The amount of students relying on interest-free overdrafts to get through their degrees appears a consistent feature of higher education. According SavetheStudent’s 2018 Student Money Survey, 78 percent of students worry about making ends meet and 45 percent of students report relying on their overdraft as a source of income. In previous years Endsleigh – UEA’s recommended student insurance provider – has reported similar figures of 46 percent.
So are overdrafts a godsend, or just a burden?
Well, it depends. Wendy Lee, an exchange student at UEA, says that ‘whilst not so good as loans, overdrafts can prove can very useful in emergencies’. She isn’t wrong. Student overdrafts can act as good safety nets and, in some ways, can actually help with budgeting. Some student costs at the beginning of the academic year, such as society/club fees, course materials and bus passes can remain year-long investments and as such it is sometimes easier to subtract these from a year-long budget without having to worry about the actual availability of money at the time to do so. Likewise, when the going gets tough, overdrafts can help soften the financial blow from unforeseen course costs and the frustratingly high winter electricity/gas bills.
However, without proper financial planning and the go-to back-up option of part-time or summer work, these interest-free overdrafts can quickly entrap students in a sunken financial bubble. Without the long-term means to escape from dept, even that which is interest-free, the feeling of powerlessness combined with decreased ability to eat, socialise, or otherwise look after yourself is likely to result in physical and/or mental health problems. One UEA student, who wished to remain anonymous, said that ‘being stuck in an overdraft left me feeling continually depressed and meant going without food until money eventually came in’. Even the best budgeters among us can become trapped by these overdrafts; all it takes is a delayed Student Finance payment, an argument with money-providing parents, or a broken laptop to push someone over the financial edge.
With that in mind, overdrafts are either a godsend or an ensnaring burden, in which the student’s own personal context is everything. Is it really good to develop a dependence on overspending money you don’t have in preparation for the world of work? Probably not. If you can get away with not using an overdraft, as most experts would say, then don’t use it.
The harsh reality of student life is, however, that most students will need to use it at some stage or another, for no other reason than the fact that our lives are sometimes rather uncontrollable and unpredictable. To the banks, we say thanks, but we should also take care to recognise that this is not free money, and when we take from them we take away from our very future. It’s up to each of us to then determine in our own contexts: does the cost (and risks associated) outweigh the benefit?