon as possible - don't sweep cash problems under the carpet.
• Finally, it's easier said than done, but don't run up a massive debt in the first couple of months. Going out every night in the first term may make you popular but could mean a serious lack of social life later in the year.

For further advice on preparing for University, visit Student Banking

NOTE TO EDITORS:

Ann Marie Blake, NatWest Head of Student and Graduate Banking, is available for interview.