Carl Packman’s talk from the Students in Debt PERC event, November 12, 2015
Students face the very same financial pressures as everyone else. Very often they’ll face working poverty, high rents, the rise in the cost of living, and the costs of childcare. Even the eventual rise in interest rates, whereupon its likely private rental landlords will pass on the increase in costs on to their tenants. Students don’t exist in a bubble and their debt profiles will not only include “student debt”.
But in recent years another more problematic occurrence has taken place with students who are in debt.
A recent Unite report says that 26,400 undergraduates and 5,400 postgraduates depend on payday lenders and could be paying annual interest rates of up to 1,500%.
A report by Tim Hall and Alice Sampson found that of 712 surveyed students, 8% had taken out a payday loan and felt that they had an image of ‘normalcy’. Furthermore, they found that for students, having payday loan was stressful to the extent that it affected their sleep, health and personal relationships.
But these considerations don’t seem to concern unscrupulous companies.
Wonga Student loan ordeal
In 2012, Wonga.com, the biggest payday loans company in the UK, was pressured into taking down a blog from its website advertising loans as a supplement to a student loan, with the following information on it:
“When your mates tell you about finding a deal on plane tickets to the Canary Islands, you’ve got some options. Maybe you don’t have the money to pay for the whole thing now, but you will when you get your wages at the end of the week. Enter, Wonga!”
Larger payday lenders tend now to avoid the negative attention they receive when directly targeting students. But this hasn’t stopped broker websites from trying.
Payday loan broker websites are created by firms, often illegitimate or at least very shady, who charge a fee to an individual for selling their details to the highest bidder, often under the guise that they are finding the best deal.
As the payday loans market got bigger in 2012-13, these sites became more prevalent.
Here, I want to demonstrate a number of either payday loan sites or broker sites, to show how targeting students for loans looks.
Here’s how Smart Pig shows students why it is the “best choice”:
- No late payment fees or hidden charges and a 10-day grace period in case your student loan is paid late.
- A lower interest cap than other lenders – never owe more than half what you borrow, even if you run into trouble.
- No rollovers – our short term loans don’t turn into long term ones.
- Top up, extend or pay back early from your online account.
- Founded by Students for Students – no other lender knows student money like we do.
In their site’s marketing copy, they say:
“Smart-Pig private student loans are a student payday loan alternative, rather than payday loans, because our pricing, loan terms, tangible ethical safeguards and internal procedures mean our company works very differently from typical payday loan companies. Our Interest cap and no hidden fees make us the best option when it comes to instant cheap loans for students with a UK student loan.”
The cost, it is revealed, of a Smart Pig loan is £250 for 31 days costs £62 – total repay: £312. To suggest this is a good option for a student, let alone “the best”, rather than a hardship grant from one’s student union, is irresponsible at best.
Bright Sky Lending
When you type in to Google ‘Student payday loans’ one of the first sponsored sites to appear is something called Bright Sky Lending, a broker site. On the front page it reads – which is worth repeating in full:
“This is an old saying that student is always poor. Rightly so! In a student life we hardly fulfill our desires. Therefore if you want to fulfill your desires in a school or college life, you do not need to bother about yourself. Rather you should keep in your mind that nothing can be or will be a greater, comfortable and luxurious life than a college life. That’s what I am heavily stressing on this point that a student should have a complete freedom in his or her educational life. He or she must be bounded to the social orders. However if a student is worried due to his or her poor economic circumstances, he or she must not lose his or her heart at all. The good news is that payday loans are available for students to serve you them the best.”
Another example of where the loan product is being sold as the “best” option.
Unemployed Student Loans
This is another online broker site that appears as a sponsored link on Google. The front page reads:
“Are you an unemployed student in need of cash? Relax! When you are with us at Unemployed Student Loans there is no need to worry about being an unemployed student. Our matchless loan deals will help take away all your financial pressures during the time of unemployment.”
This site, while not promising the “best”, is promising to “take away all your financial pressures during the time of unemployment”, which seems very kind indeed.
Student Money Net
From their site:
“Although it is hard to get around student loans when it comes to high bills such as tuition, payday loans come in handy for smaller expenses that may occasionally overwhelm a students’ bank balance such as first month’s rent, groceries, or text books.
A payday loan may be the best choice to look into for a way to meet expenses without falling into serious debt.”
So these are the problems, these are the sites of concern, but what are the alternatives.
– British University Credit Union
The brainchild of Bruce Paterson of Changemaker Credit Union at the University of Northampton. Currently in its development stages, the next six months will be key to the eventual creation and founding of the only British universities credit union, which will have students as its common bond, but also lecturers. At the moment Bruce is seeking supporters of the project and advocates to raise the issue within their academic institution.
– Better signposting of hardship grants through student unions
These are lump sums or installments (not loans) paid to you when you can’t afford the essentials, such as rent payment, utility bills or food, and it is vital students know that they have access to it if they are stuck for money.
– More research
Of course we mustn’t ignore the need for more research that demonstrates the societal benefits, and the benefits to the UK Treasury, to justify and ring-fence grants for low income students studying subjects in areas where there is a skills shortage.