David Prosser: Students' first lesson: claim all you can

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The Independent Online

Congratulations to all those students looking forward to starting university in a few weeks' time after successful A-level results on Thursday. But before leaving home, take a crash course on student finance - most graduates emerge from college with some debt, but plan ahead and you can limit your losses.

The first golden rule is to claim every penny of financial support possible. The 2005/6 academic year is a transitional period, in the run-up to the full-scale introduction of tuition fees next September, but students are still eligible for a range of grants and loans.

This year, students from low-income families can apply for a grant of up to £1,000 to help them with the cost of university. In addition, student loans of up to £5,175 are available, depending on which university you're at and your family income (students in London get the highest awards and a quarter of the loan is means-tested).

Even those students who don't need this loan straight away should consider applying for the money as soon as they can. The interest rate on student loans is pegged to inflation - which, at its current low level of below 3 per cent, makes this a supercheap way to borrow. You can park the cash in an internet-based savings account - the best deals pay close to 5 per cent - and make money on the loan until you actually need it.

Play it smart with the banks, too. All offer generous packages in order to win students' business, including interest-free overdrafts in year one of your course of between £1,250 and £1,750. In theory, there is nothing to stop you taking out cash to use up your overdraft limit straight away. You'll pay nothing on this borrowing, but you can earn interest on the cash by transferring it into your internet savings account.

If that sounds like too much hard work, at least choose your bank carefully. The banks all offer freebies, but some are more valuable than others. HSBC's free MP3 player, for example, is good fun, but NatWest will give you a five-year railcard, which is likely to be much more valuable.

Maximise your income, too. If you're planning on working during your course - in term time or the holidays - make sure you don't pay income tax unnecessarily. There is no tax to pay on the first £4,895 of earnings this year. If you are charged tax while your employer's payroll department sorts out your account, you can claim the money back from the Inland Revenue.

Finally, students who find themselves getting into trouble need to ask for help as soon as possible. Universities, student unions and the banks themselves all offer free advice on sorting out your finances. It may even be possible to apply for hardship funds or special bursaries from your college.

One excellent source of help and advice is The Student Finance Guide, by Sean Coughlan. It is published in association with Ucas, and it is a good investment at £9.99.

n n n Save & Spend has received a deluge of e-mails and letters from readers furious that their mortgage providers have yet to pass on the 0.25 per cent Bank of England base rate cut announced earlier this month. We're getting angry too.

To be fair, at most lenders that have announced rate cuts, the reductions don't take effect until the end of the month. Several banks and building societies have told us they will cut too, but just have not announced the reductions yet.

However, there is an ominous silence in some quarters, including at several providers where lower savings rates have already been unveiled. Rest assured that we will name and shame any lenders trying to cheat their customers.

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