How to survive your studies without getting into debt

Managing finances can be tricky during three years at university. Louise Merry offers some practical advice for undergraduates
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The Independent Online

This year more than 660,000 people applied for course places at universities across the country, a rise of 12 per cent on last year's hopefuls. But successful undergraduates need to make sorting out their finances a priority.

For starters, the cost of student living has soared in recent years – climbing 28 per cent since 2004 to £718 a week, according to Family Investments. Meanwhile, an average student starting this year could owe £24,702 by the time they graduate, predicts the Association of Investment Companies.

If family can't help and students don't have savings to fall back on, how can they survive the next few years?

Government support

The first port of call for most prospective students will be an application to the Student Loans Company (SLC). As the name suggests, funding is provided to eligible students by this public body through loans and, depending on circumstances, further non-repayable grants are also available to students from lower income homes (worth up to £2,906).

Applying for support as soon as possible is a good idea to avoid long delays in getting loans.

Typically, in each academic year most students can expect to receive: a tuition fee loan (up to £3,290 for 2010/11) paid directly to the university; a maintenance loan – worth up to £4,950 if living away from home, or more if studying in London.

However, figures can vary depending on personal circumstances.

Institution bursaries

Though limited, universities have a set amount of funding reserved for students experiencing hardship. The circumstances of each student are fully assessed before any funding is allocated but it's worth asking about bursaries if there is any possibility of getting one, as a definition of "hardship" is never clearly outlined.

Some universities offer "progression awards" to students who are successful at passing each academic year without having to re-take exams for failed modules. There is no set amount of money and not all universities offer this but, again, finding out about any awards can mean getting further financial assistance.

Private foundations/trusts

There are more than 1,000 registered charities in the United Kingdom which help fund people through university. The conditions of funding varies between charities, for example some will only consider students who have been to certain schools or come from specific areas, while others will be more specific to the chosen course of study. To find out more search "education/training" at www.charitiesdirect.com.

Student bank accounts

The banks have already announced their offers for the 2010/11 academic year and it is wise to look at every option rather than snapping up the first freebie-laden account offered.

The main factor to consider is the size of the interest free overdraft.

The maintenance loan provided by the Government barely covers the cost of accommodation, so most students will need to dip into their overdrafts at some point during their time at university.

This year, Halifax is offering the largest interest-free overdraft at £3,000 which covers up to five years of study, followed by Barclays (£2,000 at five years) and Lloyds TSB (£1,500 in the first year, rising to £2,000 over a period of six years). However, it's worth bearing in mind that 0 per cent interest rates charged on student current accounts, usually expire upon completion of the final academic year.

The incentives... be aware of the tricks used by banks to attract undergraduate custom. Although the plethora of freebies on offer may be tempting, this factor should never be the sole influence of the final decision.

Family support

The amount of financial support received from families of students varies greatly depending on personal circumstances and, sometimes, preferences. A study from Barclays shows that 77 per cent of parents are willing to help fund their children's university costs, while only 43 per cent of students actually expected to receive financial assistance from their families.

'I thought I had all this free money available to me'

Louise Merry, 21, has just graduated from the University of Gloucestershire. She explains how she got caught up in financial difficulties.

I wish I had known that when people advise you to keep on top of your finances while at university, they actually mean: keep on top of your finances.

I'm sure prospective university students, especially those who consider themselves "grown-up", will tire of hearing this patronising and unoriginal recommendation. I know I did.

In fact, I was foolish enough to ignore this financial counsel, naively dismissing it as "over-cautious budgeting" – until I had almost drained my bank accounts of every available penny.

I had all of this "free money" available to me, as well as an extra £3,000 which I had saved up. I quite wrongly assumed that I didn't really need to take much interest in the amount of money which was draining out of my bank accounts each month, and was quite happy to spend £50 on one item of "credible student clothing" without even flinching.

I was never fully aware of exactly what was going in and out of my debit accounts at one time.

To begin with, in addition to my savings and the "free government money", I had two part-time jobs earning a modest wage (roughly £100-£150 per week), so I considered myself quite "well off" in comparison to some of the other students... If only I had known how wrong I was.

Halfway through the third year, the bubble I had been living in burst, my frivolous attitude towards spending had resulted in a financial mess.

It wasn't until a trip to Starbucks that I realised I couldn't even afford to buy a coffee. I had assumed my maintenance loan would cover most of my spending and hadn't even considered the possibility that the funds would stretch only so far.

A trip to the bank told me that both of my debit accounts were in the red and clearly had been for some time. I had to call upon my parents to bail me out – which, luckily for me, they could.

This was the wake-up call I needed, and after sitting down with a stack of unopened debit card statements, I was able to see exactly what was going on within my bank accounts.

I should have made note of the fact that after paying rent for the first semester of the third year, I would be left with less than £100 of my maintenance loan to live off between September and December. My share of bills would have easily taken away half of the remaining loan. I didn't even think that after shelling out for luxuries such as an internet service, a mobile phone contract and a gym membership, that first semester's loan would have been long gone.

If only I had bothered to read my bank statements, I could have calculated a monthly allowance which would have spread my savings and wages across my time at university.

If only I had acted the "grown-up" that I had considered myself to be at the age of 18, then my blood pressure levels would have been considerably lower than they were by the time I had made it through to my final year.

If only I had listened to the people who told me that by simply keeping on top of my finances, I could have passed my time at university with much greater ease.

Money tips for prospective students

Discount cards

* You'd be surprised at how much money can be saved by flashing a student card. Discounts are available in a wide range of high street shops as well as from transport services such as National Rail and city bus services. Sign up to websites such as www.vouchers.org.uk and www.voucherseeker.co.uk and take advantage of all the online money saving offers and discounts. It is essential to cut the costs wherever possible.

Get a job!

* Students may envision themselves having very little time to work, but in most cases it is possible to earn extra money through some form of part-time employment. It is believed that 83 per cent of students will have a part-time job whilst studying, that figure rising to 88 per cent during the university holidays. Any amount of extra cash, no matter how little, will bode well in the long-run.

Do a monthly budget

* Write a list of all incomes – including part-time earnings and loans and grants – and another list of all expenses, remembering clothes and fun as well as bills and accommodation costs. Drawing up a plan which sets a rough guide for a monthly budget will detail exactly how much money needs to be reserved for certain payments as well as provide sensible allowances for luxuries, such as the all-important nights out at the pub.

Becoming financially savvy may not seem like the most glamorous achievement but when stories of student life are so heavily marred by tails of debt and money woes, basic financial awareness will pay in the long-run.

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