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You’ve probably had the best three or four years of your life at university, but after graduating you’ve got to swallow a healthy dose of reality.
It’s likely that so far you haven’t fretted over your zero-rate student loan or your interest free overdraft, but perhaps it’s time to curb that live-for-today attitude a little and face up to your finances.
As we report in the news section of this issue, graduates have fallen more than £186m behind in their student loan repayments. The Student Loans Company says students and graduates combined owed nearly £18.7bn in loans, including those that were not yet due for repayment.
Debt and insolvency expert Bev Budsworth of The Debt Advisor (www.thedebtadvisor.co.uk) says students could owe £15,000 or more on leaving university – potentially causing huge problems unless the problem is tackled.
She says: ‘This is a large amount of debt for any graduate coming at a time when they can least afford it – a time when they may be looking for their first job and even contemplating getting a foot on the property ladder.’
And students are ignoring warnings about high levels of debt and seem unrealistic about the prospect of paying it off after they graduate, according to credit information provider Equifax. The firm surveyed more than 1,200 students and found that nearly a third of students believe they will clear all their debts within one year, despite the average graduate debt being estimated at £13,501 by Barclays Bank.
Equifax (www.myequifax.co.uk) says some prospective employers might want to see your credit history – though they have to get your permission first – before handing out a job.
Neil Munroe, external affairs director at Equifax, says: ‘Graduates need to understand how their credit file affects their day-to-day lives. By obtaining a copy of their credit report they can see what lenders and employers see to make those life-changing decisions. It also puts them in control of their finances.’
Read below how you can put hour finances in order – and breath easy again.

The student loan
For those that don’t read the large print, let alone the small print, you don’t have to start paying back your student loan until the beginning of the financial year after you graduate. So for those graduating in 2006, repayments will be automatically taken from your wages, as long as you’re earning over £15,000, on 6 April 2007. If you’re earning £20k, then you’ll have to pay back £450 a year.
The zero rate interest on your loan is set against inflation and is currently 3.2 per cent. According to the DfES, the average student debt is now £7,918, and the interest accrued in a year on this sum would be as much as £252. To reduce this amount, you can send a cheque to the Student Loans Company at anytime, or set up a standing order.
Contrary to the myths that fly around campus, you cannot avoid your debts by emigrating or declaring yourself bankrupt. Thousand of graduates declared bankruptcy before 2004, but the government has now closed this loophole and student loans are only cancelled in a few limited circumstances.

Graduate loans
Graduate loans can kick-start your career by helping you to fund a deposit for a flat, work clothing and the various costs associated with entering the world of work.
However, although they are usually cheaper than bog-standard personal loans, graduate loans are more expensive than student loans.
NUS National President, Gemma Tumelty, says: ‘For those considering taking out a graduate loan, it’s really important to research the area thoroughly. Have a good look round at the rates of interest that different banks are offering rather than taking the first deal you are offered.
‘Make sure you set the rate of repayment at one you will be able to afford, and check how much interest you will end up paying over the entire period of the loan.’
Remember that the lower the APR, usually the less you pay, but there may be other charges not included, so find out what these are.
Another option is to borrow from your employer, often at a very low rate or even interest-free.
If you're looking for further funding while trying to obtain a professional qualification, then you should explore career development loans. These are available from most high-street lenders and offer low rates of interest.

Best buy grad accounts
If you already have a student account, then it will automatically be converted into a graduate account, however you should still consider switching banks.
The best graduate accounts on offer are with Lloyds TSB and Royal Bank of Scotland, as they offer a three-year interest free overdraft and the highest limits – £2,000 in year one after graduating, £1,500 in year two and £1,000 in year three.
Don’t be sucked in by promotional incentives and distracted from the deal you’re getting. If you do decide to change your account, your new bank will require proof of graduation and most request that it is your main account – HSBC is one exception.
See our table (below) for more details on graduate bank deals.

Save, save, save
More than two thirds of 19 to 25 year olds do not own an Isa, pensions company Friends Provident, found. Perhaps after experiencing the shock of how much the taxman subtracts from your first pay packet, you will start to consider tax-free savings accounts.
If you are in credit, or will be soon, the best savings account is the Halifax Fixed Rate Saver. The account pays seven per cent and requires a standing order to be paid in monthly.
The amount you pay in can vary each month from £25 to £250. If you miss a payment or withdraw cash within the year, the account is closed, the interest credited, but only at approximately five per cent.

