Archive for Student Debt
Tuesday, June 3rd, 2008
Most first time buyers are struggling to buy even the cheapest homes without finding a partner to buy with, and are facing major problems if they decide to sell.
It has been revealed that almost 75% of all would-be first time buyers in the past ten years could not even consider buying a home unless they pooled their earnings to get a home loan. However most are unable to buy their partner out should they decide to sell.
A new survey conducted by Scottish Widows has found the just 44% of those who have left higher education in the past decade have been able to buy a home and 72% of them who did so were forced to join up with a partner, family member or friend in order to do so.
69% of those who have joint mortgages have revealed that if the agreement should turn sour, they would not have the means for buying the other person out.
In the past decade the idea of buying a home as become far more difficult than it had been in previous decades. The cost of an average home has gone from £69,000 in October 1997 up to £198,000 today.
At the same time the cut back in student loans as well as the introduction of tuition fees have left many of those graduating from university further in the red than their predecessors. The average debt of a student graduating now stands at £10,856.
Posted in Loans, Bad Credit, Finance, Property, Secured Loans, Financial News, Student Debt, Mortgages, Borrowing, Bad Debt, Housing News, UK Finance, Personal Loans | No Comments »
Friday, September 7th, 2007
There is nothing more frustrating than attending university for three to five years, accumulating thousands of pounds of debt, paying a student loan off for five and ten years, only to learn that there is no chance of earning the promised wages.
The ceiling is solid in most industries. It is not created by lack of education, but by lack of opportunity. As a career professional moves up the ladder, the opportunities dissolve quickly.
This can be devastating for someone who applied for a mortgage, or is paying off student loans, with the expectation that they could rise up the corporate ladder within ten years and earn a respectable wage.
That is why many people are venturing into the self-employment world to start their own businesses, or supplement their income. Unfortunately, this can backfire, especially for people who plan to buy a home.
Many banks and financial institutions will not include the income generated from a personal business when they calculate a mortgage or personal loan, even if that amount is substantial.
It is a fact that a factory worker earning £30,000 a year can qualify for a mortgage easier, and borrow more money, than a self employed professional who earns £50,000 a year – or more. This is because of the risk level involved.
Smart people take their profits and turn them into investments. This gives them leverage, making it easier to apply for a mortgage. The important element to remember is that the investment must not be high-risk. When using this strategy to overcome the career ceiling, the professional should focus more on building fixed assets and capital, than earning interest and dividends.
Posted in Loans, Finance, Property, Student Debt, Income, Mortgages, Borrowing, Debt Management, UK Finance | No Comments »
Tuesday, September 4th, 2007
The average debts of university graduates in the UK are now estimated at between thirteen thousand and fifteen thousand pounds. These debts are made up predominantly of student loans, bank overdrafts and credit card debt. Many students are also taking out personal loans and most borrow heavily from their parents. The debt figures for students are increasing by twelve per cent per year and this figure is set to grow dramatically as next year is the first year that universities have been allowed to charge maximum fees of up to three thousand pounds per year. This is up from the previous figure of one thousand two hundred and fifty pounds per year.
The Student Loans Company has reported that total lending for this year stands at 3.4 billion pounds, which is half a billion pounds higher than for the same period in the previous year. These debts are seen as spiralling out of control and many fear that graduates will not be able to purchase homes, make investments and save for their futures as a result of the high levels of debt that they are leaving university with.
Many are calling for more debt counselling and financial planning training to be given to young people so that they can understand better the deals that they are getting involved in and the credit agreements that they are signing with banks. Others claim that many students stand little chance of clearing their debt within the first couple of years of graduating unless more training and advice is given to them on how such debts operate.
Posted in Loans, Bad Credit, Finance, Financial News, Student Debt, Borrowing, Bad Debt, Debt Management, UK Finance, Personal Loans | No Comments »
Wednesday, August 29th, 2007
The country is worried as the younger generation sinks farther and farther into debt. The alarming trend starts in the teens, when young people accept bank credit cards without understanding the purpose.
Some watchdog groups have blamed student loans for creating a debt culture where young people believe debt is the price to pay for success. There are very few programs teaching youth to build wealth, instead of falling into debt.
Justine Greening, for the Conservatives, attacked the government over the “growing crisis” of debt levels among young people.
Twentysomethings are hit hardest by debt. They are taxed more following the disbanding of the 10p tax rate.
Angela Eagle, the exchequer secretary, said there is an “issue” around young people, debt and financial education.
But although there are higher levels of debt in the economy, asset levels - at £7trillion - are higher as well. Unfortunately, very little of this belongs to consumers under 35 years old. Most of it is owned by family households over 45 years old.
