Nicola Woolcock of The Times is reporting that student debt is spiralling because of increasing tuition fees and the use of some commercial loans at very high rates, a report commissioned by the Government suggests.

More than half of the students questioned said that money worries had affected their academic performance. One in 12 full-time students had considered dropping out because of financial problems. Fewer students thought that higher education was worth the expense when their responses were compared with similar research conducted three years earlier.

Although the number who had jobs while taking their degree had decreased, it was still a popular choice. For many students it had a negative impact on their studies.

Researchers from the Institute of Employment Studies and the National Centre for Social Research interviewed more than 2,600 students about their finances for the Student Income and Expenditure Survey.

They said that the average debt in 2008 of students at the end of their first year was £3,500, compared with £2,400 three years earlier. The report said: “Some full-time students had borrowed from commercial or higher cost sources, such as commercial credit companies and via bank overdrafts. Where students had made use of these sources, the average amounts involved were substantial.”

The direct cost of going to university for first-year students had risen by almost 70 per cent between 2005 and 2008, the report found.

Students were deeper in debt than their predecessors, because they were less reliant on their families and more dependent on loans. This was particularly evident for students from working-class backgrounds.

Concerns about debt nearly stopped a quarter of full-time and almost a third of part-time students from going to university. The report said: “It is expected that students in their first or second year of study, under the new student finance system, will on average graduate with greater debt.

“One in three students said that the availability of funding and financial support affected their decisions about higher education.”

The researchers found that having a job was essential for many students to survive, but this came at a cost. They said: “Income from paid work was important for full-time students, representing 20 per cent of their total average income, and it was critical for part-time students. Half of part-time students and around one third of full-time students who worked during the academic year reported that this had affected their studies.”

Three quarters said that they had less time available to study and read, three fifths were more stressed and the same proportion said that the quality of their university work had suffered. Almost half were getting by on less sleep because of their paid work.

Wes Streeting, president of the National Union of Students, said: “It is not acceptable that a third of students have to base their decisions about which university to attend or which course to study on the amount of financial support which will be available to them.

“We need a national bursary scheme, so that all financial support is based on how much a student needs it, not where they happen to be studying. We cannot leave this in the hands of individual institutions any longer.”

David Lammy, Minister for Higher Education, said: “Higher education remains one of the best pathways to a rewarding career, and it is good to see that students recognise it as a good investment for their future.

"We firmly believe that finance should never be a barrier to good education. This is why we continue to make generous loans and grants available to students.”

Source: The Times online - http://www.timesonline.co.uk/tol/news/uk/education/article6143763.ece