Finances for university can look like a minefield, but getting to grips with the system is relatively straightforward, says Rob Fowler, the co-ordinator of the student money advice and rights team at the University of Derby. The key: apply for loans early, prioritise accommodation costs and don’t ignore budgetary warning signs.
The first step is to cover course fees, which most students will do via a loan from the government. The tuition fee loan, which is not means-tested, is paid directly to the university; once students have applied and been approved, they don’t really need to think about it again until it needs to be repaid — more on this shortly.
Alongside this, all students are eligible for at least a partial annual maintenance loan regardless of their parents’ income (this has risen from £3,610 in 2014 to £3,731 last year and this year it is £3,821), while those living in a low-income household are entitled to up to £8,200, or a bit more in London. The maintenance loan is paid directly to students in three equal lumps, beginning a few days after enrolment, or later if the student was slow to apply.
The two government loans are rolled up into one for the purposes of interest and repayment. The loan starts accruing interest from day one at the rate of inflation (RPI) plus 3 per cent while studying, then RPI plus up to 3 per cent, depending on income, from the April after leaving the course.
Repayment starts when the student finishes (or leaves) the course and is earning at least £21,000, and ends after 30 years, or when it has been paid off. Students repay the loan at a rate of 9 per cent of any income over £21,000; someone earning £25,000 will repay £30 a month.
“Some students will pay it all back and some will pay nothing, but most will pay something,” Fowler says. “And it’s important that parents know it’s entirely the student’s responsibility — it is not passed on to parents.”
Many parents will, however, find themselves contributing to their children’s day-to-day living costs, particularly where parental income means a student can’t get the full maintenance loan. It’s better to give them a budget than a blank cheque, Fowler says. “Do not rush in to fix students’ mistakes or try to run their financial lives for them. Give them the chance to do things themselves.”
He suggests that all students should draw up a budget that prioritises accommodation costs and has some flexibility in it — for instance, students may allow themselves a generous socialising budget during the first few weeks, with the understanding that they will tighten their belts later in the year to cover it.
Fowler also recommends that students apply for a managed overdraft, even if they don’t think they will need it, as it provides a useful free safety net — and is much better than going into an unauthorised overdraft. “Credit cards can work as long as the student can pay them off at the end of the month,” he says. “We would not advise spending to the limit then paying off when they graduate as that is very expensive. The same holds true for payday loans — a lot of students take them out and get into trouble.”
Students who find themselves in trouble should face it head on, says Nicola Beech, a finance officer at the University of Hull. Universities have hardship funds that can help out in an emergency, as well as being able to offer assistance in budgeting.
And, before things get difficult, it is also worth investigating scholarships, bursaries and other financial awards offered by your university, she says. “About half of our first-years get one,” she says. “Research the options as early as possible by looking at your university’s website.”
‘The first few weeks are the most expensive’
Spreadsheets, sharing and a sharp eye for freebies helped Nathan Moore to balance his books during his first year of a BSc in management at the University of Warwick.
“It took me about a month to set a budget and stick to it,” says Nathan, 19. The first few weeks are the most expensive. It’s not just because of all the things you have to buy and because you’re socialising a lot to make friends, but because you don’t realise how much things cost.
“You wake up one morning, realise you have no shower gel and then discover the sort that your parents normally buy is £2.50 or £3.
“But the big things go out of your account after the first month, you do a couple of shops and you get the hang of it.”
Nathan has a full tuition loan and the non-means-tested element of the maintenance loan that all goes towards his accommodation costs. Everything else comes out of the £280 monthly allowance that he receives from his parents.
“I budget by breaking it into weekly amounts and splitting it into categories — say, £25 a week on food, £25 on going out and £10 on toiletries.”
He records his spending each evening on a spreadsheet so that he knows where he stands, reducing the chance he will overspend or have no money left to go out at the weekend.
He makes the most of his food budget by shopping and cooking with four friends, which means they can save money on bulk purchases and buy-one-get-one-free deals without worrying that the food will go off before they can use it.
“We all cook and wash up together, which makes it quick and easy — and it’s fun.”
They also share a supermarket loyalty card, which gives them reward points that can be used for discounts, as can the NUS extra card and a 16-25 Railcard.
Nathan also advises asking for a student discount whenever you buy larger items, even if they are not advertised.
“Getting £10 off doesn’t sound like much, but that’s 40 per cent of my food budget.”
Watch out for freebies too, from wi-fi, which can be used for calls and downloads, to promotional stationery.
“A notebook is £3.50, so if you are at a careers fair and someone offers you a free notebook, take it, even if you already have three or four in your bag.”
Finally, consider getting a job, but don’t take on more than 10 to 15 hours a week, says Nathan, who is a student ambassador for Warwick Business School.
“Income can allow you to do things you could not normally do on your budget, it’s great for your CV and you make new friends.
“Remember, though, that you are on a budget because you are a student. You are there to get your degree.”
Find out more about student loans
Northern Ireland studentfinanceNI.co.uk
Students should apply through the agency based where they live, not where they will be going to university.