Everything you need to know
University doesn’t have to mean living in squalor like ‘The Young Ones’. Harry Brennan lays out all you need to know
Student finances
Hundreds of thousands of students across the country received their A-level results last week and many will now be preparing for the next step: university. This stage of life presents a new challenge for most teenagers as they learn how to manage their own finances.
It’s not easy: many students are frequently overdrawn, as many as 40pc of whom have gone into an unauthorised overdraft, according to the Money Advice Service, a charity. In the past six months alone, 11pc of students have fallen behind on payments for accommodation, credit cards or other bills, the charity said, with 6pc resorting to high interest payday loans to make ends meet.
Almost four in 10 people in higher education have considered withdrawing from their studies because they have struggled with money, according to Blackbullion, a financial education service. Three out of four worry about having enough cash to get by.
To help undergraduates start navigating their personal finances, Telegraph Money has compiled a comprehensive guide to managing your money at university.
Fees
Students are borrowing more than ever before – often at least £9,250 a year to cover the cost of tuition, and a further £8,430 for living costs, or £11,002 if studying in London.
This means graduates could leave university with £60,000 of debt, and the interest charged means indebted students could end up paying a lot more than what they borrowed. Are loans the best way to pay – or, if you can, is it worth paying as you go?
The answer depends on your expected future earnings. Current students will repay 9pc of earnings above £25,000 and whatever’s left of the loan after 30 years is written off.
This means you may pay less in interest than you first thought, and lower earners could end up paying back less than their original loan. If you don’t take out a student loan you will enter the workforce debt-free – but you could end up paying more than you need to.
Accounts and overdrafts
Living within your immediate needs is not always the easiest thing for students, as maintenance loans are paid in lump sums every term. But student-specific accounts allow free borrowing through interest-free overdrafts.
An overdraft is a borrowing agreement with your bank that lets you run up a negative balance, up to a pre-arranged limit. Interest-free simply means that you won’t be charged on the amount borrowed. For example, Nationwide’s Flexstudent account provides a £1,000 interestfree overdraft in the first year of study, £2,000 in the second and £3,000 in the third.
That money will eventually need to be paid back, however. Some banks will upgrade you to a graduate account once you finish your study, allowing you to pay off your debt slowly. But living perpetually with an overdraft can be damaging to your credit score, even if you haven’t missed a deadline.
Many student accounts also offer additional perks. Santander, for example, offers students a free four-year Young Person’s Railcard – which usually costs £30 a year – giving holders one third off rail travel, while Natwest offers a third off National Express coach fares.
HSBC gives first-year students who open an account a £60 Amazon voucher plus a one-year Amazon Prime membership worth £39.
Budgeting and saving
Budgeting is essential to ensure the lump sum you receive at the beginning of each term will last for the three or four months until your next instalment.
Jake Butler, of Save the Student, a student money advice website, said: “Costs for students are rising and the paltry maintenance loans don’t get anywhere near covering them. If a student isn’t lucky enough to receive parental help or tie down a part-time job, they could end up feeling squeezed. Budgeting and planning are essential. While a budget won’t directly help you to make money, it can help you to save.”
One trick to make your money last is to open a second bank account, set up a standing order and pay yourself a salary. This should get you used to living within your means and will help you to avoid being cashless at the end of the term. Students in full-time education are entitled to a number of exemptions and discounts that can help them save. For example, a full-time student living alone or with other students doesn’t need to pay council tax. You can apply for council tax exemption on the gov.uk website.
Other money-saving tricks include getting a refund on your TV licence. You will need a £150.50 licence if you are watching any BBC programme, even on catch-up.
However, you can get your money back for the months you don’t use it. If you purchase the licence in September and move back home the following July, you can get a refund for the remaining two months of the licence, worth £24.50.
You should also check you are not paying over the odds for your energy or mobile phone service provider, so make sure you shop around for the best deals.
Students may want to consider using cashback sites such as Quidco and Topcashback when shopping online, which pay you when you
‘Student costs are rising and the paltry maintenance loans don’t cover them’
make an online purchase through them. Both offer free membership for users and will offer cashback on utility bills, holidays, clothing, groceries and more. For instance, you can earn cashback of up to £70 on a Sky TV package, or up to 5pc on purchases at Currys PC World.
How to get help
The last thing you should do if you find yourself in financial trouble is turn to a payday lender or take out a credit card. Without a stable income you will have no way to pay back what you borrowed and will be faced with enormous interest rates that will drag you deeper into debt.
Your first port of call should be your university. Most have student services where you will find free and impartial advice.
Another option is to ask your bank if you can extend your interest-free overdraft. Be sure you have enough money coming in to cover the level of borrowing, as the money needs to be paid back eventually, usually a couple of years after you graduate.
After that point, the bank will start to charge you interest and you may face fines on top as well.