Funding for university.

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Never have so many made so little go so far
Don't let money worries cramp your study or your student life

You've gained the grades, accepted your place and agreed all the final details, so now is an ideal opportunity to catch your breath and look forward to student life, meeting new people, letting your hair down and - of course - putting in some serious study. With these pressures, the last thing you need is the added stress of financial uncertainty, so it's worth doing some forward planning on this front before you even hit campus.

The cost of university education has risen dramatically over the last ten years, with maintenance grants being phased out and students expected to pay their own way with the help of student loans. In this new environment your money will have to stretch in many directions to meet the costs of tuition fees, accommodation, domestic bills, course books, travel, food and drink, entertainment and many things besides. Left unattended, money worries can interfere with your academic accomplishments or dampen the university experience as a whole, but by making the right financial choices early on you can ensure that they don't.

Earning money

Part-time/holiday jobs
You may need to work part time during term time or in the holidays to bump up your income. As well as going to the local job centre, positions will be advertised on your college notice-board, in the local papers and in shops.

'Sandwich Year' work experience
Many courses incorporate a 'Sandwich Year' scheme, so as well as earning welcome money towards your final year, you are gaining on-the-job work experience in your chosen field. You might even persuade a firm to sponsor your degree course.

What am I entitled to?
The minimum wage for workers aged between 18 and 21 is £4.60 an hour. At 22 the minimum wage goes up to £5.52 an hour.

This means you get your wages gross without any deductions if, for the 2008/2009 tax year, you earn:

• for National Insurance Contributions £105 a week
• for income tax: up to an average of £104.52 a week or £5,435 over the tax year from all employment or holiday jobs.  

Other ways to save money

Insurance
If you are fortunate enough to drive a car, you will need at least third party insurance, but before shelling out, make sure you get quotes from a number of different companies, as the cheapest cover at home may not be the cheapest whilst at university. Although not a legal requirement, you would be wise to take out some insurance cover for your possessions. Check first if they are covered within the existing policy for your parental home.

If you do have to buy your own insurance, shop around for the best rates. Ensure you are insured for the right level - too little could leave you out of pocket should the worst happen, whilst too much cover could leave you paying higher premiums than you need to. Also check the excess before signing anything, since this is the amount of loss you agree to cover before the insurer stumps up.

Thrift
Whilst it may seem impossible, there are ways to cut down on expenditure without spoiling your social life or harming your studies. Things like mobile phones and designer clothes may seem vital to survival, but cutting back on some of these luxuries could cut down your expenditure each term by hundreds of pounds. Make sure that you take advantage of all the discounts available to students - many stores, forms of travel, clubs and cinemas will offer a discount if you bring along your NUS card. Also, try to shop more efficiently and check out discounts for bulk buys. You may be able to persuade your housemates to share them for a share of the cost. Finally, try to keep your books in mint condition so you can sell them back to the university or bookshop when you no longer need them.

Borrowing

Although you may not be keen to build up debts whilst studying, for most students it is unavoidable. However, by choosing the right deal, you can save a fortune whilst you're still at university and when you graduate.

Student loans
Before you consider any other forms of credit always look at your student loan options. Full-time students benefit from a better deal on borrowing than vocational trainees who take a course while they are working. Student loans can be very competitive in terms of the interest rate and when the loan needs to be repaid. Career development loans from the big lenders can be far more expensive. The Student Loans company is a sensible place to start looking for loans and further information can be found at: www.slc.co.uk 

High Street banks
The High Street banks can't wait to sign up the movers and shakers of tomorrow and most have on-campus branches. However, don't be swayed by the introductory gimmicks offered with many student current accounts and pay closer attention to the facilities, terms and conditions of the account such as free overdraft facilities, which allow you to borrow interest-free up to a pre-agreed level. Be careful not to go beyond this level, since you could be stung by hefty fees. Also check the terms following graduation as you may be given a short time span to pay the overdraft back.

Look wider than the big four High Street banks as better current account deals can often be found elsewhere. 

Finally, negotiate - as a student you will potentially earn them lots of money in the future and, as such, you have a surprising amount of bargaining power.

Credit cards
Your bank or building society will usually allow you a credit card, often with no annual fee, a standard credit limit of around £500 and up to 56 days' interest-free credit if you pay off your balance in full each month.

But be warned, if you don't pay in full, you can be charged a very high rate of interest on the amount you leave outstanding. If you are likely to be borrowing more than you can afford to pay off each month, search around for credit cards with low interest rates and beware of additional administration fees or penalties for late payment, which make some deals not so attractive as they at first seem.

Credit cards are a good emergency backup but used casually, debts can quickly mount up so they should be treated with care.

Store cards
As a rule of thumb, unless you know for sure you can clear your balance monthly, steer clear of store cards, since most have high rates of interest.

Using existing funds
If you're lucky enough to have built up a nest egg, received cash gifts from your family or inherited sums of money, then think about investing this early on to take full advantage of its growth potential. Consider whether you will need the money right away or whether you can afford to invest some of it for later on.

Short term
If you think you'll need to access the money within five years, think about stashing away anything you can into a deposit account. Be sure to shop around the various providers, since often lesser-known names such as building societies and internet banks usually offer much better interest rates than High Street banks.

