Abstract
Overview
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.
Report 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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