Money: Debt

Everyone has some debt, whether from a mobile phone contract or rent on a flat. But what happens when it's no longer manageable and how should you deal with it? 

What is debt?

Debt is simply when one person owes another something. Thanks to the student loan and fees it is estimated that the majority of students will graduate with a minimum debt of £20,000.

Top tips for dealing with debt

For most students, dealing with debt is part and parcel of the modern-day university experience. But while tightened finances and a need for borrowing have long been an element of the student lifestyle, there are steps you can take to gain control of your debt. Getting your finances sorted from the start of your time at university is key to good money management.

Keep an eye on your bank balance - Online banking is a great way to keep track of your incomings and outgoings. If you find you need a credit card, look online for the best deals with the lowest interest rates. Be careful with credit, though, and always have a plan to repay it. Ideally, keep working at your weekly or monthly budget until you can make your projected costs match your student loan, grant, work income or other sources of funding.

Act quickly - As soon as you realise you can't make a payment, seek help and tell the person you owe money to. If you let them know why you can't pay, they might be more reasonable.

Pay something - If you owe £50 but can't afford to pay the whole amount in one go, work out whether you can pay something towards it as paying a few pounds is often better than paying nothing. It will also start to pay off some of your debt rather than letting it mount.

Maximise your income - Find out if you have all the money you are entitled to such as grants and loans. There is also the GOV.UK - Access to Learning Fund  which can help you out if you're struggling to make ends meet - go to your university advice centre to find out what you're entitled to.

Prioritise - Some debts are more important than others so sort out any which could have serious consequences such as not paying your rent could put you on the streets.

Budget - Showing that you have a plan to pay back any money might help your case when looking at extending the loan payback period. It should also make things seem a little less scary if you know how much you owe and exactly how you are going to pay it back. Find out more about budgeting.

Borrow carefully - Borrowing money to pay off your bills or rent might seem like a good idea because you’ve paid that particular bill however you've just added a considerable amount to your debt thanks to the borrowed money. If you really need to borrow think carefully about whether you will benefit from it in the long run and how you will make the repayments. Always get advice first.

How to avoid debt

Work before you go to university - Not getting into debt in the first place is the Holy Grail of personal finance but sadly out of reach for most, particularly with rising tuition fees and cost of living. But before you go to university, it helps to work and save over the holidays or even take a year out to work and build up a savings pot to draw on once you begin your studies. Read more about saving.

Draw up a budget - Using a budget will help to minimise your outgoings. It's also worth having a savings target in mind to help focus your efforts.

Work part time while you study - Look for a job that offers flexibility and avoid over-working to the point where it affects your studies. For those of you who want to combine a night out with earning money, aim to get a job in your favourite bar, pub or restaurant to enjoy the social aspect while earning valuable income.

Getting help

It's important to seek help at the first opportunity. The time to press the panic button is if your rent is due but you spent all your money last weekend. Head to your university's student advice office to speak to a Money Doctor or dedicated adviser. They will be able to help you organise your debts and work out a way forward.

There is also the National Debtline and the Consumer Credit Counselling Service which have experts available to help you draw up plans to manage debt including advising on how to make proposals to creditors to reschedule payments so that they become manageable. Your local Citizens Advice Bureau  should provide debt counselling within a wider context.

Dealing with personal finance issues is one of the most valuable lessons you'll learn as a student. So if you get into trouble, deal with it and learn from the experience. You'll put yourself in a stronger position to manage your financial health for your post-student life ahead.