Payday loan provider Wonga has removed pages from its website suggesting students should take out its loans.
The move came after the National Union of Students (NUJ) called the firm “highly irresponsible” for marketing loans with a typical APR of up to 4,214% to students. Wonga said it will continue to except applications from working students despite taking down its marketing material.
The pages in question suggested a Wonga short-term loan could be a viable alternative to a student loan – on which borrowers pay an interest rate of just 1.5%. The firm said taking out one of its loans could help with the purchase of air tickets or meet any essential outgoings between paydays.
A student borrowing £400 from Wonga for a period of 30 days would typically pay interest and charges of £125.48 for credit, paying back a total of £525.48.
The offending material said: Student loans are usually far cheaper than your standard personal loan. But there can be a downside you potentially end up borrowing more than you need, while a nasty debt accumulates for your graduation that could take years to repay.
With a Wonga loan the interest rate is much higher, but you only borrow it for a month and pay the loan back on a date that suits. For those occasional emergencies or unexpected events, it means you can carry on with life without a long-term debt that keeps accumulating.
Pete Mercer, NUS vice-president, said: It is highly irresponsible of any company to suggest to students that high-cost short-term loans be a part of their everyday financial planning.
Students should think long and hard before choosing payday loans over any other form of borrowing, including Government-backed student loans.
If students are struggling to make ends meet there is often other support available, and anyone worried about their finances should talk to their students union or financial advisers at their university.
Wonga should immediately withdraw this predatory marketing, which contains information that appears to be inaccurate, and is aimed at financially vulnerable young people.
A spokesperson for Wonga said: Our decisions about any students who do choose to apply are based on the same rigorous checks we perform on all applications, but we do not believe working, adult students should be excluded from a popular credit option.
The two web pages in question are examples of the many search engine optimisation (SEO) pages on our site, which is essentially content covering all aspects of credit designed to help our particular option appear in general internet searches for loans or credit.
As for the content of those pages, we merely highlight the risk and high cost of unauthorised overdraft charges, plus the potential trap of long-term debt versus a short-term solution.
The Office of Fair Trading has said payday loan firms like Wonga offer a useful service to people who cannot access traditional forms of credit and should not have the amount of interest they charge capped. The Labour MP Stella Creasy has called on the government to limit the amount payday loan companies can charge their customers.
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