Amy Shimmin argues in opposition to student payday loans
It would be dishonest to say that university is a cheap experience – even for students who don’t pay tuition fees, the day-to-day expenses add up. Most students, despite being eligible for at least some sort of government funding, will still find themselves short – but payday loans dressed up as "short-term support" is not the answer, and marketing them as such is a reprehensible ploy to win over vulnerable students.
This summer, while scrolling through social media feeds, it wasn’t uncommon to come across targeted adverts for "short-term private loans" from companies priding themselves on their student-exclusive clientele. One company – its name omitted, but rhyming with Dart Big – happily offers me a same-day payment of £300, with a total repayment of the loan and its fees on the date of my government student loan payment. This company prides itself on its "ethical safeguarding", including a limit on interest, a grace period for late-running student loans, and no late fees for consumers. However, overdue loans – from any provider – run grave risks for an individual’s credit in the future. Very little is stated about these risks – or at least not in open view – on their website, and students could be digging themselves into bigger financial holes. Priding a business on being built "for students" may seem progressive, but ultimately it will serve one purpose: to create and collect further debt from young people - often already saddled with substantial government debt (courtesy of the Student Loans Company).
Unlike most European countries, heavy debt has become a requisite to British university study. With many students already relying on student account overdrafts and part-time work to supplement their student loans, there are indicators that the system has long been broken. But adding short-term loans to the mix only exacerbates the issue, as it possesses the most uncertainty of the options. Student account overdrafts are often generous and interest-free until a period after graduation; government loans – by far the most popular form of funding, with 87% of students receiving some sort of loan - while liable to interest, are only repayable after hitting a wage threshold, and wiped off after a period of time. Universities, in fulfilling their duty of care to students, need to provide better financial advice to students – better advertising of in-house support available, such as hardship funds, could alleviate the need for crisis loans like these. While the simplistic answer to student debt would be to scrap tuition fees, many fee-paying students don’t ever see their tuition fee loan anyway. Rather, issues that affect all students – staggering rents and eye-wateringly expensive textbooks, to name a few – are what lead to problems on the ground. Frankly, scrapping tuition fees would make no difference to the students using loan services; they need lobbying from their student representatives against the rising costs of being a student, full stop.
The same summer I was bombarded by these ads, I learned that reviled payday lender, Wonga, had almost a 98% loss in its value, dropping from $1 billion to $30 million. The well-designed loan shark relied on the same premise – short-term support between pay packets – yet its flaws became quickly obvious, to its downfall. The answer is obvious: we must speak out against similar projects targeting students. After all, it wasn’t the wealthiest in society trapped by Wonga loans; universities need to acknowledge this problem, and provide better support for their working-class students to avoid traps like these from becoming commonplace.
There are endless, fair criticisms to be made of the Student Loans Company: "it doesn’t fully cover the cost of studying", and "it shouldn’t rely on parental income", to name a few. But is an alternative of private bank loans any better? I’d argue not. I can't help but feel that reliance on student loan-day loans is a slippery slope towards a loan system not dissimilar to the USA.
Education should not be a commodity exclusive to the wealthiest in society. We need to do more to make education more financially accessible, and - despite appearances - short-term loans will never achieve this.
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