For students in financial peril, is Europe’s biggest student lender the solution?

By Oliver Smith 10 May 2016
Brian Norton, CEO of Future Finance.

With most UK students facing at least a £12,000 gap between their costs and what they can borrow, Future Finance might be the answer.

Being a student is a lot harder than it used to be.

Fees have been introduced, and then they have gradually risen from £1,000 to £9,000 in the UK. At the same time student grants, originally given to every student and more recently only given to the poorest students, have been completely replaced by student loans which must be repaid.

Today a three-year undergraduate degree will typically cost around £21,000/year and £63,000 over the length of the course (£9,000 annual tuition fees + £12,000 average cost of living).

Excluding buying a house – that’s if today’s students stand any chance of getting on the property ladder – going to university is the largest financial commitment you’re likely to make in your life.

Plus typically the Government’s Student Loan Company will only lend you around £51,000 over a three-year degree, leaving most students with a shortfall of around £12,000.

And while many humanities students, with only 6 hours contact time a week, will pick up part-time work to fill this funding gap, for those on full-time medicine degrees or intensive postgraduate courses, this cannot always be the case.

In this environment, new businesses are popping up to help students get through the financial burden of uni, and to the better-paid jobs that await on the other side.

Meet Europe’s biggest student lender

Future Finance is one such group (not to be confused with our video series of the same name), the Dublin-based company was started in May 2014 by American founder Brian Norton.

Coming from the US, where university fees are often much higher than in Europe and the landscape for student lending is more developed, Norton saw the obvious opportunity to offer longer-term lending especially for students doing career progression postgraduate courses like an MBA.

“The system is broken,” Norton told The Memo. “Student financing is in a terrible state right now. For those who find that government student loans don’t cover all their expenses, and who don’t have the bank of mum and dad to fund their education, there is a big gaping financial hole to fill.”

“A decent student credit card will charge you around 20% interest. Short-term loans can rack up 50% or more APR, and Wonga can be over 1000%. It’s scandalous.”

Since 2014 Future Finance has received over 45,000 UK applications for loans, which amount to around 1.5% of the UK’s entire student population, and has lent out nearly £27m making it Europe’s biggest single student lender.

It’s also introduced features to appeal specifically to students, like ten-year terms, no early repayment charges and the ability to take payment holidays.

“All this helps students plan responsibly for the long-term, taking pressure off their day-to-day finances and enabling them to focus on their career goals and life ambitions,” says Norton.

It’s also seeing traction amongst a key audience of millennial students (18-35-year-olds), with 42% of its loan applications being made via smartphone and partnerships already in place with 33 universities across the UK, including London Business School.

“[Students] are savvy, time-poor and expect great online user experience, across devices. And that’s where we pitch ourselves,” says Norton.

But Future Finance has aspirations to grow much bigger, recently raising £119m of which £100m has been set aside for lending to students.

“We’ve recently soft launched in Germany and we have ambitious growth plans for the business, particularly in Europe over the next few years where we see a lot of opportunity. But we have plenty to do in the UK too.”

The future of student finance?

It’s not nice to think about the amount of money that today’s students are having to beg, borrow, scrimp and save in order to get a degree that the previous generation mostly took for granted.

The situation for most students is made worse by the fact that many lack any kind of credit history and are therefore only able to borrow the most costly loans available, like credit cards and payday loans.

In this environment, and for students facing a £12,000 gap, Future Finance is a breath of fresh air.

UPDATE 2016-05-10 – Tweaked to show Future Finance have now had 45,000 applications, rather than 37,000, with £27m of loans approved, rather than the £25m originally reported.