Many of the younger generation are finding it difficult to pay off their student loans. The problem has become so vast that surveys reveal many young people believe they will not be able to buy a home, or even start a family, for at least ten years.
Other young people are opting for 40 year mortgages, or interest-only home loan products in an attempt to buy their first home. So few young people feel they have a chance for wealth building, that they are not attempting to start their own businesses, or investing.
Posted in Loans, Bad Credit, Finance, Spending, Property, Secured Loans, Financial News, Interest Rates, Student Debt, Credit Cards, Mortgages, Borrowing, Bad Debt, Debt Management, UK Finance, Personal Loans | No Comments »
Thursday, July 5th, 2007
Recently HSBC announced that they would end their free overdraft facility to postgraduates, which will affect thousands of new graduates. Traditionally major banks have offered students free overdrafts while they are in university with a gradual reduction to zero over three years after graduation. However HSBC plans to end this offer to postgraduates starting this summer they will introduce and interest charge of nearly 10% on the overdrafts of customers who leave university this year.
Student who will be graduating this summer will be offered the chance to keep the previous deal of a three year tapering facility, but only by opening a Graduate Plus account at a cost of £9.95 a month. Currently HSBC offers students a free overdraft of £1,000 in their first year in university, £1,250 in the second year, and £1,500 in their third year. After they have graduated the overdraft remains at £1,500 for the first year, then falls to £1,000 in the second and £500 in the third. However, those who are leaving this year will be charged 9.9% on any overdraft staring in August, which may be a high fee for graduates, but it beats the current 18.6% charged on overdrafts from HSBC’s standard current account.
There are many who are concerned over this new announcement as they feel that the students who graduate this year will be greatly affected as well as their parents who these students will end up turning to. More graduates are returning home asking their parents for financial assistance to help reduce their overdrafts, as majority of postgraduates do not earn enough to pay off their debts. Although other major banks have not followed suit with HSBC, there’s no reason to say that they may not do so in the future, which will not only affect graduates, but their parents as well.
This news is grim for students and those contemplating going to university. As grants have been replaced by loans and study fees have been introduced, students and their parents are feeling the net tightening around them. People are being caught in a trap of wanting to graduate to earn good money, but then spending all their earnings repaying the personal loans taken out to fund their studies.
Posted in Loans, Finance, Unsecured Loans, Financial News, Student Debt, Family News, Borrowing, UK Finance, Personal Loans | No Comments »
Monday, June 25th, 2007
Students are taking a good look at the 30-something generation and worrying about their own future. University once promised the fast track to a good life. Now overwhelming university tuitions, high interest rates and the impact of immigration on available jobs has many students worrying.
A number of post-graduate students are dropping out of university in the hopes that they can secure a good job while staying out of debt. Many students believe that the 10 – 15 years it takes to repay a university student loan, is equal to the pay inequity between a university job and a public sector job.
This is disturbing for government and economists.
Alan Mitchell, assistant director of CBI Scotland, said: “If we’re going to have a high-value economy, it’s people with postgraduate degrees who are going to fuel that.
“It’s time for an overhaul of the system. Education must be based on ability to learn, not pay.”
Science postgraduate enrollment fell from 3,650 to 3,490, while non-science courses decreased from 6,555 to 6,150. These numbers do not compare to overseas numbers. The number of overseas postgraduate students rose by 59 per cent over the same period.
Robin McAlpine, a spokesman Universities Scotland, said: “It should be a Scottish priority to get the volume of our people staying on for postgraduate study up to the UK level.”
Postgraduate students cannot apply for student loans, so they must work, or take out a personal loan to continue their studies. This puts undue hardship on the student, risking their credit rating, and forcing them to repay a loan whilst finishing their studies
Posted in Loans, Finance, Spending, Financial News, Student Debt, Income, Borrowing, Credit Record, Debt Management, UK Finance, Personal Loans | No Comments »
Friday, May 25th, 2007
Prospective housebuyers often make ill-informed decisions because of their “low financial IQ”, according to a study from Stroud & Swindon Building Society. As degrading as this sounds, they were not actually insulting borrowers.
They prepared a test that challenged consumers to separate the names of real mortgage products from fake ones. Almost 70 per cent of consumers denied that a ‘current account mortgage’ was a genuine product. Meanwhile, 31 per cent of men and 28 per cent of women believed that a ‘base rate mortgage’ described is a financial product.
Four of ten housebuyers are unaware that it is their responsibility to pay the Stamp duty tax.
