Student funding in further education

6.1 Key findings: Financial profile of FE students

Chapter Summary

• Most of the students that participated in the research were worried about their financial situation and one in every five were very worriedabout this.
• A lot of FE students do not have enough money to cover their basic living costs.
• Most FE students were found to be highly dependent on their families, particularly their parents, to support them financially.
• However, not all students are able to turn to their families for financial support, particularly those who are care-experienced or whose families are experiencing financial difficulties themselves.
• Those who do not have access to family support are more likely to turn to commercial forms of debt, including payday loans and credit cards.

Introduction

6.1 This chapter reports on the financial profile of the Further Education (FE) students that participated in the research. It begins with an overview their financial position, followed by discussion of their levels of financial literacy.

Overview

Most of the students that participated in the research were worried about their financial situation.

6.2 Two thirds (67%) of survey respondents said that they were worried about their financial situation (Figure 6‑1). More than one in every five (22%) said that they were very worried about this. This finding was substantiated through the focus group discussions, during which almost all participants expressed some concern about their financial situation. This was often reported to be having a negative impact on their mental health and wellbeing.

Figure 6‑1: To what extent are you worried about your financial situation?

Source: SQW Survey of FE Students
Base: 2,065

Younger students who had gone straight to college on leaving school were least worried about their financial situation, whilst older returners were most worried.

6.3 Across all age groups, 22% of survey respondents were very worried about their financial situation. Figure 6‑2 shows that this falls to 12% for young people aged 16-17. The notable exceptions to this were young people who were care-experienced or had disabilities, who were more likely to be worried about money.

6.4 A higher proportion of those aged 18-24 were concerned about their finances, with a fifth (20%) of this group saying that they were very worried. This increases to 30% for those aged 24-34 and again to 37% for those aged 35-44 – the latter cohort being the most worried. Again, this was confirmed through the focus group discussions. At least one participant in each focus group had considered dropping out of college for financial reasons.

"I came to college to be better off in the long run but have had to adjust my way of living."

"I gave up a job, a career and income to come back to college. It has been hard."

Focus Group Participants

Figure 6‑2: Percentage of survey respondents who were 'very worried' about their financial situation

Source: SQW Survey of FE Students
Bases: all respondents in each cohort (aged 65+ n=1; 55-64, 4; 45-54, 20; 35-44, 70; 25-34, 107; 18-24, 196; 16-17, 50)

Students who were lone parents and / or carers were most likely to be very worried about their financial situation.

6.5 Figure 6‑3 shows the proportion of survey respondents who were very worried about their financial situation by various demographic characteristics. The key messages from this analysis are that:

• Lone parents were most likely to be very worried about their financial situation – this aligns closely with the evidence gathered during the focus groups, which suggested that this cohort of FE students were most likely to be experiencing financial difficulties
• Relatively high proportions of those who were carers, care-experienced, from a non-white ethnic background and / or disabled were very worried – again, this also came out of the focus group discussions, particularly in relation to those who were care-experienced and / or disabled
• Female students were more likely than male students to be very worried about their financial situation – this ties in with the fact that most (>80%) of the parents, lone parents and carers that completed the survey were female
• Those living in deprived areas were more likely to be very worried about their financial situation than those living in more affluent areas^[35] – this is perhaps unsurprising given that SIMD10 areas tend to be characterised by high levels of unemployment, benefit dependency and poverty. Students living in these areas are likely to be witnessing and experiencing the negative effects of this daily.

6.6 The focus group discussions highlighted that a lot of FE students do not have enough money to cover their basic living costs, which would be expected to lead to higher levels of worry about their financial situation. Students reported not being able to afford to buy lunch when attending college and some relied on college provision of free meals (either at breakfast or lunchtime).

Figure 6‑3: Percentage of survey respondents who were 'very worried' about their financial situation

Source: SQW Survey of FE Students
Bases: all respondents (n=456) in each cohort (lone parents n=81; carer, 135; parent, 147; care-experienced, 40; non-white, 30; disabled, 64; SIMD10, 99; female, 317; male, 121; SIMD90, 11)

Running out of money is a common occurrence amongst FE students, particularly amongst parents and those with caring responsibilities.

6.7 Survey respondents were asked if they had ever run out of money and almost three quarters (73%) said that they had(Figure 6‑4). This was consistent with feedback received during the focus groups with around half of participating students stating that they do not have enough income to cover their living costs and often found themselves falling short. This made it difficult for them to deal with unplanned costs, such as those associated with illness, bereavement or household repairs / maintenance.

