Dealing with debt

Jemma Smith, Editor
January, 2019

For students income is low and budgets are tight, so it's hardly surprising that many run into student debt. Discover how to tackle your money troubles head on

Aside from tuition fee and maintenance loans, student debts can take the form of rent arrears, utility bills such as gas, water and electricity, overdrafts, store cards and credit cards. If you're dealing with these worries alone, the problem can seem insurmountable.

The strain of owing money not only has a negative impact on your mental wellbeing but can also affect your academic studies. Worrying about how to pay the bills is no way to go through university and can make what should be one of the best times of your life feel like one of the most stressful. If money worries are affecting your university experience, read up on 5 ways to manage student stress.

If you're determined to get debt free, follow these basic steps.

Don't panic

It's tempting to bury your head in the sand but this short-term solution won't help and can lead to debts spiralling out of control. 'Don't ignore the problem, debts won't go away on their own, they'll get worse and may be harder to resolve if not dealt with,' explains Sophie Taylor, National Association of Student Money Advisers (NASMA) member. 'Seek help as early as possible as what may seem like a huge problem to you may be quickly resolved with the right advice and guidance.'

Don't let letters or emails pile up either. Open and deal with all correspondence to make sure that you're fully clued up on the severity of your situation. Keep and make copies of all correspondence in case you need to produce these at a later date.

Family, friends, university services and outside agencies won't be able to offer help and support if you're not honest about, or aware of, the extent of your debts.

Prioritise your debts

If you have multiple debts it's important to prioritise them and not just pay the creditors who shout the loudest.

Debts usually fall into one of two categories: priority debts and non-priority debts.

Priority debts include:

  • rent or mortgage arrears
  • utility bills such as gas and electricity
  • income tax
  • TV licence
  • court fines.

The non-payment of these debts can directly affect your wellbeing. For example, you could lose your home, have essential supplies cut off or in some cases go to prison.

Non-priority debts cover:

  • bank overdrafts or loans
  • credit or store cards
  • unsecured personal loans
  • money borrowed from friends or family.

While it's still important to clear these debts, they are not an immediate threat to your wellbeing. Penalties for not paying are generally less severe but you should still take secondary debts seriously.

To begin getting a handle on your money troubles, separate your priority debts from your non-priority debts. These are the ones that you're going to tackle first and foremost. Completing this simple first step can make you feel more proactive and can help to put your troubles into perspective.

Talk to people

While being in debt may feel isolating you don't have to suffer in silence. Talk to your family, because although they may not be able to offer financial help, sharing your money worries can feel like a huge relief. Next, tell your friends about your situation, they're best placed to offer moral support if you're studying away from home. Close friends can also be a source of practical support as you try to curb any bad spending habits.

University student services are also a great place to turn to for help and advice. 'Most universities have dedicated teams of student money advisers who help students make sense of their finances and provide one-to-one support or signposting to external services where necessary,' says Sophie. University advisers can help to confirm your debts, with budgeting and maximising your income, and with drafting financial statements. They'll also be able to support you through negotiating with your creditors.

Don't feel embarrassed to talk about your debts. How you got where you are is irrelevant - university student money advisers aren't there to judge. They're there to talk you through your options and help you move forward.

If your institution can't offer the help you need then they may point you in the direction of professional debt charities such as the Money Advice Service, Step Change or the National Debtline, where you'll receive free, impartial advice.

Take control of your finances

After receiving some professional advice it's time to check that you're getting all the financial support you're entitled to. 'Online student finance calculator tools give an estimate of what financial support a student may be able to access in advance, which can help when planning finances,' advises Sophie. Your university will have specialist advisers that can check your entitlement to statutory student support. Most institutions also have hardship funds to help students facing a change in circumstance or unexpected financial problems.

Next you need to set yourself a realistic budget to avoid getting into further debt and to free up some cash to start repaying priority debts. There's plenty of budgeting advice online but, if you need a little help make an appointment with a student money adviser and take along any bank statements and receipts. Budgeting will mean cutting back on social and leisure spending so be prepared to make this change. There are lots of ways for students to maximise their income, for example if you don't already have one you could consider a part-time job. Learn how to balance work and study.

For more money saving tips, see 7 ways to save money as a student.

Tackle existing debts

Once you've prioritised your debts, received advice and have a solid grasp on your financial situation you need to tackle your most important debts.

To begin with you'll need to draw up a financial statement containing details of your current financial circumstances. Include all incomings and outgoings and outline all unpaid debts and repayments due. If you have any available income, calculate how much you can afford to repay each month and apportion this among priority creditors. If you need some guidance a university adviser should be able to help with this.

You then need to write to your creditors proposing a new repayment offer. Attach a copy of your financial statement and make them aware of any exceptional circumstances that affect you meeting the previously agreed repayments. You can request that creditors freeze the interest on any debts while you renegotiate terms. You can also ask a university adviser to check letters before sending and to submit a letter supporting your case if necessary.

Avoid using quick-fix, pay-day loans at all costs. 'These may appear to offer a solution but the interest charges and repayment terms are unaffordable and can lead to a cycle of dependency as students are left with insufficient funds to meet essential costs, and are therefore often tempted to take out another loan to cover these costs,' adds Sophie.

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