Student finance: Learning all the way to the bank

The world of student finance has undergone a series of changes in the last few years. Maintenance grants have been abolished, and last year saw the introduction of tuition fees of pounds 1,025 a year. But the amount available to each student from the Student Loans Company has also been increased.

Not surprisingly, the average debt for students graduating has increased by 40 per cent over the last four years. First-year students in 1998 owed on average 36 per cent more than first-year students in the previous year, suggesting a 73 per cent increase in student debt by the time they graduate in 2001.

Parental investment in children's higher education has also increased in proportion - up pounds 82m since 1998 to pounds 522m.

The role that banks play and the amount they lend to students has also kept growing. Over the last year, a survey by Barclays showed student debt to banks had risen by 15 per cent.

Banks are continuing their pledge to support undergraduates throughout their time at university. A bank spokesperson said: "We are confident that students will pay back their overdrafts after graduation. We want to help and be responsive to their needs as they work towards their future vocation." Martin Preater, a student business officer from Bath, comments: "I believe the importance of my role increases each year as the financial demand on students gets tougher."

Such financial investment in students is not, of course, without other motives. High street banks understand that after graduation, as they move into the workplace, young adults will set up home and require mortgages and other financial services. So banks aim to retain the custom of students after they have graduated.

As most courses are three years long the level of overdraft available increases a set amount a year. The overdraft level varies from bank to bank but if a course continues longer than three years, such as medicine or dentistry, banks increase the amount available accordingly.

Professional trainee loans are geared specifically for students studying to be barristers, solicitors, doctors, dentists, vets and other professions. NatWest's professions unit said: "Students can borrow up to pounds 15,000 but don't have to start repayments until six months after graduating. This is designed to take some of the stress out of living on a tight budget."

Interest-free overdrafts generally continue to be available with no fees for up to three years after graduation. General graduate packages can be arranged through the high street banks with loans of up to pounds 10,000 available with favourable APRs (annual percentage rates).

David Bloomfield, head of student and graduate banking at NatWest said: "For many new graduates, the first couple of years out of university can be a real struggle... graduates need just as much support from their bank as they did when they were at university"

Generally, professional students leave university with a guaranteed placement on some sort of company vocational training course. This enables them to start paying back the loans taken out during their time at university.

All graduates do not walk into well-paid jobs with index-linked pensions. An increasing number of graduates have unrealistic expectations of their first salary.

Kevin McGall left Queens University, Belfast, with an arts-based degree, and he worked in bars for three years: "Unfortunately, with over pounds 3,000 in debts and very low wages, I couldn't meet the repayments. Students should be made more aware of the consequences of over-borrowing."