Students taking out payday loans 'to pay for gym memberships and avocados'

Students are taking out payday loans to fund holidays and "healthy food" like avocado on toast, new figures have shown.

Research by Moneysupermarket, a price comparison website, showed a 136pc uplift in the number of students taking out the costly, short-term loans to help fund their lifestyle at university.

Students are able to borrow as much as £9,000 a year but increased living costs appear to be pushing an increasing number towards payday loans, which come with notoriously high rates.

The firm asked students who started university a decade ago and those who began their studies since 2015 about their borrowing and spending. Just over one-in-four current students said they had borrowed from a payday lender compared to 11pc 10 years ago.

Students squeezed by high living costs reported spending their entire maintenance loan for a term, which can be as high as £3,000, in just five weeks and having to resort to loans and credit cards. A third said they choose to hide these debts from their parents.

Although drinking alcohol and going to nightclubs were still the most popular ways those surveyed spent their money, more and more young people are prioritising things like gym memberships and healthy food, the research said.

Going to the gym was the most popular choice after alcohol and nights out, with 33pc of today’s students saying they spent money on a membership, an increase of 50pc on a decade ago.

The surge in low-cost flights has caused a massive upturn in the popularity of student holidays with today’s students 68pc more likely to take a break, while the popularity of healthy food, like the notorious breakfast of avocado and toast, soared by 74pc.

Emma Craig, a money expert at Moneysupermarket, said the rising cost of living and the inability of students to make their student loan last were likely to be the reason for the increased borrowing.

“Payday loans are rarely the most cost efficient way to borrow and should be a last resort,” she said. “If you’re a student heading off to university this month, now is definitely a good time to think about how you’re going to manage your finances.

“If you think you may need to borrow money at some point, taking out a student current account with an interest free overdraft can be a good option.

“Before you decide which bank to go with, make sure you shop around to ensure you’re choosing the current account that’s best for you, particularly in the long run.”

More than a third of students are also relying on credit cards to fund their time at university, while visits to so-called “Instagrammable” restaurants, those which will look attractive for a social media post, are an increasing spending priority for students.

The Daily Telegraph reported last month that Ucas, which administers the university admissions process, was criticised for promoting a private loan company which specialises in lending to students.

Among the literature sent to prospective students was an advert for Future Finance, which offers loans at rates of 13.41pc, far higher than that of a normal student loan or the best available personal loans on the market.

At the time, Future Finance told the Telegraph it assesses individual affordability and promotes responsible borrowing, while Ucas said it always recommends the government-funded student loan as the best option.