Show me the money

The low-down on student loans - from how much you get to when you pay them back

The crystal ball of student finance can appear particularly murky to the untrained eye. It is a labyrinth of fees, means tests, loans, sponsorships, debts, scholarships, access funds... How easy it must have been for students 10 or 15 years ago. One grant and you were away.

But, as we're constantly being told, things have changed. Unless you have mega-rich parents, or become the latest millionaire Internet entrepreneur, your main source of cash will be the student loan.

Taking out a loan is big responsibility. For first-year students the maximum entitlement was a whopping £4,480 in London and £3,635 in all other parts of the country (for the year 1999/2000). How many 18-year-olds have had access to that kind of cash before?

Fortunately, students do not have to pay any of this back until they have graduated and are earning over £10,000 a year. But interest will build at the rate of inflation from the moment you take your first loan; so you won't pay back more than you borrow in real terms but you'll still end up graduating with a big debt. The National Union of Students has estimated this could be anything between £5,000 and £10,000. Loans are not free money!

The table below highlights what the maximum amounts of loan are available this year.

1st/2nd year Final year London £4,480 £3,885elsewhere £3,635 £3,150For students living at their parents' home 1st/2nd year Final year£2,875 £2,510

Loans are paid directly into your bank account, which you must have ready by the time you apply at university/college. If the loan is your only major source of income, then it's wise to get it paid into your account in chunks at the start of each term. Don't spend it all in the first month!

How do you apply?Basically, you need to apply to your Local Education Authority (LEA) now! Local authority officials will be able to determine if you are eligible for support with fees and loans, and how much you are entitled to, through a means test of your family's total income. Everyone is eligible for 75 per cent of the maximum loan. The remaining quarter depends on your family's means test. You then apply to the Student Loans Company, telling them the figure the LEA says you are entitled to.After all that, the loan cheque should be ready and waiting for you on the day you start your new life in higher education, right? Well, that's the theory. But if history has anything to teach you, it's to be prepared for the worst.

Last summer saw a fiasco in the distribution of loan cheques to hundreds of thousands of new students. New computer software sent by the Student Loans Company to LEAs across the country to determine entitlements was either late or had errors. Despite the higher education minister saying in July that "there is no reason for students or parents to worry", thousands of students up and down the land were penniless for the first few weeks of term. Of these, most of their cheques had not been sent, and some were sent but were accidentally cancelled by the time the students came to cash them.

The situation should have calmed down by the time you go off to college. But the moral of the story is be prepared - make sure you have some cash in the bank that will last for those expensive first few weeks (Parents take note!).

Student Loans Company Helpline (0800 405 010) or www.slc.co.uk

c.brown@independent.co.uk