Don't let debt get to you

If you're thinking of going on to postgraduate study when you've finished you degree, you've got a couple of things to consider. Do you want to further your education and, if you do, will your bank balance be able to go the distance with you? According to NatWest, graduating students are coming out of university with average debts of £12,640, accrued through loans, overdrafts and credit cards. In last year's Barclays' Annual Graduate Survey the figure was quoted as £13,501, a 12 per cent increase on the findings of 2003. Either way, it doesn't make for pretty reading.

Then again, these figures are hardly surprising. When you go to university, you know you're going to have a lot more outgoings then you have incomings: course fees, accommodation, food, books and transport are necessities that just cannot be balanced, even with a part-time job. That's not to say that a part-time job isn't a useful thing to have - as long as it doesn't infringe too much on your studies - but still, the financial odds are stacked against you.

It's not all doom and gloom though. For a start, you've got your student loan to cover living costs during your undergraduate study. It doesn't have to be paid off until you are earning a minimum of £15,000, at which point repayments are taken out of your salary at 9 per cent of whatever you earn over that mark. An added bonus is that the rate of interest on your student loan is very low. As a result, this needn't be a major concern. "I know that I've got £9,000 waiting and accumulating interest," says Anna Jewitt, 23, who studied music and drama at the University of Manchester, "but I don't let it bother me because it will get paid off and sorted. I was always within my overdraft limit, which I knew was there for me to live off and for my studies."

However, things are set to change from September this year - which is worth bearing in mind if you're considering taking a second degree. Until now, students have had to pay their tuition fees up front. However, for the next academic year you will be able to apply for a loan to cover these fees and defer paying for them in the same way that you do with a student loan at the moment. That might sound good, but bear in mind that institutions will also be free to charge up to £3,000 a year in tuition fees. Go to the Student Finance Direct website ( www.studentsupportdirect.co.uk) for details on all the changes.

One thing remains the same whatever changes might be made: you should be sensible with how you use your loan and overdraft. Obviously your time at university should involve a lot of fun - but don't throw money around like there's no tomorrow; there is one and it involves you paying all that money back! Andrea Rozario of Rozario Harris, an independent financial adviser, says: "When you think back to our grandparents' generation, the mindset was very much that if you could not afford it, you did not buy it. But we seem to have become more of a 'buy now, pay later' consumer society."

Deferred payment can make it seem like you're getting something for nothing, so be wary, especially if you use a credit card. The interest can really mount up. Anna did the right thinking by keeping an eye on what she was spending, and it meant she could go on to do an MA in music and drama. She's got a handy piece of advice too: "The busier you are the less money you spend!"

When it comes to funding postgraduate study there are various options open to you. You could take a year out after your degree and work full-time to earn some cash in preparation. If you don't want to do that, you could take out a graduate loan. Some universities provide financial support for their students, or have a link-up with a particular bank. You can also approach banks yourself but be sure to shop around for the best deal for you. Factors such as the amount of money you can loan and how long you have got to pay it back vary greatly (see the box on page 13 for more information).

You might be able to apply for a funding award or research grant. Various bodies offer this, including The Royal Academy of Engineering and the Medical Research Council, so depending on what your postgraduate study is in, it might be worth checking out. Your careers service should be able to offer you advice or visit www.scholarship-search.org.uk to see the information hotcourses have on the subject.

Something else to consider is a Career Development Loan (CDL). This is a deferred bank loan, whereby the Learning and Skills Council pay the interest on the loan for the duration of your course and for one month afterwards, and then you take over repayments. The CDL covers up to two years of study, but you can use it to fund part of your course if it's longer. Visit the Directgov website ( www.direct.gov.uk/cdl) for further information.

The financial support is there and is a great help if you utilise it in the right way. It's a good idea to work out a budget for yourself, both to keep an eye on your spending while you're studying and to incorporate repayments when you've finished. Avoid setting up any sort of credit arrangement that you can't afford and deal with bills and statements when they arrive; setting up a direct debit to pay for regular bills reduces some of the hassle.

Whatever you do, don't let debt get to you; it's an unavoidable part of Higher Education today. At the same time, don't ignore it. If you're having problems, speak to your bank or the institution that is funding you, as often alternative payment schedules can be worked out. You can also get free money advice from the National Debtline (0808 808 4000), the Consumer Credit Counselling Service (0808 138 111), and the Student Loans Company ( www.slc.co.uk), so don't suffer in silence. And remember, it's all great practice for when you buy a house and get a mortgage!

A brief guide to overdrafts and loans

Most high street banks offer financial help for graduates and it is worth going into your local branch and talking to a member of staff to find out exactly what you can get from them.

By Mayuri Patel

HSBC

HSBC provide an interest-free overdraft that decreases each year for three years after graduation, from £1,500 to £500. You can also get a graduate loan - up to five years after you graduate - to a maximum of £25,000, with repayment terms of up to eight years and optional payment protection. Depending on what postgraduate subject you are studying for you could get a professional studies loan instead, which offers different benefits; check the HSBC website for details.

www.hsbc.co.uk

Abbey

Abbey offer an interest-free overdraft of up to £2,000 that decreases over three years. They've also got something called an Overdraft Manager where you can pay off up to £5,000 over three years with more disciplined monthly repayments. You can apply for a preferential loan of up to £10,000 at any time within three years of graduating.

www.abbey.com

Barclays

With Barclays you can get an interest-free overdraft of up to £3,000 for up to three years after graduation. Their graduate loan is up to a maximum of £10,000 and repayments can be spread over seven years. Other options include a professional studies loan and a Career Development Loan; visit the website for more details.

www.barclays.co.uk

Lloyds TSB

Lloyds TSB will give you an interest-free overdraft of up to £1,500 (£2,000 for five-year courses) repayable over the three years after graduation. You can get a graduate loan from between £1,000 and £10,000 with up to five years to pay it. You've got the options of making no repayments for the first four months after graduation and of using loan protection, which cover your repayments in the event of illness or unemployment.

www.lloydstsb.com

NatWest

NatWest offer a graduate account with an interest-free overdraft of up to £2,000 in the first year of graduation, decreasing to £500 three years after graduation. You can borrow up to £15,000 repayable over seven years and have a four- or 12-month repayment holiday at the start of the loan and can take advantage of loan protection. See the website for further details.

www.natwest.com

Money matters

Katy Bennett, 25, did an MA in biotechnological law and ethics at Sheffield University

"I came out of my undergraduate course with the normal amount of student debt based on the student loan I was allocated over three years. I still have it to pay off and won't start doing that until I'm earning £15,000 or more, which I'm hoping will be soon! It doesn't really concern me that I still need to pay it off though, because when I have a job that is earning me the required salary I'll be earning more money then I do now anyway, and I'm used to living without much money.

I had two years in between finishing my degree and starting my Masters where I worked and travelled. When I did go back to university, I took up a Career Development Loan (CDL) with Barclays bank, which I found out about through my university careers service.

I'm doing less in terms of going out and that sort of thing to pay off my graduate loan now, because you have to start paying it off as soon as you graduate no matter how much you are earning. You can choose how many years you want to take to pay it off and so I pay a certain amount towards it each month within what I can afford."