£50,000 – the scariest university challenge
Student debts are on the rise – but following a few simple steps can help balance the books
STUDENTS heading to university in England and Wales later this month will have to contend with tuition rising to £9,250 a year, as well as the heavy burden of student loans, some of which come with an interest rate as high as 6.1 per cent.
With the Institute of Fiscal Studies warning that the average debt at graduation of students across the UK is £50,000, taking steps to budget and save wherever you can is more important than ever before.
YOUR BANK ACCOUNT
ONE of the big decisions you need to make when starting university is which bank to use.
Andrew Hagger is finance expert at money website Moneycomms. He says: ‘For many cash-strapped students, the account offering the largest interest-free overdraft will be the main priority. Barclays, Nationwide Building Society and HSBC all offer overdrafts up to £2,000 interest-free in year two and £3,000 in year three.’
These overdraft limits are not guaranteed as all students will be credit-checked. In year one, the free overdraft limit is a maximum £1,000 although Barclays offers £500 to begin with.
Also be aware that the banks will look to win your custom with freebies and offers. For example, Santander is offering for free a four-year 16-25 Railcard which normally costs £30 a year. NatWest is offering a four-year National Express Young Persons Coachcard that would otherwise cost £10 a year. Both give a third off fares.
Hagger adds: ‘While such giveaways are appealing, a higher interest-free overdraft limit is the smart financial move.’
BUDGET CAREFULLY
FOR many students, starting university is the first time they will to manage their own finances. Freshers are notorious for going on spending sprees once their student loan hits their bank account because they lack budgeting experience.
Figures from insurer Aviva suggest that, on average, parents give their children nearly £300 per month to support them during their studies. This adds up to more than £10,000 over a three-year degree.
But not all students are lucky enough to receive such a handout.
Hannah Maundrell is founder of website Money. She says: ‘Knowing how to budget properly is one of the most important skills you can learn as a student. First, work out how much income you are likely to have a month, including money from loans, earnings from a part-time job and anything your parents are going to contribute.
‘Then write down all your guaranteed outgoings such as rent, bills, council tax, new books and your basic food shopping. After this, you will know how much you have for the fun stuff such as going out. Split this into weekly instalments and make sure you do not overspend. Also, get into the habit of checking your balance on a regular basis.’
Student Tiffany Cullern is savvy with her spending and always keeps an eye out for a bargain.
The 20-year-old, who lives in Swindon, Wiltshire, is about to start her final year at Bournemouth University where she is studying Forensic Science.
She says: ‘My mum taught me to be careful with money and never to pay full price for anything. I think I have taken that to a new level.
‘Before making any purchase, I check for student discounts and whether I can earn money through cashback websites. I am also signed up to coupon websites and do most of my grocery shopping when items are likely to be discounted. In addition, I email companies either to complain – or to tell them how much I like a product – and often get a voucher in return.’
Tiffany has a student bank account with Santander.
She says: ‘I chose the bank so as to take advantage of the free 16-25 Railcard, plus I get up to 3 per cent interest on any bank balance in credit. This is great as I never dip into my overdraft. I try to do everything I can to avoid getting into debt and have not had a credit card during my time at university.’
Tiffany has been working hard all summer as a checkout team leader at supermarket Morrisons. The extra cash will help her through the final year. She says: ‘I get a maintenance loan but, by being careful with my spending and supplementing it with money I have earned, I can make sure each instalment lasts the whole term.’
MMMMDISCOUNTS AND DEALS
INVEST in a student discount card. The National Union of Students card costs £12 a year and you will soon make your money back.
Also check out discounts available at websites Unidays, Studentmoneysaver and Studentbeans. Whenever you are out, always ask if there is a student discount available.
CHECK for any deals, discounts and cashback before making a purchase. Current deals available from website TopCashback include 6 per cent cashback at homeware retailer Wilko, 4.2 per cent at bookshop Waterstones and 5.25 per cent on a 16-25 Railcard. Also check out websites Quidco, HotUKDeals and VoucherCodes.
JOIN course pages for your university on Facebook and buy used textbooks from students in the year above. Also search websites such as eBay, Gumtree and Preloved. AVOID store cards. They may seem like a great deal but most charge eye-watering interest rates on uncleared balances.
Try not to use your debit card on nights out. By spending cash you are more likely to keep within budget.
Book travel in advance, thereby taking advantage of discounted fares. Save on transport costs locally by cycling.
If you only use your car occasionally, consider new insurer Cuvva which offers insurance by the hour – meaning you only pay when you actually use the car.