Many consumers have “a relatively low financial IQ”, commented Stroud & Swindon’s sales and marketing director Paul Chafer.
“Understanding basic personal finances is key to consumers making the most of their income and, ultimately, avoiding significant debt problems,” he added.
Another report stated that most teens do not understand what APR is, and a significant number are unaware that the credit cards they were given at school must be repaid.
This has led to the under 30 generation amassing amazing levels of debt, without measuring the consequences of their actions, or their ability to repay personal loans and other debts. It is also leaving many young people with no hope of ever repaying their debts.
The government has started an phone help line, and Citizen’s Advice is working to educate consumers, but there will be no financial education in schools until 2008. Until then, consumers are encouraged to learn as much as they can, and take advantage of any resource made available to them.
Posted in Loans, Bad Credit, Finance, Interest Rates, Student Debt, Credit Cards, Mortgages, Banking, Borrowing, Bad Debt, UK Finance, Personal Loans | No Comments »
Thursday, May 10th, 2007
There are many UK high street banks that are offering free overdrafts to students, some as much as two thousand pounds. As good as this offer may seem to students, there is much debate and criticism from parents and debt groups as more and more students end up leaving University with such a high debt.
If you have recently graduated from University or if you are still a student, then you will be familiar with overdrafts. Overdrafts are extremely popular with students as many of them need the interest free money to pay for their fees and expenses during their studies. However, as more students are taking on the debt of an overdraft, there has been a lot of criticism from parents who feel that there is no need for students to take on debt, and that it is a bait-and-hook scheme that is leading students into a life of debt. However, the fact is that overdrafts offer students an interest free and convenient way to borrow money. If the students are aware of the responsibility they have taken on and manage to handle their finances, an overdraft can be extremely beneficial to students who would otherwise be struggling with their finances. Students should also be made aware that although the overdraft is interest free, once they graduate the banks will start charging an interest on the amount, so if at all possible, students should pay off the debt before graduating to avoid paying additional amounts towards interest charges.
Posted in Loans, Finance, Spending, Interest Rates, Student Debt, Borrowing, Overdrafts, Debt Management, UK Finance | No Comments »
Friday, March 30th, 2007
A report in the Financial Times revealed that Brown will sell part of the government’s student loan book, estimated at £16 billion. This is the second time he sold part of the student loans book. He sold £4 billion worth of debt between 1997-1999.
Analysts believe that Brown may sell another £10 billion of the debt, to reduce net debt.
“This will help Brown to meet his sustainable investment rule, which stipulates that net debt must average less than 40 per cent of GDP over the cycle,” said Jonathan Loynes, chief UK economist at Capital Economics.
“On Brown’s existing forecasts, the level of debt gets pretty close to the 40 per cent ceiling over the next few years and the addition of some of the government’s off-balance sheet liabilities could break the ceiling,” he added.
Though the revenue would reduce debt, they will not impact borrowing, Loynes said, as government loans to students are not included in the main public sector net borrowing (PSNB) measure.
Analysts predict that the sale may push borrowing up, especially if Brown uses part of the revenue to fund education spending.
“And second, the sale of the loans will reduce the future stream of interest payments from students to the government,” he added.
Loynes said that any impact on the debt will be negligible as the Debt Management Office is planning £60 billion worth of gilt sales next year.
This will have an impact on student loans and education, but there is no way of accurately predicting the outcome for some time to come.
Posted in Loans, Finance, Financial News, Student Debt, Borrowing, Debt Management, UK Finance | No Comments »
Wednesday, January 10th, 2007
One recent trend that has been having an impact on the property market is the advent and growth of parent landlords. These are parents who invest in a property so that their kids will have a place to live when they go to university. While this does require that you have a little capital available to make the investment, the fact of the matter is that a great many households will be able to get their hands on the necessary funds in order to invest in a second home for their children who are in university.
Because house prices have risen so dramatically over recent years, many homeowners will have enough equity in their home to take out a second mortgage. Also, because students usually live in small flats that are quite low in cost, this also makes the process that much more affordable. Parents all over the country have been investing in small one and two bedroom flats for their kids while they are in university.
It appears also as if these investments are actually very wise. Most people would have to pay a lot of money on rent for their kids during their university years. This can amount to thousands of pounds a year. Because they no longer need to do this, they are already saving a lot of money. Also, if the property has an extra bedroom or two, then these can be rented out to other students, thus increasing the return on the investment. Finally, most people find that once their children have finished university, the property will have increased dramatically in value.
Posted in Finance, Property, Homeowner Loans, Financial News, Student Debt, Family News, Mortgages, Borrowing, Housing News | No Comments »
