As ‘Generation Debt’ (the first cohort of UK students with tuition-fee debts exceeding £50,000) enters the workforce, research* from challenger bank brand B shows over 40% of current UK university students feel nervous they will never earn a high enough salary to pay off their mounting debt and a quarter (23%) believe they may face bankruptcy by the age of 30.
The survey also estimates around 282,000 students have now stopped studying for their exams and are instead focusing on trying to land a job before they graduate. A third (34%) of students believe they would have been better off joining an apprentice scheme when they left high school and 41% believe a degree no longer means as much as it used to.
Helen Page, Group Innovation Director at B said, “We need to address the fact that a whole generation of young adults are, for the first time, entering the workforce with debts exceeding £50,000 and yet they have not been given any significant support or education around managing debt of that scale. We simply don’t know what the impact will be on this generation’s wellbeing. At B we believe it’s the combined responsibility of schools, universities and the financial services industry to support and educate these young people so we don’t create the perfect storm for serious mental health issues further down the road.”
According to the research a lack of understanding about how tuition fees will be repaid, with 38% admitting they do not know how much their student loan will be when they graduate. Three quarters (75%) say they are unsure what percentage of their salary will be deducted to pay back their loan once they are in full time employment, while over half (52%) admit to not knowing when they will have to start paying back their student loan.
Thomas Webb, Psychologist at the University of Sheffield says: “The fact that such a high number of students are worried about the implications of the debt they have accrued is especially troubling given that people are usually optimistic about their ability to cope. The reality is the financial problems that current students are likely to face in the future may be even worse than they imagine. Even more worryingly, the findings also suggest that many students have not taken steps to consider the implications of their debt (e.g. when they will have to start paying it back and how they will do so). This seems like a classic case of “the ostrich problem” and points to the need to find ways to help students confront and manage their financial situation.”
Despite debt playing on student’s minds, 80% do not have a plan in place to help them manage their finances, and only 15% say they will approach their bank for financial advice within the next year.
Page continues: “Concerns about money are likely to start much sooner and stronger for Generation Debt than for previous generations. We built B with young people in mind and we are on a mission to get the UK financially fit, starting with young adults who are facing much tougher challenges on all fronts. The good news is technology is enabling banks like ours to give people the tools to take some control back of their money and ultimately their lives. The key to really getting this to work is in making financial education a much bigger priority for schools and universities as that’s where the bad habits tend to start.”