/ Money, Parenting

Student finance Q&A

Piggybank wearing graduation hat

If you’re one of the lucky ones heading off to uni this Autumn, it’ll pay to keep your cash in check. Look no further – here’s everything you need to know from our student money expert.

1. I need financial help to get me through uni – should I take out a student loan?

Unfortunately, unless you’re very well-off, or have wealthy and generous parents, you’ll almost certainly need a student loan to fund your course. It covers two key elements – academic fees and maintenance.

  • English universities can charge academic (tuition) fees up to a maximum of £3,290 a year for full-time courses in 2010-11. Few institutions charge less than the maximum and many are keen to increase it.
  • Scottish students don’t pay academic fees to attend university, provided they study at a Scottish university. If they come to England or Wales they pay the same as everyone else. English students still pay fees if they study in Scotland. These are only £1,700 a year, although degree courses in Scotland are normally longer than those in England.
  • In Wales, students get a non-repayable tuition fee grant of up to £1,980, to go towards their academic fees. This brings down the total cost of studying in Wales, but is limited to students who live there.

2. So what’s a Maintenance Loan?

The Maintenance Loan covers your rent and living expenses. These can vary significantly, depending on where you study and what sort of accommodation you’re in.

The amount you can get depends on your parents’ financial circumstances and where you’re studying. Students who stay at home get far less than those who live away and those who study in London get more.

As part of the Maintenance Loan ‘means test’, students from less well-off homes can get some money paid as a Maintenance Grant, which you don’t have to repay. But it does reduce the amount you can get as a loan. Details of how much you can borrow as a student loan are on DirectGov.

3. Are top-up fees the same as loans?

Yes, these are the tuition fees charged by universities. The loan you receive to cover them is paid directly to the institution, while your maintenance loan is paid to your own bank account.

4. When and how will I need to pay my student loan back?

At the moment, you start repaying 9% of everything you earn above £15,000. Most people have it automatically deducted from their pay via PAYE. It’s taken in regular instalments until the total is cleared.

Interest is charged on the outstanding balance, although not at commercial rates. Instead, it’s linked to inflation or Bank of England Base Rate. For 2009-10 the rate was actually zero but in 2010-11 most students and graduates will be hit by a rate of 1.5%.

5. What other financial help can I get?

As well as loans and gifts from your parents and saving up from part-time jobs, you can apply for an interest-free overdraft from your bank.

This money will need paying back at some point, but borrowing it without incurring interest is a good student ‘perk’. It’s helpful when funds run low – often towards the end of term or when you move from halls to private accommodation. Landlords often require a month’s rent and a hefty deposit upfront, so an overdraft is a useful way of covering these costs.

Some banks lend more than others. Halifax has a maximum of £3,000, while Barclays offer £2,000 in the first year. NatWest and HSBC have a limit of £1,000. Check out our student bank account reviews to compare more accounts.

An additional source of funding is bursaries, paid direct by universities to students. These are often for specific purposes, such as travel, but some also cover general living and study expenses.

6. There are so many student bank accounts – how do I choose the best one?

Student accounts offer differing amounts of interest-free overdraft. The headline figures are maximums, so not everyone will be offered this much. You tend to have your limit increased step-by-step, so you may be offered £500 in your first term, £1,000 in your second and £1,500 in your third.

As well as the overdraft limit, you might want to check if there is a branch on campus, or nearby. Banks traditionally offer incentives for students to join up – and of these the railcard from NatWest is probably the best. But try not to let these offers influence your choice – it’s best to find a bank that suits your needs.

7. Is it worth bothering with a student credit card?

Student credit cards aren’t interest free, so they’re quite an expensive way of borrowing. It might be worth having one for ’emergency spending’ or convenience, but try to avoid borrowing on a card for any length of time. If possible, stick to cash.

8. What are your top budgeting tips for students?

Working out your weekly budget is a good way to start. How much has to go in rent, and what do you have to spend on food and other essentials? Once you’ve got a clear idea of this, you can see what’s left for other spending. Try not to let this get out of hand. If you get into difficulties, let your bank know.

Authorised borrowing is normally much cheaper than unauthorised borrowing (where you go over your overdraft limit). Do try to clear your overdraft over the summer if you can. If you can avoid dipping into it, you’ll have an emergency ‘buffer’ to draw on when you really need it.

Do you have any other questions or concerns about managing your student money? Let Ian know below…

Jimlad says:
21 August 2010

As a University Course Leader I would like to make a few points:
1] Top-up fees are just that ‘top-up’ and represent only a small proportion of the total cost of a University course. The state does pay a large proportion still!
2] Most Universities have a ‘job shop’ where students can find part-time work, usually with companies that have been vetted to ensure they are at least reasonable employers.
3] A big cost for students is for text books. I suggest buying second-hand [maybe from past students]; sharing text books [maybe three or four students buying one copy of each text and sharing around]; buying texts when you know they are needed and not available from the library – most reading lists are ‘advisory’ rather than ‘required’
4] Beware of house rental costs especially with private landlords. Saftey is important eg gas heaters, access security etc, but also checking the inventory and state of the property before and after renting [take plenty of photos] to ensure you get your deposit back – make sure it is held by a third party or ina separate account.
5] Enjoy the Universirty experience – but create an income and expenditure budget and be ruthless with it! Try to avoid spending all your loan in the first few weeks of term!!

The interest rate on student loans has been confirmed to rise to 1.5% for most students and graduates from September. http://www.which.co.uk/news/2010/08/student-loan-interest-rates-set-to-rise-226231

Also, students are still being tempted by rubbish perks for bank accounts.