PART-TIME WORK
A GOOD way to supplement your finances if your course is not all-consuming is to take on a part-time job, such as bar work or waiting tables.
Check out websites such as Studentjob, Coople and Toptask. If
you end up working during term time – or over the summer – to help with mounting debt, make sure you are not paying more tax than you need to.
Students earning less than £11,500 a year should not pay any tax. Notify Revenue & Customs as soon as you start working.
Caroline Miskin, from the Institute of Chartered Accountants in England and Wales, says: ‘It is easy for students to overpay tax. But do not panic if your employer deducts more income than it should. You can still claim back any overpaid tax.’ Contact Revenue & Customs at gov.uk or call 0300 200 3300.
INSURANCE
WHILE sorting out insurance may not be top of your ‘to-do list’ when going to university, it is an important consideration. Burglars often see halls of residences and houses in student areas as soft targets.
Research by Aviva indicates that the average student room contains possessions worth nearly £2,200 with electronic equipment alone – laptop, phone, tablet, TV and music equipment – adding up to more than £1,100.
Despite this, a quarter of students had no cover for their belongings while studying. Kevin Pratt, of comparison website MoneySupermarket, says there are various options for students. He says: ‘It is worth checking your parents’ home contents policy to see if this automatically covers your belongings while at university.
‘If not, it might be possible to extend their policy by paying an extra premium of between £30 and £40 for £3,000 of standard cover. Add a bicycle and expensive laptop, though, and the additional cost could rise to around £80.’
Alternatively, you could buy a standalone policy. Pratt says: ‘You will probably pay a premium equivalent to between 10 and 15 per cent of your chosen amount of cover, depending on where you are living. This gets you basic protection for most belongings, but once again you have to pay more for a bike, laptop and other expensive gadgets.’
Other options include buying cover from the university itself while you are in halls or using the insurance option that may be included with your student bank account. Pratt adds: ‘It is worth checking whether your policy imposes any restrictions or conditions, such as requiring your room to be locked – even in a shared house.’
As the owner of a laptop, mobile phone and valuable music and camera equipment, Natasha Nelson is glad to have the peace of mind that her belongings at university are insured. The 19-year-old is about to go into her second year at Reading University and will be living in a house-share with four friends.
She is covered under her parents’ home insurance policy with Aviva. This provides £5,000 cover for items ‘temporarily removed from the home’.
Natasha, studying French and Spanish, says: ‘Knowing I am covered on Mum and Dad’s policy gives me peace of mind.’
STUDENT FINANCE
STUDENT loans are a complex issue. English and Welsh students can take both a tuition fee loan of up to £9,250 a year which is paid directly to the university, and also a means-tested maintenance loan designed to help cover the cost of living, which is paid directly into a bank account at the start of each term. The amount they are entitled to depends on household income and where you live during your studies.
Rapidly-rising inflation means students south of the Border now face a rate of 6.1 per cent on their student loans – higher than most mortgages and personal loans. Graduates do not have to start repaying their student loan until they are earning more than £21,000 a year. After 30 years, any outstanding debt is written off.
Liz Alley, from wealth management firm Brewin Dolphin, says:‘As a graduate’s salary grows, their monthly repayments will escalate.’
For Scots students who remain in Scotland to study, there are no tuition fees as these are paid directly by the Scottish Government. Loans to cover living costs are provided by the Student Awards Agency Scotland.
For Scots studying in England and Wales, Saas also provides nonincome-assessed loans of up to £9,000 a year to cover the cost of tuition fees.
SCHOLARSHIPS
SCHOLARSHIPS are financial awards to help support students through their studies. They are usually given for achievement – either academic or extra-curricular.
What you may not realise is that many scholarships are not tied to a particular university. Many are offered by companies, charities or professional bodies and tend to have wide eligibility criteria. Check out website Thescholarshiphub. The following scholarships are still open for applications this year:
NESTPICK Accommodation Scholarship. This is open to all students at both undergraduate and postgraduate level who are leaders in their community. Applicants must submit a two-minute video about how they help their community.
THE Scholarship Hub offers £250 in the form of a voucher to help pay for essential textbooks. Open to both undergraduates and postgraduates.
UKESF Scholarship. Students starting or studying degrees comprising a substantial amount of electronics or electronic engineering at one of 19 partner universities are matched with companies and offered paid summer work placements as well as bursaries. Applicants must have three As at A-level.
As well as scholarships, also see if you qualify for any grants or bursaries. Visit Gov.uk/education/ student-grants-bursaries-scholarships.