Money for nothing
By choosing the biggest and longest free overdraft, you can maximise the negative balance by saving the cash in a high interest, instant access savings account or cash Isa, and then transfer the money back when needed. You’ll be paying interest on the money the bank lends you for nothing and you can gain up to £225.

Take control
Simply acknowledging your debt and making a start on sorting it out can be a huge help. Talking to family or friends can remove some of the strain and feeling of helplessness, while other organisations, such as the Consumer Credit Counselling Service or Citizen’s Advice Bureau can offer practical advice.
The Debt Advisor Bev Budworth advises getting all your personal bills and bank statements together to sort them and put them in a file.
She says: ‘An untidy environment creates confusion and a sense of loss of control. A thorough tidy out has a good feel factor – you will instantly feel more in command.’
For those who bank online, a new computer program called BankClarity may be helpful – the software lets you download your bank statements and then scans them to highlight your spending patterns.
Its makers say it can show you where your money is going each month – helping you to keep a tighter rein – and could also flag up potential fraudulent transactions or problems. The software costs £20 for a one-year personal licence – log on to www.bankclarity.com for more information.
 
Budget yourself
It’s crucial that you spend within your means if you’re not to push your debts yet further into the red. It can be tough sometimes, especially if you have to make sacrifices on life’s little luxuries like buying CDs or going out, but it’s only a temporary measure and will be worth it in the long run.
The Debt Advisor Bev Budsworth says: ‘Work out exactly what essential costs you have each month (rent, food, bills etc) and then divide what you have left into weekly amounts.
‘Try taking that amount out of the bank at the start of the week and sticking to it, rather than making numerous trips to the cash machine.’
It’s crucial you’re not tempted to spend what you haven’t got – writing cheques when you’re up to your limit as banks can charge you £20 or more if your cheque bounces.
Bev also adds: ‘Don’t take loans from friends to fund a night out – they may not be so friendly when you can’t pay it back.’

Cutting the credit card chaos
Whacking it on the plastic may be a bit like free money, but it’s got to be paid back at some time – and if you don’t do it sooner than later it could cost you dearly.
If you’re worried you can’t control your spending you may want to cut up your credit cards – or get someone else to do it. But at the very least you should avoid putting everyday expenses on them unless you pay back the full amount religiously every month.
Zero interest rate deals are handy, but will eventually run out and you could face stiff monthly payments at a time when you can least afford them.
Investment planning specialist Paul Wallace from BJB Life & Pensions (www.bjbconsultants.co.uk) says: ‘It’s important to target higher interest rate debts first, usually credit cards or overdraft, if being charged for.
‘Shop around and get as much credit card debt on nil interest as possible, but look to chip away at the nil interest rate debt as a priority.
‘When existing nil interest deals expire, be proactive and shift them. If you receive an unexpected bonus or windfall, whack it off your debt.’

Useful contacts
National Debtline: 08088 084 000, www.nationaldebtline.co.uk
National Union of Students, www.nusonline.co.uk
Citizens Advice Bureau, www.citizensadvice.org.uk
Consumer Credit Counselling Service, www.cccs.co.uk


Top tips for tackling your finances
•    Get a copy of your credit file before you apply for credit to establish all of your current financial commitments.
•    If you have moved around whilst at university ensure all your bills are delivered to your current address. This will prevent you becoming a victim of ID fraud.
•    Plan ahead with monthly out goings and repayments of credit agreements.
•    Always use extra money to pay off the debt with the highest interest. Ensure you pay off your credit cards and store cards first as student loans have little interest and graduate bank accounts normally offer a free overdraft.
•    Always make at least the minimum payments. Missed or late payments will remain on your credit file and will impact on future financial decisions.
•    Ensure that any joint finance agreements you had with university friends have been settled.
•    If you have had a joint agreement and the other person has defaulted or if you missed a payment due to unforeseen circumstances you can add a notice of correction on your credit file. This will explain to lenders looking at your file why there has been a problem
•    If you are experiencing financial difficulties you must speak to your creditors to make alternative payment arrangements
•    If a County Court Judgement (CCJ) is issued, it can be removed from your credit file if it is paid within one month. If you take longer than a month to pay the CCJ, it will remain on your credit file for six years

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