Teresa Hunter: Start your studies by learning about debt

Published on Thursday 26 August 2010 13:29

THOUSANDS of students will embark on their university studies over the next few weeks, with freshers' weeks already under way at some colleges. Yet the fun of finding new friends, interests and academic challenges will be overshadowed by the many financial uncertainties ahead.

Before their four-year courses are over they could face paying tuition fees and even be burdened by a graduate tax, which could reduce earnings throughout the rest of their careers.

The Scottish Government has pledged to launch its own review into university funding in the autumn, after the Browne review makes its recommendations about financing higher education in England and Wales.

It will examine the case for introducing a levy on students towards the cost of their tuition and look at ways of encouraging business to contribute. A graduate tax will also be on the table for consideration.

The National Union of Students south of the Border is campaigning in favour of the tax, but NUS Scotland, an autonomous body, is less convinced.

Currently, Scottish students do not pay towards their tuition fees, which are met by the Student Awards Agency for Scotland.

EU students outside the UK also do not pay tuition fees, which partly explains the explosion of foreign students in some cities. However, scholars from England and Wales are required to contribute towards their time at college, to the tune of 1,820 a year for a degree or 2,895 for medicine. However, this is less than the 3,290 they would pay at an English or Welsh institution.

Scottish students may also qualify for a grant, which does not have to be repaid, if parents jointly earn less than 34,195. The maximum grant is 2,640. This is only available to students whose parental household income is below 19,000. Above these earnings it is tapered to nothing when you get to more than 34,000.

On top of this, Scottish students can apply for loans. The maximum non-means-tested loan is 915, which is also the most students get where parental income is more than 58,300. If your parents jointly earn less than 24,000 the most you can borrow is 5,067.

However, where you are already qualifying for a grant, the maximum loan is clawed back so the most you can get, by way of combined loan and grant, is 5,852.

English and Welsh students can get a loan to cover their tuition fees in full, but may also qualify for a maintenance grant of up to 2,906 this year, if their parents' income is 25,000. Above this the amount is reduced, although you'll get something up to 50,020.

Students can also apply for a loan to help towards living costs; however, this is means-tested. If you're living away from home, the maximum is 4,950, although it may be less depending on parental earnings. The money is paid into your bank account in three instalments at the start of each term.

But interest begins accruing at a rate equivalent to inflation the minute the money is borrowed, and all this debt will have to be repaid once you start work. You will lose 9 per cent of your salary once you earn 15,000.

So it is important to keep debt to a minimum if you don't want a future bogged down by hefty repayments. That means getting to grips with your cash from the start and budgeting carefully. Once rent or hall fees are taken care of, work out how much you have left for necessities such as food, books and equipment. After that, allocate an amount to socialising, but do not exceed it.

If you are renting a flat for the first time, take photographs before you move in and count items so you can claim your damage deposit back at the end. Also get gas and electricity readings so you don't end up paying bills for tenants before or after you.

Be cautious about volunteering to organise anything involving money. Avoid being the one named in any contracts for cable TV etc, as fellow students are not reliable co-hirers when it comes to paying. Any bad marks left by unsettled bills could damage your personal credit rating for years.

You may need a commercial overdraft on top of the loans available from the government. Most banks offer a valuable interest-free facility. Bank of Scotland and Halifax offer a 3,000 interest-free overdraft from the first year, but you will have to be individually assessed to qualify for the full amount.

Other banks are less generous, particularly in the first year. Lloyds will grant a free overdraft of 1,500 in the first three years, rising to 2,000 in year four. Royal Bank of Scotland will lend you 1,000 interest-free in the first year, rising to 1,250 in year two, 1,500 in the third year and 1,759 in year five.

Most banks offer incentives such as money-off vouchers for stores, but Lloyds also pays for free Youth Hostel Association membership for three years, 40 free music downloads plus a free Lava mini-speaker . RBS student customers can get a free three-year railcard.

Tuition fees swayed my university choice

Sarah Robertson, 18, is having second thoughts about whether she will be able to afford everything she wants. Photograph: Dan Phillips

SARAH Robertson, who is shortly heading for Glasgow University to study history and politics, can't wait for freshers' week, even though friends have warned her it will be the "most expensive week of the year".

"You go out every night socialising so I am prepared for it to be expensive. But I have saved some cash from working over the summer, so I'm not too worried about the cost," said the 18-year-old from Edinburgh.

The absence of any tuition fees was a major factor in her decision to stay in Scotland to study. She said: "My parents didn't put me under any pressure. But my eldest sister had stayed in Scotland, so my parents hadn't paid any fees for her. I felt this was a consideration when choosing my course.

"I didn't want to incur costs for my parents, or debts for myself, which my sister hadn't."

Sarah is also staying in the cheapest halls at Glasgow University, the self-catering Murano Street Student Village.

There she will get a room for 87 weekly, but will have to pay for food and other necessities on top of that.

Although at first she was confident that she could budget effectively, she is not so sure after completing an online budget living costs spreadsheet.

She said: "On the student website there is a section showing how much to expect to pay for necessities such as food. When I worked my way through that, it came to much more than I had expected."

And this didn't include books. "I will try and borrow them from the library," she said.