Avoiding student debt

You’re bound to be in debt post-university, but there are ways to avoid being absolutely up to your eyeballs in it. We explain how to earn, save and borrow to lower your student debt.

Graphic shows a student who is learning to manage money. She is reading at a desk and the illustration show money and credit cards

Choose the right student bank account

If you are a student, you’ll probably take advantage of one of the special bank accounts on offer. Avoid the gimmicks and free gifts. You should pick the account that offers free banking, the best interest rates and a sensible borrowing limit. A bank with a branch close by is handy, although being able to bank over the phone and by internet make this less important.

Use your interest-free overdraft carefully

Most student bank accounts have an interest-free overdraft, which is great as long as you don’t go over your limit. This really can help you manage your student debt. If you spend beyond your limit, your bank may spring a load of extra charges on you (and no one wants that).

Also, be warned: This isn’t free money. You will have to pay it back eventually. Once you graduate, most banks tend to reduce your overdraft limits pretty swiftly.

Get all the help you’re entitled to

If you’re going to need to borrow money, you should first approach the Student Loans Company. The Government links the interest rate to inflation and you don’t have to start paying the loan back until you are earning more than a certain amount.

As well as your basic student loan and grants, you may also be entitled to extra money (woohoo), so make sure you apply for everything you can.

Ask your student services about bursaries and grants from the university. There is also help in the form of the Disabled Students’ Allowance, the Parents’ Learning Allowance, and a bursary if you’ve been in local authority care.

Spend your student loan wisely

Blowing your whole loan on jagerbombs might seem like a good idea at the time, but it’s a sure fire way of leaving you skint, living off value noodles, and staying in every Friday night until the end of term.

One way to avoid student debt is to learn how to make a budget. Put the bulk of your student loan payment into a savings account and transfer a bit into your current account at the beginning of every month. To avoid lots of maths or scary spreadsheets, just put some numbers into the Money Helper Budget Planner, which does the difficult bit for you.

Don’t think you have the self-control? Send your loan to your parents and get them to set up a standing order to transfer over an allowance for you.

Getting part-time or summer work

Actually earning money is a good way to cut down your student loan debt. It’s way better than borrowing and looks good on your CV.

Working for the university itself can be really flexible. Being a university student ambassador (like the students who showed you around on your open day) tends to pay quite well and can include reception work, working in schools or doing tours.

Take advantage of student discounts

You can get loads of money off things as a student, so milk it while you can. We guarantee you’ll miss those 10% discounts as soon as your NUS card runs out.

It’s also worth keeping an eye out for deals and vouchers on sites like Student Beans and UNiDAYS, and getting yourself a 16-25 railcard to help pay for those trips back home for the weekend.

If you find yourself in serious debt

If you are struggling with any repayments, let your lenders know as soon as possible. If you keep in touch they will try to help. They may let you reduce your repayments for a while. The same is true if your circumstances change suddenly (for example, if you become ill or your income drops).

Becoming bankrupt is a last resort. Even though many people who become bankrupt now come out of bankruptcy within a year, the bankruptcy stays on your credit report for at least six years. And most people who become bankrupt still have to repay their student loans in full. It may also stop you getting the best rates and might make it difficult for you to rent a flat or get the job you want. If you are considering declaring yourself bankrupt, speak to a professional debt adviser first.

Read our article on paying off your debt.

Get money advice

There are loads of organisations that can help support you with advice and information on your finances. You should speak to a student adviser in your students’ union or college. They will also be able to give you valuable advice about budgeting and other ways to help you manage your money. Find them on the NASMA (National Association of Student Money Advisers) website.

You might also want to speak to a free debt advice provider such as StepChange, PayPlan, National Debtline or Christians Against Poverty. They can help you understand all your expenses and support your conversations with lenders.

You could also give the Money Advice Service a call on 0800 138 7777, or ring us on 0808 808 4994.

For more information on all things money, head to The Mix’s money page.

Thanks to Experian for their help with this article.

Next Steps

  • The Money Advice Service offers free, unbiased and independent advice about all financial matters. 0800 138 7777
  • Use the Money Advice Service's budget planner to take charge of your finances.
  • Chat about this subject on our Discussion Boards.
  • Need help but confused where to go locally? Download our StepFinder iPhone app to find local support services quickly.

By Holly Turner

Updated on 01-Aug-2021