Half of students treat student loans as a 'windfall'

Article date: 16 September 2014

  • 46% blow all or most of their loan on luxuries
  • Three in five start spending as soon as the loan hits their bank account
  • Three in five run out of money before end of term
  • Almost half turn to parents to bail them out when they run out of cash
  • Only one in five consider getting a job to tide them over

Students admit to blowing their loan intended for accommodation, food and essentials, on nights out, gadgets and even holidays, a study revealed yesterday.

Researchers found that more than half of students admit to treating their loan as a ‘windfall’ and three in five (60%) immediately started to splash out on luxuries and the latest electrical goods. One in twenty even admit to letting the entire amount slip through their fingers within just days of it landing in their bank account.

Less than one in five said they put at least some money aside in an attempt to get through the whole term. And two thirds worry their lack of savings means they will have the same financial struggles during their working lives as they did whilst at university.

Tim Orton, Director at Aviva UK Life, which commissioned the research, said: ‘’For many students having a large sum of money paid into your bank account at the start of each term is a huge temptation, especially for those who are in their first year.

‘University is the first time they experience independence in every way. They suddenly find their account is flush with money, with no-one to answer to about how they spend it.

‘’This money isn’t from a never-ending pot and it’s important for those just starting out at university to budget and put some funds aside, so that the money lasts them.

‘’Not only will it help them graduate with as little debt as possible, but if they learn the savings habit early, students will hopefully continue to save throughout their working lives until they need to consider how to make their savings last through their retirement.”       

The study of 1,800 students and graduates found three in five starts spending their loan as soon as the money appears in their bank account. And within a week of receiving it, the average student has already spent around a third.

But rather than essentials like books and living expenses, 46 per cent admit they blow all or most of their loan on luxuries they don’t really need, or which aren’t at all related to their studies.

While a sensible 44 per cent put the cash towards their day-to-day living expenses, just a third make books for their course a priority.

Instead, 42 per cent use the money to buy alcohol or new clothes, while another 39 per cent put it towards nights out. One in five splash out on new make-up and 18 per cent enjoy regular meals in restaurants. Fifteen per cent even admit to using their loan to book a holiday, with another one in ten treating themselves to city breaks or weekends away.

Others spend their student loan on games consoles, entertainment and kitchen gadgets, paying off other loans and even paying for a wedding. One in twenty admitted they put the cash towards a new car or motorbike.

But 61 per cent say there are times when they run out of their loan money before their next instalment is due, with more than one in ten saying this happens all the time.

To get them through to their next instalment, 44 per cent turn to the bank of mum and dad, while another 41 per cent use their bank overdraft or credit card (28%). Only 30% cut back on spending and one in five (19%) got a job to tide them over.

Looking back, four in ten graduates say they regret spending their student loan the way they did, with 58 per cent saying they could have spent it more wisely. Over half (53%) wish they had made more of an effort to save for university, or had a part-time job, so they didn’t have to rely on their student loan so much.

60% of graduates think dealing with their student loan, and the resulting debt, has made them better at handling their money now. Three quarters are making more effort to put money aside for their future because of their university experience.

Tim Orton at Aviva added: “It’s important that students enjoy their undergraduate years but they’re never too young to get into the habit of budgeting.  Separating their needs from wants, and setting some simple financial goals for the short, medium and long term will instil some self-control over spending, and form habits that will deliver considerable benefits in later life.”

Top 25 things bought with a student loan:

  1. Day-to-day living expenses
  2. Alcohol
  3. New clothes
  4. Books for my course
  5. Nights out with friends
  6. Computer/laptop
  7. Make-up
  8. Restaurant meals
  9. Savings
  10. Takeaways
  11. Music or films
  12. Holiday
  13. iPad/tablet
  14. Partied all the time
  15. Weekend/city breaks
  16. Games console
  17. Paid for trips around the country to visit friends at other unis
  18. Deposit on a house/flat
  19. Kitchen gadgets
  20. New car/motorbike
  21. Entertainment gadgets
  22. Paid off other loans
  23. New TV
  24. Spa/beauty treatments
  25. A wedding

- Ends -

If you are a journalist and would like further information, please contact: Fiona Whytock: Aviva Press Office: 01904 452659: 07800 692299: Fiona.whytock@aviva.co.uk           

Notes to editors:

  • Methodology: This news release was based on online interviews with 1,800 students and graduates in September 2014. Research carried out via One Poll, part of SWNS.
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