Midweek Money: Grant yourself some peace of mind

IN RECENT years overdrafts have been the common theme of the banks' student packages. As state funding for students has decreased, the credit facilities available for those undertaking degree courses have increased.

In the Seventies, when the parents of this year's intake were studying, everyone undertaking a course of higher education received a grant for their living expenses from their Local Education Authority (LEA). Admittedly, the offspring of wealthy parents received only a token pounds 50 a year, but the level of grants for those on average incomes was reasonably adequate, so that their parents were expected to contribute only an affordable amount.

Since 1990, the level of grants has been steadily eroded. The sum payable to those starting a course this year has been dramatically slashed by 50 per cent.

As of this were not bad enough, those starting a course next year will receive nothing at all. The expense will come as a shock for many parents.

As in the past, the grants are means-tested on the students' parental income. The calculations are based on the residual income, which is basically the gross income from all sources, less any payments which qualify for tax relief, such as pension contributions, some mortgage interest, and payments into life policies taken out before 11 March 1984.

It is only the offspring of parents whose residual income is below pounds 16,945 who will receive a full grant. Those with a residual income above this amount will be expected to contribute to their son or daughter's expenses on a sliding scale, with a reduction of pounds 75 for every other dependent child. As a rule of thumb, those with a residual income of around pounds 35,000 or more who have a student undertaking a course will receive nothing.

For parents who are employees, the calculations are based on their income in the financial year preceding the start of the course - the 1997/98 tax year for courses starting this autumn.

For self-employed parents, the LEA may, with agreement, base its assessment on the income in the trading year ending in the last financial year before the start of the course. Where parents are divorced, the assessment is generally made on the income of the parent with whom the student lives.

Those who have not already applied for a grant should contact their LEA as soon as possible to make the arrangements.

Maximum grants for the academic year 1998/99 in England and Wales are: London, pounds 1,225; elsewhere, pounds 810; Parental Home (any location), pounds 480. The figures are based on an academic year of 30 weeks and three days, and 25 weeks and three days at Oxford and Cambridge. Extra weekly payments are made for additional weeks of study - London, pounds 82.20; elsewhere, pounds 61.60; and those living at the parental home, pounds 43.15