Payday loans: the phrase immediately conjures up thoughts of quick, easy cash and annoying catchy jingles. At least, that’s all companies want us to think about. In reality, short term pay-day loans are exploitative and often dangerous, leading to a rapid accumulation of debt. The personal and social harm caused by payday loans has been common knowledge for over a decade, and yet over the past three years, the market has grown from £900 million to £2.2 billion.
Today, they are being increasingly used by students to paper over the financial cracks at the end of the month, or to provide an escape from substandard accommodation. Several students in Wales, for example, have been using pay-day loans and credit card overdrafts to pay for ‘luxury’ accommodation, as the accommodation within the average student budget is ‘substandard’ with many facing rats and damp.
The rise of the use of payday loans indicates a core issue in our country’s education system. University is still becoming increasingly unaffordable, despite the rise in those taking out government loans. NUS figures for the last academic year show a typical £8,000 a year shortfall between student living costs and their income from loans and the maintenance grant. For most, this gap is unbridgeable without the help of either parents or short-term loans.
Shelly Asquith, the NUS vice-president of welfare said; “Students are facing a housing crisis with an ever-narrowing gap between their incomes and what they are expected to pay in rent,”.
Sites such as Smart Pig have been set up specifically to meet the student need for quick cash with promises on their website to deliver the cash to your bank account within the hour. The 1,017% APR (annual percentage rate) is displayed in slightly smaller letters. This active targeting of students in desperate need and their subsequent exploitation via obscene interest rates is an embarrassing testament to our current corporate culture.
Rising student debt levels are a problem for multitude of reasons: they greatly exacerbate inequality, threaten to eliminate a university degree as a route into the workplace and are potentially a source of downward social mobility. This is a frightening prospect for wider university ideals and paints a bleak picture of a potential drop in the UK’s skilled workforce in years to come.
Furthermore, mortgage lenders are regarding any evidence of using payday loans as evidence of an inability to manage finances and refusing mortgage lending on that basis, meaning that a shortfall in cash at university can potentially affect your chances of a loan later in life.
It seems ridiculous that students should effectively be punished via astronomical interest rates (and regular demonisation in the media) simply for not having enough money. Yet, it is symptomatic of our society which now sees education not as a right or an equaliser, but as an investment in future career options and the ‘student experience’ as a package to be sold to entice whoever is able to pay the most money.
Universities must start providing students with cheaper, better, student facilities and accommodation alongside sufficient education regarding the financial difficulties involved in accessing short-term loans. In order to see this happen, we must start valuing education and class mobility as highly as we do economic profit.
Image: Jonathan Rolandé