New research suggests that the postcode that a new student’s family lives in could affect whether a bank will give them an interest-free overdraft – with those from wealthier families more likely to have one granted.
Several banks offer student accounts for freshers, with attractive benefits including free NUS cards, 16-25 railcards and vouchers for stores like Amazon. They also offer interest-free overdrafts. With Santander, that could be as much as £1500, and with HSBC that could be as much as £3000.
Moving away from home for the first time is tough, and that extra cushion can be make or break for a lot of students.
I would've been completely unable to go to uni without my overdraft. My life would've been very very different rn https://t.co/5jka3DXBQV
— Bly (@AdamJBly) September 7, 2016
This likely applies more to students from low-income backgrounds than anyone else, as their families are less likely to be able to support them financially.
The news that banks may be choosing which students to give their overdrafts to based on the location they grew up in, then, could have very significant consequences.
When banks determine suitability for overdrafts, they run credit checks. It is likely that new students will have yet to accrue credit, given they often have little financial responsibility until they are 18.
This means that banks will run other checks on suitability – and it seems that postcode is one of them.
According to Justin Basini of ClearScore, a firm that gives customers free access to their credit reports:
Lenders can take the attitude that birds of a feather tend to flock together, so if you live in an area where people tend to have poor credit scores, you will also be affected by this.
ClearScore have an interactive map that allows you to check the average credit score of postcodes across the UK. It will come as little surprise that some of the most deprived areas in the country, including Toxteth in Liverpool and Newham in East London, rank as some of the lowest.
For poorer students, this comes in a context where the government has already voted to abolish university grants, previously awarded to students from lower-income families to help with the costs of living and studying.
Then there’s the persistent statistics that suggest that students from low-income families are still under-represented in the UK’s leading institutions, despite an apparent increase in applications.
The NUS’ vice principal for welfare, Shelly Asquith, questioned Santander on their overdraft policy on Twitter on September 7th.
Hi Santander, do you refuse these interest-free overdrafts if students are from poor neighbourhoods? https://t.co/G6muObWv5g
— Shelly Asquith (@ShellyAsquith) September 7, 2016
Their reply did not really give an answer either way.
— Santander UK Help (@santanderukhelp) September 7, 2016
There is a disclaimer in their guidance on applications for accounts and other products with regards to credit scores that says “We do not refuse credit simply because of the place or area that you live in either.”
This would appear to suggest that it certainly can be taken into account. And all the while it is, poorer students are going to be facing yet another barrier to accessing higher education.
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