Go Higher: Plan your way out of debt

Despite the cost of paying for your degree it is still worth having, writes Alex Watts

Debt will be almost every student's companion, but as long as you treat it carefully and don't become complacent, you should end your degree in good financial shape for the future.

A degree is about the best financial investment you can make. Surveys show that employees with degrees earn more than those who join the labour market straight after school. Forecast starting salaries for graduates in 1998 are between pounds 14,580 and pounds 20,000, with a few getting more than pounds 25,000, according to a survey by the Institute of Employment Studies for the Association of Graduate Recruiters.

It also reveals the average income for graduates recruited in 1994 has risen from a starting salary of pounds 13,500 to pounds 21,000.

Another fact to reassure you as you fill in your UCAS form is that as a graduate your chances of becoming unemployed during your working life are half those of non-graduates.

Also the hourly pay for men aged 33 with a degree is 21 per cent higher than for those with just A-levels, and 39 per cent higher for women, according to the Institute of Fiscal Studies.

Everybody knows that students will build up debt but the debt can be paid back slowly when you can afford to, and your degree class status will be a meal ticket for life.

The student finance world is now a maze of loans, fees, sponsorships and access funds which can seem daunting if your only budgeting experience is making sure you have enough cash for a taxi home.

Experts say the key is planning. Make sure you know where your money is coming from and when as well as how you expect to spend it.

The major change is that grants - cash given to students for their expenses - are a thing of the past and in their last year. They will now be replaced by loans and if you are lucky your parents may help as well.

Also students will have to find as much as pounds 1,000-per-year towards their tuition costs depending on how much their parents earn.

Outside London, the National Union of Students found that students spend pounds 1,679 on rent, pounds 1,011 on food and household goods, pounds 443 on books and equipment, pounds 309 on travel, pounds 174 on clothing and pounds 130 on heating costs.

The average student spends pounds 578 a year on leisure - just over pounds 10 a week - so it is unlikely that you will be able to splash out on theatre tickets, restaurant meals and champagne.

Most universities and colleges estimate that students need pounds 4,000-5,000 per year for living expenses.

Part of this expenditure can be financed by loans. You can borrow large sums from the Student Loans Company, but the size of the loan depends on your circumstances.

If you live in London the amount is pounds 3,145, elsewhere pounds 2,735, and if you are living at home with your parents it is pounds 2,325.

You will begin to repay your loan through income tax when you leave university or college and start earning pounds 10,000 or more a year.

Your annual repayments will depend on your income, and the interest rate will be linked to the rate of inflation so that students will repay no more in real terms than they borrowed.

You can also borrow interest-free loans from banks. The sums vary - last year they ranged from pounds 400 to pounds 1,100 for first-year students.

Make sure you check them out first and are aware of all the details. If you spend more than your authorised overdraft limit, your debt will start to mount as interest penalties are added to your account.

From autumn next year, whether you are starting your course or are already in further education, there will be changes to your funding: you will have to contribute to tuition fees, you may take out a loan, but the amount available will be means tested, and grants will be abolished.

However daunting the prospect of going into debt is, there is light at the end of the tunnel. Despite the fact that students now have to take more responsibility for the costs of their studies, higher education is still seen as a stepping stone to bigger pay packets.

All the surveys show that the incomes of those who go through university rise much faster than for those who don't.