Banks pitch for long-term link with graduates

Thousands of third-level students who have put down their pens and escaped exam halls for the final time will currently be experiencing an anti-climactic "what do I do now?" feeling as they try to decide what to do next.

Graduates who find that their degree certificates alone won't instantly fast-track them to the front of the jobs queue may find their current account balance dipping alarmingly low at a time when expenses are mounting.

Potential outlays include interview costs (travel and clothes), living expenses for periods of unpaid work experience and repayments on debt incurred while they were studying full-time.

Even people who find employment before the ink is dry on their thesis could have to wait up to a month before their starting salary starts flowing in, while it may be necessary for ex-students to move to new rental accommodation near to their place of employment and thus fork out for upfront deposits of at least one month's rent.

Then there is the small matter of being obliged to pay off any library fines and any borrowings from the college hardship fund before they can graduate.

With final year students' lives in such a state of flux, it is no wonder that financial institutions market specific products at graduates.

It also marks a last-ditch attempt at reeling in current account customers before they get settled into a long-term relationship with their bank.

AIB, for example, is offering "free upgrades" to final-year third-level students. The offer is not a complimentary laptop, but a switch from their humble "student" current account to an impressive-sounding "graduate" account.

The account, which lasts for 18 months, gives graduates a 3 per cent discount on personal loan rates and a 4.4 per cent discount on overdrafts.

Graduate account holders are also blessed with a €500 pre-approved overdraft and do not have to pay the normal documentation fee of €63.49 on car loans.

Making it easier for graduates to borrow appears to be the theme of the account.

Financial institutions are "very accommodating" to students and graduates, says Mr Will Priestley, president of the Union of Students of Ireland (USI), which campaigns regularly for higher third-level grants to be available to a wider group of students than under the current system.

"It's unfortunate that a lot of students will be in debt just as they're at the start of their working lives," he notes.

But with good qualifications to their names, graduates' earnings potential (and thus capacity to repay) is above average, even if they are unable to realise that potential in the short term.

Jumping at the first offer of a loan is not a prudent step, however.

"There is this gap between finishing your studies and getting a job and we would advise that people look around if they are getting a loan, because there is a variance in the rates," cautions Mr Priestley.

"Also they should know that short-term loan rates are quite high, often comparable to overdraft rates," he says.

"And people who have debt on their credit cards should try and get it off their cards and maybe get a loan at a lower rate to consolidate the debt. These are just common-sense things."

Many final-year students, already practised in the art of repaying debt, won't shirk at getting back into the red one more time.

Ms Fiona Moriarty has just finished her final exams for her four-year degree in Business, Economics and Social Studies in Trinity College Dublin and is planning to use a bank loan to purchase a round-the-world ticket.

"I will be getting a bank loan definitely, because I have had them before. I was planning to travel after my degree, so I'm going to use the loan to backpack around Asia for about four months.

"I have some money saved up as well, but I think I will be borrowing €5,000-€6,000."

She hopes to be able to postpone the repayments for about six months. It is worth the banks' while to be flexible, she says.

Some postgraduate students have reported, however, that the banks' willingness to postpone repayments on loans evaporates once they get their first set of letters after their name.

Ms Moriarty is a Bank of Ireland customer and as she doesn't officially graduate until December, she should still qualify for its student loan discounts.

As far as fully fledged graduates are concerned, Bank of Ireland says the interest charged is around 3.5 per cent cheaper than the average personal loan, based on a loan of €6,500.

The bank charges tiered rates on its personal loans, but its graduates loans have a flat interest rate of 6.7 per cent regardless of how much the person borrows.

Under AIB's package, loans are available to graduates at the slightly cheaper rate of 6.6 per cent.

But Bank of Ireland's loan discounts are available for twice as long as AIB's, which expire after 18 months. Bank of Ireland's free banking extension also runs for six months longer than AIB's.

Ulster Bank's graduate account is open to those who have graduated in the previous year and it remains open for 12 months.

It offers an interest-free overdraft, preferential rate loans and transaction-free banking as long as the account remains in credit or within the authorised interest-free overdraft limit.

Graduates who continue with their studies will have this transaction-free period extended for a further year.

Graduates should remember that it may take their bank a little while - up to two years in some cases - before it gets around to changing the status of their student account.

Once the period for which they are eligible for a graduate account expires, they may be charged banking fees for the first time - that is, unless, they "upgrade" to a bank that makes free banking available all of the time.

Ulster Bank recently raised its threshold for free banking to €500. Permanent TSB offers free banking to mortgage customers and people who hold a minimum balance of €1,000 in their accounts.

National Irish Bank has the most straightforward offer, however.

It is the only financial institution in the Republic offering free banking to all personal customers whose accounts are in credit, regardless of their age or educational history.