Being in debt does tend to have bad consequences for people

Professor Stephen Lea Exeter University

Prime Minister Tony Blair has acknowledged there is public concern about his government's abolition of grants in favour of tuition fees.

Earlier this month he indicated he is prepared to reconsider funding for poorer students, although he said graduates should contribute as they have increased earning power.

"It is an issue that came up a lot in the election campaign and we have to make sure we've got the right way forward for the future," he said.

Earnings optimism

Higher education minister Margaret Hodge has admitted the wide range of grants and bursaries for poor students is an "absolute nightmare".

According to the book, entitled Student Debt: The Causes and Consequences of Undergraduate Borrowing in the UK, around two-thirds of students over-estimate their likely salaries.

The researchers found that 45% of students who did not worry about getting into debt suffered from anxiety, while among those who did the figure was 74%.

And just under a third (32%) of students with existing debt problems said they were depressed, compared to only 8% of those without cash concerns.

The National Union of Students warns students can now expect to owe up to �12,000 upon graduation.

Rising debt is also making students more cynical about banks, with six times as many negative comments as favourable ones.

Scottish solution

Psychology Professor Stephen Lea, deputy vice-chancellor of Exeter University and one of the book's editors, said the government should consider introducing Scottish-style tuition fees, paid on completion of the degree, or a graduate tax.

He added that, while the likelihood of debt put many potential students off, attitudes towards owing money tended to change quickly once a student had begun their course.

That is creating a culture of people getting used to owing large amounts of money, he warned.

Debt incurred while studying has to be seen in the context of extra earnings

DfEE spokeswoman

"I don't think that is a good thing to do - on the whole, being in debt does tend to have bad consequences for people.

"There's not a high percentage but a percentage of people do get used to using credit and then over-use it.

"I think one of the things that has come out of these surveys is the importance of educating youngsters before they go off and be independent in how to manage money."

The research suggests women are less likely to get into debt than men, owe smaller amounts, and are better at managing a budget.

A spokeswoman for the Department for Education and Skills said there was "no indication" that the prospect of debt was deterring potential students.

"The latest UCAS figures show a 5% rise in those applying to university," she said.

"Debt incurred while studying has to be seen in the context of extra earnings from being a graduate which can be as high as �400,000 during a lifetime."