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Home > Business/Finance > Financial Services > Lending
Student Lending in the UK: Assessing Risk in an Environment of Rising Consumer Debt
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| Published Date:
December 2006
Published By:
Datamonitor
Page Count:
21
Order Code:
R313-18855
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Introduction
Banks devote a considerable effort acquiring students while they are at university, by offering them cheap lines of credit in the hope that they will be profitable customers in the future. However, with increasing bankruptcies and Individual Voluntary Arrangements (IVAs) and a tougher economic environment in general, is lending to students really worth the risk?
Scope
Discusses the benefits and risks of lending to students.
Provides insight on what lenders should take into account when putting together their student portfolios.
Understand where the opportunities lie for UK lenders.
Incorporates primary interviews from industry experts and secondary data from a wide range of sources.
Highlights
While current accounts are the main acquisition focus of banks, once they have the student as a current account customer, their focus shifts to lending products. The propensity for students to accrue debt means that banks can often generate further product sales during or after graduation through the provision of credit cards and personal loans.
The vast majority of student debt is in the form of Government student loans, with the majority of the rest from overdrafts and other commercial lending. Based on the Student Experience Report 2005 and Ipsos MORI data in 2005, 77 per cent of students in debt have to repay a Government loan, 36 per cent an overdraft and 17 per cent a credit card.
At present the SLC is not allowed to share data on student loans with other lenders via credit reference agencies, meaning that prospective borrowers can have loans and repayment difficulties that are "hidden" from the lender. However, the DTI has agreed to hold a consultation on the removal of barriers to the sharing of non-consensual credit data.
Reasons to Purchase
Evaluate the risks of student lending and understand what steps your business can take to reduce its exposure.
Understand your competitors' strategies and what they are offering to students.
Assess the opportunities of student lending and learn how the market is changing.
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