This page originally appeared on Money4MedStudents
RMBF.org now hosts all revised and updated Money4MedStudents content
Nearly all students are in some level of debt. The National Student Experience Report of 2010-2011 found that “78% of students said that their debt was either as high as they expected or even higher.”
If you manage to graduate with student loans and a student (interest-free) overdraft as your only debts you are doing well. It’s impossible to live on nothing, and as a student your earning capabilities are limited. Student loans and overdrafts are a very cheap way to borrow money.
Here you will find a few pointers to help you manage your debts. You can also use our debt calculator to find out where you currently stand.
Organise your debts
Make a list of all your bills, including how much each is for and then prioritise the debts. Very large or very late bills should not necessarily be your biggest concern. Pay off priority debts first, but make sure you contact all creditors so that they know you are not avoiding payment.
These are debts owed to creditors who can take strong legal action against you if you do not pay. These include:
Mortgage or rent arrears
The house could be repossessed by the bank or the landlord could have you evicted.
e.g. for traffic offences. Bailiffs can be sent to seize possessions, or you could be imprisoned.
e.g. electricity and gas. Without payment you could be disconnected from these services.
Credit and store cards, bank loans and overdrafts, catalogue debts and money owed to family and friends – although stressful, potentially embarrassing and not good for your credit rating – are non-priority debts, because you cannot be imprisoned or made homeless or without heat and light. That doesn’t mean they can be ignored – eventually your creditors will take you to court if you fail to make contact with them or make some offer of payment.
Don’t ignore your bills
The most important way to deal with debt is not to ignore it or hope it will go away. Letters from creditors should always be opened and dealt with as soon as possible. If you don’t reply to the letters, at worst the bank could freeze your account and refer the debt to their collections/debt recovery department. This would mean losing both your account and your overdraft facility. At best they will be charging you high interest on an ‘unarranged’ overdraft (the excess borrowing on top of your normal overdraft, if you are still over your limit).
Speak to the bank and explain your difficulties. Check when your next student loan payment is due, and see if the bank can wait until then for repayment of the unarranged overdraft. If you are paying high interest charges and can’t negotiate with the bank to reduce them, you should try to put some money into the account to get back within your overdraft limit. You may be able to pay in some wages, try to get a temporary loan from friends or family, or ask your student welfare service for advice – they may be able to offer an emergency loan or hardship payment.
A student advisor may be able help you to negotiate repayments and get onto a debt management plan. They will draw up a financial statement with you (a sheet detailing your income and expenditure) and calculate how much available income you have. An offer based on this will then be made to each creditor and a request made for interest and charges on the account to be frozen. If you have no or very little available income, token offers (e.g. £1) can be made. An advisor may negotiate with creditors on your behalf, as well as checking your entitlement to hardship funds and benefits. If you do not have advisors at your institution that can provide you with this service, our online money adviser may be able to help.
- Budget planner
- Debt calculator
- Medical student money adviser
- Borrowing money as a student
- Credit cards