A few years later, and funding has undergone the transition from grants to loans. The dependency on student loans has grown and grown, and the number of people with student loans is now over the two million mark. Especially unnerving is the sheer size of debt many students looking for graduate jobs find themselves in. These days debt above £20,000 is really not uncommon.
Low interest rates and moderate repayments schemes are scant compensation if you’re a graduate staring down the barrel of two decade’s worth of repayments. And equally alarming is the fact that people with debt of this scale seem almost desensitised to their predicament. In the course of my research, I’ve come across people in search of graduate jobs with over £20,000 of debt who’ll think nothing of adding on another few thousand pounds so they can go travelling. Ask them why, and the typical response is something along the lines of “what’s 2 or 3 on top of 20”. Connected with this state of desensitisation are increasing instances of non-payment, to which the student loans company has responded by requesting to register such defaults with credit reference agencies. An action like this can have serious long-term consequences.
So what’s the solution if you’re graduating with debts like these? Well firstly it’s pointless acting as if the problem is going to go away by itself. Make it a priority to devise a plan for settling the debt.
In my opinion, the best option may be to take out a mortgage sooner rather than later. A mortgage is double winner: the amount you’re borrowing decreases over time, and at the same time you own an asset that has lately been appreciating faster than any bank savings. The only alternative is renting, which it hardly needs saying offers absolutely nil investment value. You might have reservations about the increased responsibility, but a large student debt is a responsibility in itself – and one you can't simply run away from.
In fairness, house prices are currently so high that a lot of people simply cannot afford to buy. Faced with this problem, it’s worth considering a 'share to buy' mortgage. These smart little schemes allow friends to form a partnership that gets them on the property ladder in a way that would otherwise be impossible. They’re legally reliable, and there are suitable contingencies if any party wants to opt out of the arrangement.
I hope reading all this isn’t too disheartening. On the upside, if you take control of matters quickly it’s possible to swiftly take the sting out of your debt. There are graduates out there who’ve bought a house within the last year and half alone, the interest value of which already outstrips their debt. The other answer is to tap into your work ethic and get your career started in earnest. Those who do well and get promoted quickly in graduate jobs can soon take home salaries that make their student debt repayments more or less insignificant.
