Student debt.

Students starting university courses this autumn can expect to graduate owing £23,000, a survey suggests.

- BBC

So, everyone's saying, "Poor students! So much debt to start their working lives with. How will they cope?"

There are two kinds of debt the average student gets themselves into.

Type One: The Student Loans. This covers tuition fees and maintenance loans. You never have to pay a penny of that until you graduate and earn at least £15k, you pay it off automatically from your salary bit by bit, and the amount you pay per month is proportional to your income, so it's always a manageable amount to pay (in theory).

A lot of people don't understand about the way student loans work, and assume they work the same way a regular bank loan works, with the corresponding difficulty getting loans and mortgages in the future. First, the interest on the loans is much smaller than a normal loan, so you don't get shafted quite as badly paying it off. Second, it doesn't affect your credit rating at all. Third, if you never earn more than £15k and don't manage to pay it off, you don't get angry men taking away your car/house/firstborn to pay off the debt. So, this sort of debt is (mostly) harmless.

Type Two: Proper Debt. This is what happens when, after you graduate, all of the sudden, your interest-free overdraft becomes a Proper Overdraft, with charges and interest. This is what happens when you fail to pay off your credit card bills, and you end up just about getting the money together to pay off the interest each month. This IS the sort of debt that can cause credit rating troubles.

However, a student may be forced to use their overdraft if the loan falls short, or parents can't give as much financial support as is required, or if work doesn't pay enough, or is unavailable, or incompatible with the type of study that is being undertaken. (Unfortunately, everything in this paragraph applies to me in varying severities. Yay!)

So, really. Most of that £23k of average debt is Type One, and shouldn't be worried about too much. Considered for a while, but not the sort of thing you should lose sleep over. It's the bit that the maintenance loan doesn't cover that you should really be looking at, if you're worried about not making ends meet.

Now, what would happen if the government allowed universities to charge what they actually wanted to for tuition? That's up to £30k. Of course, you would have to maintain a similar system to what we have today; £30k is more than the average yearly salary in Britain - not many families have it just lying around to pay upfront. So, let's say we keep the current system of not paying before you reach the £15k mark and paying off a small, manageable amount every month. Would you actually be able to pay off £100,000+ worth of debt over a lifetime of work without lifting the amount required to pay off a month? I doubt it.

This university thing sure is tricky.

(I might moan sometimes, but I'm pretty glad I study in the UK. It would be so much more expensive to study at MIT for four years, and there's very little government support.)