Budgeting clinic

Our finance expert Gwenda Thomas solves some student dilemmas
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The Independent Online

The overspending student

Anthony Lewis-Binns, 20, is in the second year of a law degree at King’s College London

Being a student in London is one thing, but being a law student at a prestigious London university is quite another. Textbooks can cost anything up to £60, while lavish law balls and expensive society events certainly take their toll on a paltry student budget. I finished my second year penniless and in debt. Having put my entire student loan towards renting a flat which was both safe and central, I was forced to rely heavily on my overdraft as well as the charity of my parents to cover my daily living expenses and the excess rent that the loan didn’t cover. You would think that a well-paid retail job on Savile Row might help the situation, but for me it took up valuable time which would have been better spent in the library, and offered social opportunities which I couldn’t resist. Going out in expensive nightclubs on the King’s Road with friends in full-time employment certainly made it difficult to sustain an economical student lifestyle.

Gwenda’s Answer

Anthony, if you don’t want to read the obvious, look away now. Your lifestyle is your downfall. You have succumbed to the temptations of the city. You’re not the first – but it has to stop. You didn’t win a place at a top university to join the Savile Row set. Resist! Reform!

Forego the hot spots of the King’s Road until you are earning an inflated lawyers salary. Securing a job is the best option for cash-starved students. Some 42 per cent of students will have term-time jobs this year according to a NatWest survey. You just need to use the money earned, and your free time more wisely.

You’re right about the price of books. But there is good news: your law school is starting to digitalise key scholarly articles and book chapters so students can access them online. Failing that, buy second-hand where possible or even book-share with a fellow student, and scour the web for good deals – Sell Student Stuff (www.sellstudentstuff.com) could be a good starting point.

Cheap accommodation doesn’t exist in London, barring dodgy areas. Living out of town is an option if you can bear a long commute. At some universities (King’s included) you can apply for a second year in halls – no guarantee of success – but it’s cheaper than the open market.

If things get really tough, try your university’s Access to Learning Fund. Handouts of £100 - £3,500 are given, but only to the most deserving cases and I’m not sure how they would view your financial history. Still, it’s worth a try.

The worries of making ends meet

Luke Harkin, 19, is in the second year, studying politics at Sheffield University

Money has certainly been a huge factor during my time at uni. It is a real and incredibly daunting distraction, having to constantly worry about money, thinking: How much have I got to spend this week? How am I to repay my loan? It sometimes gets on top of you.”

Money management is especially difficult at the beginning of university. I found the initial transition to a more independent lifestyle incredibly difficult. I rely on my grant and a meagre student loan during term time as well as casual income from bar work, which is hard to find due to a vast number of students living in Sheffield. At times, I doubt whether university was the right road for me, mainly because of the debt I will have racked up by the end of it. It has been a wonderful social and personal experience, although it took some time to realise that you must keep a balance between the social and academic sides of uni. This is a huge learning curve and a very difficult one.

Gwenda’s Answer

Lighten up, Luke. It sounds to me as if you’ve cracked it. Your greatest worry is anxiety itself. You don’t talk about being without funds, calling on parents for help, dipping into the interest free overdraft facility banks offer students. Well done! As you receive a maintenance grant, you could be entitled to a university bursary as well. At Sheffield, if family income is assessed at below £34,615 students receive a bursary of around £420 pa. Check it out!

Your mounting loan debt may feel scary, but the payback system for graduates is one of the best elements of the student funding package. Repayment levels are based on earnings above £15,000 and the money is taken from your income at source. It’s like paying tax, so you won’t notice it’s gone. And with graduate starting salaries in major firms around £24,500 (AGR median figure for 2008) once you have embarked on your career, you will be in no doubt that university was the right route for you.

What to do now? Get a job and save. If you need a job next term, return early and contact your university job shop as jobs are likely to be scarce in the current economic climate. Try to find something more regular. If this is your final year, remember your maintenance loan will be relatively less than other years.

Try putting aside money for your major expenses – rent, utility bills, etc – then dividing what’s left by the number of weeks in the term and only draw out that amount each week. When it’s gone, stay at home, or better still throw a bottle party. That way lies solvency and not a little fun.

The overdraft junkie

Andrew Styles, 23, graduated from Cardiff University last year with a degree in journalism

I was always in debt from the word go. I think I went through £800 or £900 in freshers’ week and I’ve been living off my overdraft ever since. I also went off to Thailand travelling while I was at university, which didn’t really help. So I took out a second student account with an overdraft to cover that.

I didn’t know whether I was allowed to have more than one student account or not, so I just applied, and I got it. A £1,600 overdraft – it’s pretty difficult to work your way through that. I had a credit card too from my gap year, but thankfully I used it as little as possible. I’ve now started my own graphic design company and I have a bar job as well. I’m still in quite a lot of debt. I’m just trying to keep afloat now.

Gwenda’s Answer

Well done Andrew, you made all the classic student mistakes. Around £900 spent during freshers’ week: certainly over the top, but not quite a record. I’ve known students who had to quit their studies to pay off their freshers’ week debts, returning the following year chastened and more restrained.

Of course, Thailand should have been a no-no. A summer vacation stacking supermarket shelves would have done more for your finances, but, not so much fun. As to opening a second student account, the banks don’t like it, but the fact is there isn’t much they can do about it.

However, two overdrafts to pay off is not to be recommended, especially if you are also paying off a couple of student loans. Your debts must be enormous. I hope you are making full use of the special facilities banks offer newly qualified graduates to enable them to pay off their overdraft gradually without incurring more debt.

Thank goodness you learnt some credit card sense during your gap year. Credit cards are the ruin of many a student, as they offer easy money but expensive, and lasting, debt. Any student with a credit card should cut it up now.

With two jobs, it looks as if you are trying to get on top of your money problems. If things start to get sticky, ask one of your banks for help. They won’t want to lose you as a customer. Banks like students, they see them as a long-term investment, believing good students mature into high earners.

I hope you are managing your new company’s finances better than you did your student budget. Best of luck! Don’t let debt sap your obvious enterprise.

  • Gwenda Thomas is author of ‘Students’ Money Matters 08-09’, published by Trotman, £16.99