A-Z of student finance
Aug 17: Managing money can be difficult for new students. Hilary Osborne shows
how to make your cash go that little bit further.
Accommodation will be your biggest expense at university, unless you opt
to stay at home. According to Royal Bank of Scotland (RBS), students spend a
combined total of £3.9bn a year on rent. When you start your course you are
likely to live in a room or flat owned by your university or college. This is a
good option - it's easy, should be safe, and you'll be surrounded by lots of
people to socialise with. Don't expect it to be cheap though. Research
last year showed that in 2006-07 weekly rents for living in halls were £82, up
from £63 in 2003-04. In London students paid an average of £100, while at the
other end of the scale students in Wales paid an average of £63.
Living in a shared house or flat won't necessarily be more expensive during term
time. Average private rents for students weigh in at £60 a week, according to research by student homes website Accommodation for Students.
However, unlike with halls of residence you will probably have to pay rent
during the holidays.
When it comes to choosing a bank account you will be able to take your
pick of a range aimed specifically at students. Most of the big banks have
student accounts, all offering interest and fee-free overdrafts. Many come with
some kind of incentive - Barclays
is offering six free cinema tickets, for example, while NatWest
is giving away a five-year railcard. While the freebies may be tempting, there
are other things you should be paying more attention to, particularly interest rates
on extra borrowing.
Hand-in-hand with student bank accounts go student credit cards. These
tend to have much lower credit limits than standard cards, reflecting the fact
that students don't tend to be a particularly good credit risk. Lloyds TSB,
for example, caps spending at just £250. The biggest advertised credit limit is
£600 from Barclaycard, but
operate on a case-by-case basis. Interest rates on student credit cards are not
particularly competitive, especially when compared to the 0% introductory deals
available elsewhere. Lloyds TSB charges 19.9% on purchases, while RBS and Smile
charge 18.9%. Halifax charges 8.9% on purchases if you apply for its student
card online, but a heftier 14.9% if you apply in a branch.
Debt is likely to be something you encounter during your course,
however carefully plan your finances. But that's not to say you shouldn't think
carefully about where your money is going or try to keep your borrowing to a
limit. The best way to do this is to draw up a budget, listing all your expected
expenditure and setting a limit for each item. Ucas has an online budget planner,
which you might find helpful, not least because it will remind you of all the
different things your money must buy.
You may not always stick to the amount you've allocated yourself for each
item, but at least you will feel you have some control over your spending and
the debt isn't spiralling out of control.
After somewhere to live, tuition fees
will be the next big expense to cover. Universities and colleges in England and
Wales can charge full-time students up to £3,070 for tuition for the new
academic year, payable upfront. Next year, fees will rise to £3,145, and for
each subsequent year of your course they will rise in line with inflation.
A tuition fee loan is available for the full amount for every student
starting a course. You can apply for a loan online
or by post.
If your parents have a combined income of less than £38,330 you will be
eligible for a maintenance grant from the government. Students whose
parents earn less than £17,910 between them will be entitled to receive the full
grant, which is worth £2,765 in this academic year. Partial grants are available
on a sliding scale to students whose parents earn between £17,911 and £38,330.
The grant, which doesn't have to be paid back, is given to you in three
instalments at the start of each term. If you are entitled to the full grant
your university will also give you £300 to help with living expenses. Next year,
the income threshold for the full grant will rise to £25,000. If your parents
earn just under £25,000 but more than £17,910 you could be £1,000 better off if you defer starting your course until next year.
Universities also have hardship funds, with some of the money coming
from the government. These are last resort funds and you will need to
demonstrate that you need the money before being granted a pay out. Before
things get that bad, investigate what bursaries and scholarships your university
has to offer - you might find you are eligible for a few hundred pounds.
However cash-strapped you are, it's important to think about buying
insurance for your possessions. Forking out for the right cover will save
you money in the event of a break-in or accident that damages your stuff.
