BRITAIN'S university students are in debt to the tune of £5bn - a sobering thought for the 450,000 school-leavers about to join them at the start of the new academic year.

Today's students expect to leave university with individual debts of over £7,000 - but at least 80 per cent believe their further education is an investment that will stand them in good stead for the future.

The downside, however, says National Union of Students president Owain James, is that the fear of debt is putting many people off going to university.

''While some graduates can walk into a highly-paid job, others may struggle with a period of unemployment followed by relatively modest starting salaries.''

A fifth of this year's school-leavers who have decided against doing a degree said they could not afford to go - six per cent more than in 2000, according to the NatWest Bank's Money Matters poll.

Second thoughts

And nearly half - 44 per cent - of all those questioned were having second thoughts about university because of debt fears, with graduates now leaving owing up to £12,000 after a three-year degree.

Ann-Marie Blake, head of student banking at NatWest, said going to university was a ''financial challenge,'' but students could look forward to a well-paid job at the end of their course.

The Money Matters survey reveals that average salaries for this year's graduates have risen by an inflation-busting eight per cent. The results, however, show significant regional variations.

The average for the north is £17,500, and while the average salary figure is good news for those currently studying, the survey shows that there are still 29 per cent of northern graduates earning less than £7,000 after leaving university.

NatWest says the overall increase in salaries appears to be linked to graduates' negotiation skills and is, perhaps, driven by the volume of student debt. While one in five graduates in the north leaves university owing no money, the national figures show average debts at £9,000, which represents a rise of 40 per cent on last year's figure, underlining the full impact of the withdrawal of local education funding and the introduction of tuition fees.

Proportions

Sian Evans, manager of students and graduate banking at Barclay's, says the number of student loans had jumped tenfold since 1992, from 280,000 to 2.8 million.

Although the government wants to encourage more young people from poorer backgrounds to go into further education, statistics show that the proportion of working class students is not rising.

Former Labour deputy leader Roy Hattersley says the government should be looking at alternatives, such as replacing tuition fees with a ''graduate tax''.

''I don't think a student going to university would be deterred by the thought that in 10 years' time, when they reach a certain income level, they will pay a bit more tax.''

Despite the prospect of finishing college with huge debts, however, graduates have a positive outlook. Almost 6 out of 10 claim not to be worried about the money they owe, and getting a job just to pay off their debts is the least important consideration when they are looking for that first job.

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