Funding is the biggest headache faced by students wanting to continue their studies after their undergrad degree. Taught master's degrees no longer qualify for research council funding, and while some students manage to put together a funding package through scholarships and sponsorships, others are drawn to taking out a bank loan. But is this a good move?
Career development loans (CDLs) have become an increasingly common funding option for those undertaking postgraduate study. There are only two banks currently offering them – the Co-operative bank and Barclays.
Since the government-supported scheme began in 1988, over 304, 000 people have taken out a CDL. In this 25-year period, banks have lent in excess of £1.34bn. The Co-operative says: "We have seen a steady increase. In 2013, almost 5, 000 people took out a CDL with the Co-operative bank."
The CDL funds full- or part-time vocational and professional study. Although it is a commercial bank loan, the government pays the interest for the duration of the course and recipients do not have to repay the loan until they complete their studies.
In recent years, the number of students undertaking postgraduate study has fallen due to following a rise in course fees. A postgraduate taught course now costs an average of just under £6, 000 a year, an increase of 7% since 2012-2013.
Despite the fall in numbers of those undertaking postgrad study, there's been a rise in CDL applications, because of the funding cuts.
The Department for Business, Innovation and Skills (BIS) explains the point of the loans: "Professional career development loans are short-term finance offers which enable adults to undertake vocational and professional study, with the aim of moving on in work or into work quickly. Recipients are able to concentrate on the learning or training without needing to meet repayments. Repayment only begins one month after they leave their course."
Nevertheless, CDLs have come under some scrutiny and the University and College Union (UCU) argues that "high interest rates, non-income contingent payback terms and the need for a good credit record" mean that they are not suitable for everyone.
UCU points to a worrying effect on access to postgrad study: "Students from less advantaged socio-economic backgrounds tend to be more risk-averse, and the benefits of further learning and the increased salaries that postgraduate qualifications can bring are being skewed towards more advantaged learners only."
You can take out a loan for any amount between £300 and £10, 000, and both banks offer an interest rate of 9.9%. CDLs are available to those aged between 18 and 69 with an unlimited right to stay in the UK. However, you need to have been resident in Britain for at least three years, so if you have been abroad for over six months then the banks are likely to reject your application.
The banks will also reject your application if your credit rating doesn't match their eligibility criteria. While neither the Co-operative nor Barclays were able to disclose the number of applications they rejected, I spoke to a number of students who had their applications declined.
Emma Finamore, currently doing a journalism master's at Goldsmiths, University of London, says: "My application was rejected even though I hadn't been in any trouble with the bank or phone companies. This nearly stopped me from pursuing my dream of studying journalism.
"If I hadn't started a crowd-sourcing campaign and known someone who was prepared to lend me £5, 000, I wouldn't have been able to do this master's."
The government covers the interest for one month after the course finishes, but after that the loan operates as a normal bank loan. The student is then fully liable for repayment. Recipients are given between one and five years to repay their loan; but obviously the longer they take, the more interest they accrue. The Co-op bank says the average term on a CDL is five years.
Unlike ordinary loans, CDLs come without arrangement fees or early settlement charges - if you want to end your repayment plan prematurely you can settle without additional charges.
If a graduate is still unemployed after they complete their course, there are protections in place and repayments can be deferred for up to 17 months, but this must be applied for in three separate stages.
However, once the recipient has entered into a repayment scheme it can become very difficult to halt or postpone payments. Banks are keen to retrieve their money even if employment circumstances change. With increasingly precarious labour conditions and the growth of zero-hour contracts, jobs will not necessarily remain secure for the entire repayment scheme.
Veering off-plan can cause long-lasting damage to your credit history and affect your future ability to gain credit. As with all bank loans, there is some degree of financial risk involved.
If recipients fail to meet payments, both the Co-operative and Barclays transfer the loan to a debt collector agency. The Co-op says they cannot disclose how frequently they transfer loans to a third-party debt agency because this is commercially sensitive data.
The Co-op says: "If a customer encounters financial difficulties and is unable to pay back their loan, we would encourage them to contact us as soon as possible. We always strive to support customers facing financial difficulties and would only turn to a collection firm as a last resort."
BIS says: "CDLs are commercial bank loans and as such the banks seek recoveries in the event someone misses regular repayments and so defaults."
The CDL may be far from a perfect solution to postgraduate funding, but it is one of the few funding options available.
If applicants think the course will further their vocational skills and career prospects, then the CDL may be a good option, but it is less so for those wishing to pursue a future in academia or any other career where a regular salary is not a safe bet.