According to new research by the Money Advice Service, in partnership with the National Association of Student Money Advisers (NASMA), around one in ten undergraduate students have fallen behind on or missed payments in the last six months. 11% of students surveyed in April had fallen behind or missed payments on university accommodation, credit cards, household bills or other debts in the previous six months.

The research surveyed over 5,000 full-time undergraduate students in the UK, also found that half (56%) are satisfied with their financial circumstances. In practice, eight in 10 report they keep track of their personal expenditure, with three in five (59%) setting a budget.

Furthermore, 77 per cent have savings either in a dedicated account, their current account or an ISA, with two in five (40%) saving money most months of the year. Students who do save are most likely to be saving for a holiday (42%), living expenses after graduation (39%) or a deposit to purchase a home in future (31%).

One in five (20%) find themselves frequently overdrawn. Of those who have been overdrawn at some time, 40 per cent have gone over or used an unauthorised overdraft, meaning they are likely to have faced additional charges and fees.

In total, 38% of students (607,000) have some form of outstanding non-student loan debt, with just under one in five (18%) owing £1,000 or more. While for most, this is on overdrafts or credit cards (30%), 6% of students have at some point turned to short-term borrowing, such as payday loans, to make ends meet.

176,000 students (11%) have fallen behind or missed payments on university accommodation, credit cards, household bills or other debts in the last six months. And a fifth (21%) owe more money in 2018 than they did last year – a concerning trend, particularly when interest rates are on the rise.

The study finds a socio-economic divide when it comes to financial well-being. Students from less affluent backgrounds are more likely to be unsatisfied with their financial circumstances (34%) than those who come from more well-off backgrounds. Similarly, this group is also more likely2 to be regularly overdrawn.

There is also a similar trend with those students attending post-1992 Universities (formerly polytechnics or colleges of higher education), with a third (33%) unsatisfied with their financial circumstances, compared with only 20 per cent attending a Russell Group University.

And money troubles can affect mental health, almost two-thirds of students (65%), the equivalent of more than a million people, have had a negative experience including mental health difficulties, due to their financial situation. Among those most likely to have trouble are students who frequently go into their overdraft.

Yet, the overwhelming majority (89%) of students that need guidance will seek it out, with parents (71%) and friends (54%) proving a popular choice when it comes to discussing money matters.

Joe Surtees, Policy Manager at Money Advice Service, who wrote the summary report said: “Our research challenges the idea that students are financially irresponsible. Most seem to show signs of being financially capable, keeping a close track of their money and frequently putting savings aside for a rainy day. However, a significant minority are still struggling with their finances, which may increase the chances of falling into a spiral of debt in the future.”

“Most importantly if you’re struggling, don’t be afraid to seek help. The second you open up about your financial circumstances, the sooner you can get help and get back on track with your finances. For those who have trouble, organisations such as the Money Advice Service and the National Association of Student Money Advisers can help.”

John Penberthy-Smith, Customer Director at the Money Advice Service commented: “This research shows that, contrary to what you might expect, students can teach the rest of us how to manage our money better. It’s great to see so many young people embracing the money management skills that will set them up well for the future. But it’s essential that they know free and impartial help is available if they need it. There are loads of great budgeting and saving tools on our website or NASMA will be able to point them in the right direction.”

Wendy Bainham of NASMA’s Financial Capability Committee, added: “It can be a challenge managing money as a student, as you are often left with lump sums to carefully budget out over a period of months. That is why it is encouraging that so many students are willing to seek guidance.

“While it’s good to ask mum and dad for help managing money, the first port of call should be the experts at MAS, NASMA or the NUS. There are NASMA advisors based in over 600 universities, colleges or places of higher education who are professionally trained to help students with all manner of financial queries – no matter how big or small.”