The best savings rates are often found on cash ISAs (Individual Savings Accounts), which allow you to put away up to £3,600 tax-free during the 2008/2009 tax year. However if you are a non-taxpayer, earning income of less than £5,435 in the 2008/2009 tax year, you will be entitled to receive interest free of tax on any savings account you open. For this to happen, you have to fill in an IR85 form, which your bank or building society will provide.

The financial press, including national newspapers and personal finance magazines, regularly record which providers are offering the keenest rates for savings accounts. When you receive your student loan, make sure you shop around rather than taking the first deal offered by your bank or building society.

Long term
If you are one of the extremely fortunate few with a large sum of money which you can leave untouched for at least five years, then you should consider investing in 'real assets' such as stocks and shares. A collective investment scheme such as a unit trust, investment trust, bond or OEIC may be appropriate where a professional fund manager manages your money within certain guidelines, such as UK growth, European, Technology, smaller American companies, etc. Or you may prefer a passive investment where the value of your money follows an index stock. You can protect your investment from tax by using your annual individual savings account allowance. An independent financial adviser can help you with your selection.

Do remember that the price of units can go down as well as up and past performance is no guarantee of future performance.

Dealing with debt

Don't panic
If you find yourself in financial strife at any point during your studies - perhaps you feel like you're drowning in debt or maybe you just need some emergency funds, don't panic, arrange a meeting with your bank account manager or other creditors to discuss the situation, don't let the problem escalate.

Try to cut down your spending to bare essentials, cut up your credit card and avoid borrowing more to pay off your debts, as this can soon become a vicious circle. Also avoid loan sharks like the plague - they advertise in the press but charge a very high rate of interest and won't offer any reduction on the interest due if you repay early.

Take advantage of any help offered by family, but ensure you keep a record of who you owe and how much!

Budget to get back on track
Work out just what you owe to each creditor. Then prioritise just who must be paid first. Rent obviously tops the list as you must keep a roof over your head.

Then try to pay off the creditor who charges the highest interest so you are not racking up more debt. Next, negotiate a sensible schedule to repay the others over a number of months.

Don't ignore threats to take you to court or you could end up with a County Court Judgement (CCJ) against you. If you are given a bad credit rating because you fail to meet your commitments, you may find it hard later to clear your name. This means getting a loan for a car or a house will be more difficult once you leave college.

If you find that you are experiencing trouble getting credit, find out why. For a copy of your credit reference file you can write to Experian Ltd, Consumer Helpdesk, PO Box 8000, Nottingham, NG1 5GX enclosing a cheque for £2 alternatively you may want to look at your credit reference file online via www.experian.co.uk or by calling 0844 481 8000. With the information you receive, you may be able to clear your credit reference.

When you finally graduate

Repaying your student loan

You start to repay your student loan in April after you graduate as long as your gross salary is at least £15,000 a year. Your employer deducts 9% of your gross income over £15,000 from your wages until the loan is repaid. If your income later drops below £15,000, repayments stop. Any outstanding debt is written off when you reach 50. Whichever is earlier. For details, ring freephone 0800 405010. Alternatively, if you are subject to Self Assessment you will repay to the Inland Revenue, or if you are outside the UK tax system you will repay directly to SLC. If you can afford to, you can make extra payments to pay off your loan more quickly, even if you earn less than £15,000 a year. This is always a good idea.

Where to go for advice
You will have a number of financial issues to consider when you graduate, as well as paying back any debts. There are endless sources of self-help information on financial issues such as guides, websites and financial magazines, however for independent, expert advice, you may prefer to talk to someone face to face. For details of local IFAs in your area call the IFA Promotion hotline on 0800 085 3250 or click online at www.unbiased.co.uk.

TOP TIPS

• Don't lend to other students or let them buy on your account - you may never get your money back and you risk losing friends into the bargain.
• Likewise, don't borrow from other students
• Never give anyone else your PIN number to withdraw cash on your bank card
• Draw up rules before you share any financial commitment - flat, car lifts, holidays - and stick to them. If in doubt about anyone's ability to contribute fully, including your own, don't share. If one person doesn't pay, you could be responsible for their share
• Don't blow your loan in the first week of term - you need to work out a monthly budget to save panic at the end of the year
• Shop around for the best deal from bank accounts, credit cards, insurance and other money products, just as you would for a TV or stereo
• Don't try to keep up with the big spenders; there will always be someone with more money than you. Just make sure you have more sense than they have, then you'll have more fun

BUDGET WORKSHEET

You may find this part pretty dull but it would help in the long run to prepare a budget sheet, listing what income and funds you will have to cover course fees, all your living costs and entertainment. Divide it by the number of weeks you have to 'survive' through to make sure you have enough. If you have a computer, load it into a spread sheet.

It should look something like this, but modify it to suit your requirements...

INCOME

COSTS

A person authorised and regulated by the Financial Services Authority (FSA) has approved this factsheet. Eligibility to invest in any of the above products and tax savings will depend on individual circumstances. Tax advantages may be subject to future statutory change. The value of investments and income from them can fall as well as rise and an investor may not get back the amount originally invested. This factsheet is for information proposes only. IFA Promotion can accept no liability for any action, which an investor takes, based on this information.

The name IFA Promotion^® and the Independent Financial Adviser (IFA) logo^® are registered trade-marks of IFA Promotion Limited.

July 2007