High number of indebted students worry ombudsman

The credit ombudsman says it is concerned by the high number of young people who fall into a debt trap while still at university. 

Every year, thousands of students join tertiary institutions and take the first step to shaping their future. With this also come their first steps into the credit world, enabled by a student card and proof of registration at a tertiary institution.

“The queries we receive from young people at our office are concerning as most will complain about debt that they incurred while at tertiary institutions, which they failed to pay and now they are listed negatively at the credit bureau.

“Students can open a student cheque account and get their first credit card by using their student cards and proof of registration, along with other documents as required by legislation,” credit ombudsman spokesperson Kabelo Teme.

“The credit cards are generally issued based on proof of income, which comes in the form of regular allowance deposits into their bank accounts. A student card also enables its holder to open accounts. All that is required is for the student’s parent to confirm that the student gets an allowance, and they could be eligible for an account and some limits range from R500 to R1,500,” she added.

Teme blamed the student’s lack of information on credit-related matters and not understanding the consequences of not paying debt.

“We are facing a youth unemployment crisis in our country. Some are able to obtain a tertiary qualification, but a bad credit record may cause them not to find employment, especially for those who want to venture into the financial sector.

“We cannot ‘downplay’ how a good credit score can open many doors for a bright future. Acquiring negative listings as a student not only places youth at a disadvantage when it comes to employment, but will limit, if not prohibit access to credit in the future,” said Teme.

Here are a few tips to help avoid bad debt:

• Ask yourself whether you really need it. Research for other legal alternatives that may be suitable for your needs.
• If you really need to take out debt, then find a registered credit provider who will grant you credit that will suit your affordability. A credit provider that will patiently assist you in your decision and allow you to carefully read and understand what your credit agreement entails.
• Once you have signed the credit agreement, know that you are liable to pay off the debt. Your monthly payments should be on time. Do not skip a month and do not pay less than the instalment amount.
• If you find yourself in financial difficulties it is imperative to communicate with your credit provider and confirm your discussion in writing.
• Do not run away from your responsibilities of paying your debt. If any of your contact details change, then be responsible and inform your credit providers. If you miss your payments and receive calls from the debt collectors, answer the calls as it gives you the chance to make alternative payment arrangements.