Since then the reliance on student loans has increased dramatically, with over 2 million people currently possessing a live student loan. What is particularly alarming is the size of the debt that many students looking for graduate jobs with figures in excess of £20,000 not uncommon.
Even with relatively low interest rates and modest repayments some graduates may be facing over 20 years of repayments to clear of this debt. What is equally worrying is what can only be described as a state of debt 'anaesthesia' which seems to develop once debts reach this level. I have interviewed people for graduate jobs with a £20,000 plus debt, who have left and immediately added a further £3000 in order to travel the world. Upon questioning the answers usually equate to “well what's another 3 on top of 20! Perhaps related to this anaesthesia are growing levels of non-payment which has lead to the student loan company requesting that they register such defaults with credit reference agencies. This type of action can have life long detrimental effects.
So when you graduate with debts, what can you do about it? Well firstly I would say you should treat it seriously, and make it a priority to formulate a strategy to pay it off. No amount of head burying will make it go away.
For me, perhaps the best solution is to commit to a mortgage on a property as soon as possible. A mortgage on a property is a double whammy, you are reducing the size of the borrowing over time whilst also owning an asset which, in recent years, has appreciated far more quickly than any bank. The alternative is renting which provides absolutely nil investment value for you. You may be reluctant to 'take on the responsibility', but if you have a large student debt, you already have a responsibility and you can't run away from that.
House prices are now so high that many can't afford to buy. However, in this case, consider a 'share to buy' mortgage. These are clever schemes to help friends club together to get on the mortgage ladder in a way that wouldn't otherwise be in reach. They a re legally sound now with proper contingencies in place should one party want out of the deal.
This may all sound depressing! The good news is, if you get on top of things quickly you can rapidly minimise the impact of your debt. I know graduates who bought property only 18 months ago and it's value has already appreciated by more than their debt. The other solution is, of course, to get your head down and work hard at your career. Successful graduates promoting quickly will soon earn salaries which will dwarf any debt repayments.
Good luck
