STUDENT FINANCE : Learning to limit the degree of debt

Struggling with faltering finances? Lee Rodwell reports on the help which is at hand

Happiness may have been a balanced budget for Mr Micawber and Mrs Thatcher, but such advice must ring hollow for today's undergraduates.

Despite a Barclays Bank survey which indicates that 19 per cent of students manage to stay out of debt for their whole time at university (probably thanks to the generosity of their parents), most freshers soon learn that owing money is a fact of student life.

But what happens when your level of debt gets out of control, when you have spent your grant and your student loan, reached the limits of your overdraft, exhausted any store or credit cards - and still have two terms to go?

The first thing is not to panic. The second is not to bury your head in the sand and hope the problem will go away. The third is to go to the experts for help.

Colleges and universities have student union welfare officers who can help students explore their options, work out budgets, ensure they are claiming all possible benefits and apply for hardship funds.

Others assist students to stave off financial ruin by helping them find part-time jobs: University College London, for instance, has now given the union funds for a placement office to match students with job vacancies inside and outside the college.

However, the expert who may be able to help most, is the one you may feel the most reluctant to consult - the student officer or advisor in charge of your bank account.

Alison Lefevre, a student officer for NatWest on the University of Surrey campus, understands the scenario.

"Many people still have the traditional idea of a bank manager as an ogre. They don't want to see someone who is going to preach at them about their profligacy, so they push the problem to the back of their mind and hope it will go away. In fact, things just get worse and worse.

"If they come to us sooner rather than later, we can help them work out ways of solving the problem. We understand what it's like being a student. We know they can't cut back on books - but we might point out that eating out can swallow up the money. Getting together with friends to buy groceries can help.

"We can't tell them what to do, but we can show them how to manage budgets."

Manchester-based Alison Roylance, one of Barclays' 170 student advisers, understands the temptations students face.

"We always advise people to take their student loan out in three stages.

"If they get a lump sum at the beginning of the year, some go mad and buy themselves a stereo or nice clothes. By the time the second or third term arrives, they've run out of money and it causes problems throughout the year. Then they have to work really hard in the summer to cope financially the next year."

So how can Alison and her colleagues help students climb out of a hole they have dug for themselves?

"We might ask if their parents can help, but we'd never insist on it. Some students don't want to tell their parents the state they've got in, and they want to be independent.

"If they have gone over their overdraft limit, we go over their budget with them and look at what their cheques have been issued for. If they were for rent or hall fees, that's one thing, designer labels are another. But we wouldn't tell them off. We'd use it as a lesson so they could work out for themselves what they'll need from now on.

"We may renegotiate the overdraft. That may mean going beyond the interest- free limits, but for students the rate is still only one per cent above base rate. And if they admit they can't control their budget - if they spend their money as soon as they get it - we can increase the overdraft limit until the end of the term, but ensure that they can't have the extra all at once. Instead, we may limit them to withdrawing a set amount, such as pounds 60 a week."

Alison also points out that running into financial difficulties in your first year may not be as disastrous as you imagine - providing you learn from your mistakes.

She says: "Students who get into trouble at the start tend to be the ones who graduate with a lower level of debt. They are determined that by the time they finish their third year they will end up with the minimum debt they could possibly have. They know how difficult it can be to get out of."