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Last Updated: Monday, 15 May 2006, 09:43 GMT 10:43 UK
Q&A: Student debt
Young people
Debt is often a way of life for many students

BBC News looks at the role debt plays in student finances and explains what are the cheapest and the most expensive ways to borrow cash.

How big a problem is student debt?

Debt has become a way of life for most British students.

With tuition fees, accommodation, general living expenses and the cost of books - not to mention socialising - it is expensive being a student.

Meanwhile, the system of grants has been replaced by loans and tution fees are set to rise in September.

On average each student graduated with 12,640 of debt in 2005, according to NatWest.

However, on the upside most research suggests that graduate pay is increasing at least as fast if not faster than debt.

My daughter is going to university. What is the cheapest way she can borrow?

The student loan scheme is widely recognised as a cheap way to borrow, as interest charged by the Student Loan Company is pegged to the retail price index (RPI).

When the loan scheme first started in 1990 it was meant to top up a system of maintenance grants.

However, eventually loans replaced the maintenance grant - and now in England and Wales many students have to meet the cost of tuition fees too.

As a result, the vast majority students take out a student loan.

What are the more dangerous types of borrowing?

Store cards, issued by high street retailers, can prove an expensive way to borrow.

Annual percentage rates (APR) of close to 30% - nearly seven times the Bank of England base rate - are commonplace.

The government estimates that having a degree increases the lifetime earnings potential of an individual by 400,000

Credit cards are generally cheaper and, in a highly competitive market, there are some very tempting introductory offers available.

However, a card if overused, as many students have found, can soon turn from a flexible friend into a fiend.

Plastic aside, what are the other ways that a student can borrow?

Fortunately students do have one thing going for them as far as High Street banks are concerned: potential.

The government estimates that having a degree increases the lifetime earnings potential of an individual by 400,000.

In short, today's student could be tomorrow's captain of industry.

As a result, the accounts on offer to students would be the envy of most people at work. Interest free overdrafts of 1,500 or more are commonplace.

Banks even entice students with offers of cash and gift vouchers.

One bank recently offered students that open an account those two mainstays of college life - a kettle and a toaster.

Freebies aside, however, it's important to remember that a bank can demand its money back at any time and may move customers into mainstream accounts - often on less favourable terms - soon after graduation.

What can my daughter do if she gets into debt trouble?

Fortunately, a student in debt is not alone.

Student union welfare officers are used to dealing with debt cases, while colleges and universities have hardship funds set up to help those most in need.

In addition, students can call on the help of charities such as Citizens Advice, National Debtline and the Consumer Credit Counselling Service.

There may also be a university hardship fund she can appeal too for funds.

What help is available from the state?

Some help is available to pay for the costs of accommodation, living expenses, childcare and even free NHS prescriptions.

However, most of these benefits are only available to groups such as lone parents, the disabled and pensioners.

Most other students will have to rely on student loans, contributions from parents and money earned from work to help them through their course.

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