Students rely on bank of Mum and Dad
Four out of five students constantly worry about money while at university, according to a new study.
The average student in 2014 spends £735 a month but the average maintenance loan only covers £458 of living costs each month, which means students have a shortfall of £277, according to student advice website Save the Student.
Only one in six students has a part-time job, while nearly one in five (18%) rely on their parents to bridge the gap in their spending. However, one in three students feel their parents don't give them enough financial support.
High street banks also play a role in providing student overdrafts, with 12% of those polled using their overdraft facilities.
Universities and wider student funding support just over 10% of students with living costs.
More worrying is the fact that some students turn to credit cards and payday loans for extra money. Some 3% of students would take out a credit card, while 2% of those polled said they would contact a payday loan company.
In a financial emergency, more than a third (37%) of students would turn to their parents for help, while a quarter would go to their bank and one in 10 would ask friends for a loan.
Worries about money has a broader impact on students' welfare, with almost a half claiming that money worries adversely affect their studies and the majority believing it causes their diets to suffer.
Jake Butler, editor of Save the Student, said: "It's a thorny issue of how much parents should contribute to the shortfall, and it entirely depends on individual circumstances. Ultimately I don't believe parents should have the expectation put upon them.
"However, with hearing daily horror stories of students living on the breadline, I feel it's still important that parents are made more aware of the situation their child at university may be in."
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.