6.8 FE students who were lone parents were found to be particularly susceptible to running out of money, with 88% saying that this had happened to them. It was also common amongst carers, those living in SIMD10 and those who were care-experienced. Students from SIMD90 and non-white ethnic groups were the least likely to have run out of money.

Figure 6‑4: Percentage of survey respondents who had run out of money

Source: SQW Survey of FE Students
Bases: all respondents (n=1,512) in each cohort (lone parent n=207; carer, 350; parent, 392; SIMD10, 303;
care-experienced, 112; female, 947; disabled, 174; male, 521; non-white, 72; SIMD 90, 42)

Most students turned to friends and family, or did without essentials (such as food), when they ran out of money.

6.9 Most of those surveyed who had run out of money had turned to friends or family for loans or cut back on their spending (Figure 6‑5). Relatively few reported having taken out commercial debt when in this situation. This was confirmed during the focus group discussions, with many participants saying that they regularly turned to their parents when they ran out of money – in some cases, these loans had to be paid back and in others they did not.

Figure 6‑5: What did you do when you ran out of money? Please select all that apply.

Source: SQW Survey of FE Students
Base: 1,429

However, not all students are able to turn to their families for financial support.

6.10 Focus group participants were often quick to point out certain student groups that they observed facing greater financial challenges due to their circumstances. It was often pointed out that not all students were able to rely on their families for financial support, most specifically students with care-experience.

"My friends and family are not in great financial positions either."

"It is difficult as my family aren't well off and they struggle too."

Survey Respondents

6.11 A key point of discussion during the focus groups was the additional financial pressure that attendance at college was putting on students' family members. A high proportion of research participants (18% of survey respondents and 14% of focus group participants) lived in areas ranked amongst the most deprived in Scotland (SIMD10), where unemployment, benefit dependency and poverty is highly prevalent. This meant that their friends and family were often in difficult financial situations themselves and could not afford to support them.

Financial literacy

Most of the younger research participants said they felt ill-informed about finances when they left school, whereas older students tended to be more financially literate.

6.12 During the focus groups, younger students were, in general, unfamiliar with common financial terms and lacked understanding about basic financial products. There were some notable exceptions to this, including one younger student who had experience of working in a bank and was highly financially literate. There were others who were "obsessed" with their credit rating and checked this on an almost daily basis. However, most admitted that they did not know as much as they should. A key message from the focus groups is that they would like to have more information, advice and guidance about how to manage finances before leaving school.

"The first time I got a credit card, I felt like the bank was saying 'here, have some money' – I ended up £2.5k in debt at age 18."

"After I left school, I got into a lot of debt. I had no idea what I was doing – it was like monopoly money. It has had a devastating impact on my life."

Focus Group Participants

6.13 There was some discussion in the focus groups of the behaviour of some banks and building societies, particularly towards young people. This included posting out pre-approved credit cards or making unsolicited offers of overdrafts or loans. The concern was that if people were desperate then they were more likely to take out these products without "reading the small print" or thinking about the longer-term implications.

6.14 The focus group ice breaker revealed that almost all older focus group participants (aged 25 and over) were familiar with common financial terms and quite comfortable describing these. The majority had experience of overdrafts and credit cards, with the former being perceived quite positively and mixed reactions to the latter. Payday loans were almost universally viewed negatively and very few focus group participants reported making use of these.

6.15 The majority of focus group participants were in rented accommodation or living with their parents and very few had mortgages or ISAs – several commented that these were simply not an option for them in their current financial situation.

There was a general lack of understanding of how bursary payments are calculated and how these interacted with other forms of income, including welfare benefits.

6.16 There was a lot of confusion amongst focus group participants around bursaries. The levels of bursary being received seemed to vary considerably according to individual circumstances and half said they had found it difficult to find out how much they would be entitled to and how to apply. This was reported to be impacting on some people's decisions about whether to come to college. There was calls for clearer information and guidelines on this to help inform decision making and financial planning.

"People don't know if they can afford college before they start as there is no way to find out how much bursary you will be entitled to until you submit your application."

Focus Group Participant

Attitudes towards debt

Some research participants could see the benefits of taking on debt in terms of improving their credit rating and helping cover unplanned expenses.

6.17 Overdrafts were the most common type of debt accessed by focus group participants. These were generally seen as positive and, in some cases, essential as they could help cover shortfalls between income and outgoings and deal with unplanned expenses. However, some had used them as a one-off loan and were now "living" in their overdraft, which was viewed less positively. There was also concern about the high charges associated with going over the limit.

6.18 Some focus group participants had taken out debt (mainly credit cards) for the sole purpose of improving their credit rating. This was viewed as a positive approach to accessing debt, as it helped build a positive financial profile, which would enable them to access things like mobile phone contracts or mortgages.