The banks that claim to listen but don't always hear

The course may be over, but the debt doesn't stop there. New graduates come under ever-greater financial strain as they try to take their first steps towards a career.

YOUR MOTHER has framed the graduation photo, you've had a break and at last the world is your oyster. There will be the job, then the flat, some new clothes and hopefully the car. All those years of hard work will surely now bring their reward.

That is the theory. But for some graduates the reality is rather different. Take Stephen, who studied in Manchester and wanted to stay in the city when he qualified because it offered the best job opportunities. But that meant a new flat, which needed a deposit, and his bank manager proved less than helpful, demanding repayment of his overdraft before he would consider any further help. Stephen is back at home with his parents in a small Lancashire town, working in a temporary job that makes no use of his qualifications and pays too little to allow him to save for a move.

Stephen is not alone. A survey by NatWest Bank, published in November, revealed that almost half of new graduates now return to live with their parents after they qualify - twice as many as went back home just two years ago.

According to David Bloomfield, the head of student and graduate banking at NatWest, the fact that each year more graduates are opting to stay at home to save money is a good thing. "It highlights the fact that graduates are concerned about their finances, and sensible money management." What parents think of the trend is not recorded, and many graduates complain that their choice of job is limited.

The latest figures show that a quarter of new graduates now start out with debts of more than pounds 5,000, and that is not counting obligations to the Student Loan Company, which does not demand repayment until an income threshold has been passed. Those who have had to take a postgraduate course for entry into a profession such as law, accountancy or, increasingly, journalism or multi-media, may well have taken out a Government-supported Career Development Loan of up to pounds 10,000 to fund a year's further study.

A graduate's biggest creditor after the Student Loan Company is likely to be their high street bank, which has been happy enough to let an overdraft mount up for years, and may also have been responsible for a postgraduate study loan. When the course is over, it is interested to know how its investment is going to be repaid.

Not quickly, is probably the answer. Another recent NatWest survey revealed "unrealistic" expectations of starting salaries. The average for 1998 graduates was only pounds 12,255 nationwide, just under pounds 14,000 in London, far from the pounds 20,000 many looking for work in management consultancy and IT expect.

All the big banks claim that not only are they student-friendly, but graduate-friendly, too. As Bloomfield admits, the first couple of years out of university can be a real struggle and new graduates may need as much support as they did while they were students. NatWest has just introduced a team of 60 special advisers to help new graduates plan their financial futures, and it expects them to be kept busy.

All the big four banks offer financial packages that will generally include an extension of the interest-free overdraft facility graduates have had as students, plus a low interest loan of up to pounds 10,000 with repayments spread over five to seven years. The loan can generally be used to pay off any outstanding overdraft.

But the banks want evidence of a job - a six-month contract of employment, or at least a regular income - before granting a loan. Some graduates, particularly those moving into industries where a lot of work is short-contract or freelance, fall down a financial black hole.

The big four banks insist that helping graduates who may be aiming for less than conventional careers is left to the discretion of branch managers. HSBC said: "It really is up to the applicant to prove credit- worthiness. Most managers would focus on income rather than a conventional salary. If that is good enough, they will look at a loan sympathetically."

Most managers may be sympathetic, but a few are not. Graduates who have fallen foul of their manager are particularly resentful when a branch hands their affairs over to a "collection centre" to chase up what has suddenly, and sometimes inexplicably, become a "bad debt".

Outside the banking network, help is sparse. For graduates to qualify for help under the Government's Welfare to Work scheme they have to have been drawing Job Seekers' Allowance for six months, a fairly demoralising prospect, and one which many graduates won't contemplate, preferring "McJobs" to the indignities of the dole. Six months on JSA brings modest assistance towards self-employment, or a special scheme for aspiring musicians under 25.

For those who want to take a different route and set up their own business, it is often back to the banks for help, and the same difficulty of proving they deserve it. As Lloyds puts it: "We are very keen on business start- ups and would review a new graduate's proposal in the same way as anyone else's. They would have to be credit-worthy and have a valid business plan."

Not much help there for recent graduates with debts they are already having difficulty paying off.

The names of graduates in this article and the case studies (right) have been changed

HOW TO COPE

n Keep in touch with your bank, especially if you are in difficulties.

n If the right job does not come along immediately, take a temporary one to keep your head above water.

n Repay credit card debts as soon as you can; interest rates can be very high.

n Try to reduce your overdraft while it is still interest-free; you'll pay more for it later.

n Consider consolidating all your debts into a personal loan at preferential graduate interest rates.

`THE CALLS ALWAYS CAME FROM A DIFFERENT PERSON'

DAVID HAD an overdraft limit of pounds 1,500 when in his final term of a technology course. Just before term ended, while completing a major project, he persuaded his branch to allow him to borrow another pounds 200.

Living at home in the Midlands to save money, he has found it difficult to launch himself in a career where many jobs are short-term or freelance, and mainly in London.

Within months of graduating he began to be bombarded with telephone calls from Lloyds' TSB `"collection centre" staff asking him to repay the pounds 200 "unauthorised borrowing".

The calls always came from a different person and they generally ended amicably with the caller asking him to contact the bank when he found work.

But the calls were quickly followed by increasingly threatening letters, written as if the telephone conversations had never taken place.

When David wrote back, asking what Lloyds TSB proposed he should do while he was unemployed, he received no reply.

He eventually borrowed pounds 200 elsewhere to repay Lloyds TSB - and, not surprisingly, he intends to change banks as soon as possible.

`THEY GIVE YOU A LOAN - THEN TREAT YOU LIKE A CRIMINAL'

MARK TOOK an arts degree and ran up an overdraft of pounds 1,000 with the Halifax.

He found that while he was job-hunting, if he strayed over his overdraft limit the bank charged him interest on the whole of the supposedly interest- free sum, not just on the unauthorised borrowing.

He switched to Lloyds TSB, which gave him a pounds 5,000 graduate loan, even though his income in a temporary job was not guaranteed. But when he needed finance to do a post-graduate course, Lloyds TSB was very unhelpful.

"I found it difficult to find out about what a Government-supported loan scheme is. There was no personal contact with my own branch, and they turned me down," he said.

Thanks to his multi-media course he has landed himself a job in the IT industry. The fees for this course were pounds 4,000. Fortunately, he was able to fund himself with an interest-free loan from a Law Society charity, largely because his late father was a solicitor.

"I think the banks are far too ready to lend money and then far too harsh when young people run into difficulties," Mark says.

"One minute they're handing out large loans and the next they're treating you like a criminal."