Professional and Career Development Loans – what’s the deal?

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The future is looking bleak for this year’s graduates. With youth unemployment at a record high, the number of university leavers dashing in the direction of post-graduate study has risen sharply.

It’s normal for people to seek further qualifications in an economic downturn, but this time it coincides with rapid price-rises for Masters programmes and cuts to funding bodies, which are making scholarship money increasingly hard to come by. One of the few options available to those who don’t have parents with the necessary funds is to take out a Professional and Career Development Loan, a bank loan which the government (or the Skills Funding Agency to be precise) pays the interest on until you finish your course.

PCDLs, as they’re known, are available from the Co-op and Barclays to people between the ages of 18 and 69 who wish to undertake further training or education – that means any approved part-time, full-time, or distance learning course that lasts up to two years (three years, if the course involves a year of work experience). You can take out between £300 and £10,000 and you pay it back at a fixed interest rate of 9.9 per cent per annum over a period of one to five years, previously agreed with your bank.

The loan can be used to pay up to 80 per cent of your course fees, or 100 per cent if you’ve been unemployed for three months. Once your course is over, you have one month to find work before the repayments start. In the current climate, that is no mean feat.

Greg Davies, 24, took out the full £10,000 in 2010 to fund his Masters in Occupational Psychology at Manchester University’s Business School. As his course neared its end, Greg began frantically searching for work.

“I was just really lucky and a week after finishing my Masters I started a job. For a bit it looked like I wasn’t going to find work in time, but it was just a case of perseverance. I applied to everything and anything. I wasn’t picky in the slightest.”

His job was as a researcher in the employee relations research team of a market research company and, although he thinks the loan worked for him, he’s keen to stress that it’s not a decision to be taken lightly: “You need to be 100 per cent certain that you’re going to find work and can afford the repayments, especially if you’re taking out the full amount.”

Some don’t get lucky so quickly and Andrew Wilson, 24, who also took out the full £10,000, didn’t find a job immediately after finishing his Masters in International Relations from the LSE. Upon graduation he was offered a sought-after internship in Brussels which, although paid, wasn’t going to leave him with enough money to start repayments of just over £200 per month. Under certain special circumstances, both Barclays and the Co-op will allow you to delay or lower your repayments, on condition that you discuss the matter with them before you are due to start repaying the loan. Such circumstances include being unemployed and claiming benefits, or being on a government training programme.

“It’s actually more flexible than it seems,” says Andrew. “Considering the economic climate they’re aware that graduates are finding it very hard to find jobs, especially ones where they can pay back £200 per month.” Andrew rang his bank and explained his situation. They allowed him to lower his repayments to £100 per month, subject to review every three months. “I was nervous about talking to them and I thought I was going to have to haggle and get it down, but they were actually really understanding.” Now Andrew has a job working for the Civil Service and has started making his repayments in full.

“I think the main thing to say is that you need to know what you want to do and that you’ve researched how the course will benefit you,” says Francesca Turner, a careers advisor at the National Careers Advice Service. “For some students who’ve recently finished undergraduate study it can be tempting to fall back into the comfort of education, bypassing experience. There’s no point doing a course unless you’ve researched where it’s going to take you and you’ve asked whether it’s best to get a bit of experience first of all.”

She stresses that it’s vital to assure yourself that the course you’re considering is recognised, something the National Careers Advice Service can help you with. There’s no point getting into debt doing a course that won’t help you find the job you’re looking for.

“You should also make sure you’ve exhausted all other possible sources of funding before taking out a loan,” adds Francesca.

Don’t be fooled – a PCDL is a bank loan and, although the government pays the interest on it while you’re studying, once you’ve graduated it’s just like any other commercial loan.

“In an ideal world we’d all get funding from elsewhere,” she says. Possible sources of funding include universities (which sometimes offer discounts to students who did undergraduate qualifications with them), charitable organisations, research councils and professional bodies relating to your chosen course of study.

“The funding that’s available can be very specific to the course you’re looking to do, so it’s best to speak to a career advisor who can inform you of your options,” she says.

“I would recommend a PCDL if there’s no other way of doing it,” says Andrew. “It’s helpful, but taking on such a large amount of debt on a commercial basis is scary and the repayments might seem very high initially.” But, he adds, there are up sides to this. “In a way, what’s good about it is that it puts the responsibility on you to make the right decision and make a sound investment. Because that’s what it is - an investment. You’ve got to ask yourself whether you’re going to maximise the return on your investment and if you’re not, it’s a lot of money to waste.”

Greg says that the repayments don’t have to be seen as terrifying: “I factor in the repayments to my monthly outgoings, so I think of it as another tax. It’s 50 per cent of my monthly rent (in London), so if I didn’t have to make the repayments I would have a nicer flat and be able to do more things, but at the same time I might not have got such a good job if I hadn’t done my Masters, so swings and roundabouts.”

Overall, the advice is to be careful. “If it hadn’t been for the availability of Professional and Career Development Loans I wouldn’t have been able to do a Masters,” says Greg. “I just didn’t have that money and nobody could have lent it to me. But you need to be aware of the effect it’s going to have. You’ll be paying it off for five years, so you need to be prepared.”