A job, either during term time or the holidays, is a good way to
supplement your income, and could also be good for your CV. Some universities
restrict the number of hours students can work to make sure they have plenty of
time to concentrate on their academic work, and it's important to bear in mind
that you will have work to do outside lecture and seminar times.
Late night kebabs, burgers and chips often seem like a good idea at
the time, but they can be an expensive habit to get into and probably aren't
part of your budget. Resisting the temptation to stop off on the way home from
the pub in favour of a couple of slices of toast when you get home can make a
real difference to your finances (and you'll feel better for it when you wake
Loans are available to help cover your living costs. The maximum
maintenance loan in 2007-08 is £3,495 for students living at home. For those
living away it is £4,510, or £6,315 if you are in London. Loans are smaller for
final year students and those receiving a maintenance grant. The first 75% of
the maximum loan is available to all students, regardless of their household
income; the remainder is means-tested. Use the government's calculator
to get an idea of how much you can borrow.
Your NUS card is a
doorway to discounts, particularly if you sign up for the extra card. This costs
£10 (the initial democracy card is free), but you can offset the cost with
savings on all kinds of purchases.
Interest-free overdrafts are a key feature of student accounts, and
the main battle ground for banks trying to win business. They tend to be offered
on a sliding scale, so that in each year of study you are allowed to take on a
bigger debt. This year's freshers will be able to achieve the biggest
interest-free overdraft at Halifax, where the limit for first-year students is
£2,750. However, this figure remains unchanged in later years. By the second
year of your studies you will be able to borrow more from Clydesdale and
Yorkshire banks (£3,000). Be warned that if you borrow more than your agreed
limit without clearing it with your bank first you could face unauthorised
overdraft charges and interest rates of more than 29%.
Parents tend to be the best source of cheap borrowing, with the bank
of mum and dad contributing £4,000 a year to their offspring's university
education, according to a survey by Unite.
Your qualifications should help you get a higher paid job than you
would if you went straight in to work after your A-levels. The latest figures
suggest graduates earn around £160,000 more over the course of their working life - more than enough to
clear those student debts.
Repayments on your student loans only start when you find a job and
are earning more than £15,000. When that happens, the Student Loans Company will ask your employer to
start deducting repayments from your gross pay; 9% of all earnings above
£15,000. So if, for example you earn £19,000 you will pay back £30 a month. This
continues until the loan is paid off. The interest rate on the loan is linked to
inflation, which is currently 2.4%. Interest is added to the loan as soon as you
get the money.
Students going to university in Scotland will encounter a different
fee structure to those studying elsewhere in the UK. Scottish students won't pay
any upfront fees, while those from other parts of the UK will pay lower fees
than in their home country..
Don't think that because you are a student you can avoid paying tax.
Like everyone else, if you earn more than £5,225 this year you will have to hand
over some of your cash to the taxman.
If you've been living with your parents, utility bills will probably
be a new thing for you. Having your name on the bill for a shared house can be a
good thing if you need to provide ID for something, for example to buy a mobile
phone. But bear in mind that if your housemates refuse to cough up and you miss
a payment, any default will be a black mark against your name.
To get better value for money on things like food, it's often better
to buy in bulk. Staples like pasta and rice will last in the cupboard all term
and you don't have to buy cash-and-carry sized bags to start saving. At
Sainsburys, for example, while 500g of penne costs 37p, 3kg costs £1 - less than
half as much. For perishable items, like cheese or milk, you could club together
with a friend to make savings.
Your student union welfare officer is a good person to contact if you
are having problems with your finances. They should be able to give you details
about the university's hardship fund, as well as general advice. They will have
eXperience of living on a student income, so will be realistic about
where and when you can cut costs.
A young person's railcard is a great investment if you plan to visit friends or
family. It costs £20 for a year and will save you a third on rail travel
(subject to various terms and conditions).
Zero per cent - that's the rate on the first part of your overdraft,
but if you want to borrow more you'll have to pay for it. As long as the
overdraft is arranged in advance you won't be hit with penalty fees, but the
rate will be higher than on a student loan, so it's wise to apply for that