Student finances: A complete guide to student money
Student finances can be confusing and worrying. For many students, going to university will be the first time you have been completely responsible for your finances so understanding where your money will come from, how much you will get and how much you will need is a great way to set out on the right track.
University is expensive, there is no doubt about that, but that doesn’t necessarily mean you can’t afford to go. This guide is intended to provide you with all the information you need about student finances, with our straightforward explanation of what’s out there and how to get it to help you make sure you manage your money effectively throughout your student life.
In this guide you will find:
- What University Costs
- How you will pay for it
- Managing your student finances
What University costs
There are some things that students often forget (or don’t know about) to factor in to their costs and for many families these additional costs can come as a shock to the system and start before you have even submitted your application.
Before you go
Open Day visits
Although 2020 has been an unusual year, we are going to take the optimistic view that next year will be different and resemble a more normal way of life. This year, open days have mostly been virtual, but next year we would like to think that a visit to campus to help you decide if you like it will be back on the cards.
But these visits can be costly. Many students look at universities up and down the country, so it is not only the cost of getting there are back to visit, but in some cases you might need overnight accommodation.
But there are some ways in which you can reduce these costs.
- Planning ahead – if you do your research and decide which universities you would like to visit, you can get cheaper train fares by booking Advance tickets. If you have a few to visit, you will also save money by getting yourself a 16-25 Railcard, which gives you one third off rail fares.
- Getting some extra help – UniConnect is a network of universities that work together to widen participation from under-represented groups. You might be eligible for some financial support to help you cover the costs of your open day visits. It is always worth getting in touch with your local UniConnect team to find out what additional support might be available.
The Application – Not a huge expense in the scheme of things, but nevertheless a cost that many students don’t even think about, so worth a little mention here.
The cost of applying via UCAS is £20 if you are applying to just one course and for 2021 it will be £26 for multiple courses.
Equipment – most students will be moving out of their family home for the first time and so there will be lots of things you will need to buy to get your started such as kitchen equipment, bedding and towels. This is usually a one off big cost in your first year but can cost up to two hundred pounds.
While you are there
Tuition Fees – this can be up to £9,250 a year, (paid for by the Student Loans). Although not all courses charge this much, many do.
Accommodation – the average cost of student accommodation across the country is £418 per month, but bear in mind that this varies significantly by city with London being the most expensive, where it averages £700 per month.
Travel – not just to and from campus if you are not living on campus, but also to and from home – assuming you will want to go and visit the family at some point!
Books and equipment – this will vary depending on the course you are studying. At the start of each course you will be given a reading list and for subjects that are lab based, you will most likely need specialist equipment. You will not necessarily need to buy all of this new but there will still be some costs involved.
Food – you will be needing to eat while at university. On average a student spends £100 per month on food.
Entertainment – an essential part of the university experience and on average students will spend £46 a month on their social lives.
Washing – not a weekly activity for all students, but at some point it will need to be done. If you are lucky enough to have a washing machine in your accommodation you will not need to pay extra but certainly on campus students will have to pay to do their laundry. Usually about £5 per month.
Printing – if you do not have a printer in your room, you will have to pay for printing from the university library. You usually have a credit that you can use up as and when you need it and it is charged per sheet.
Incidentals – haircuts, clothing, takeaways, holidays and anything else you might fancy doing from time to time.
How you will pay for university
The Student Loans
Applications for Student Finance usually open in February and in order to guarantee you will get your loan in time for the new term in September/October you need to have submitted your application usually around the last week of May.
What is available?
1. Tuition fee loan: this is to cover the cost of your tuition fees and is available to all UK students. The amount you will get depends on the cost of your course, but will cover all tuition fees up to the maximum universities are currently allowed to charge of £9,250 per annum. This money will be paid directly to the university and will never hit your bank account.
2. Maintenance Loan: this is to cover your day to day living expenses including accommodation, food, travel, entertainment, books and any other costs. It is paid directly in to the your bank account in three instalments, once per term, and can be used as you see fit.
The amount given is awarded dependent on your family’s household income. However, many students find that the amount they are entitled to, does not actually provide enough to cover their living costs. This is where it is really important to find out what you will be entitled to, work out a budget and see if you are going to have enough. The assumption is that either your parents will pay the difference, which they may not be willing or able to, or you will work part time to make it up, so make sure you have a plan.
How do the loans work?
The difference between the student loan and any other loan is that the repayments are not based on your current ability to pay but your future ability to pay. It does not matter how much you borrow, the amount you pay back will always be based on what you earn when you graduate and not what you borrowed.
You do not start paying back your loans until you earn over £27,295. This means that if you never earn over £27,295, you will never pay anything back.
However, of course, we’d like to think that by going to university you will improve your earning potential and earn more than £27,295 over the course of your career. Once you do start earning over the threshold you will start to pay back the loan.
The repayments are based on what you earn, rather than what you borrowed. Once you start to pay back, it will be 9% per year of anything you earn over the £27,295 threshold. So if you earn £28,295 you will be paying back 9% of £1,000 a year or £90 a year, spread over 12 months that’s £7.50 a month. If you earn £37,295 you will be repaying 9% of £10,000, so £900 a year or £75 a month.
Now you might think, it’s going to take years to pay off at that rate, and you’d be right. But, student loans are currently written off after 30 years, so if you haven’t paid it back by then, it is cancelled.
Let’s talk about interest
The interest rate charged on loans while you are studying is 3% above the RPI (Retail Price Index). Therefore the amount you will be charged will vary depending on the current RPI.
Once you graduate the rate changes depending on your income, to either 2.6% above the RPI for lower earners, to 3% above the RPI for higher earners.
However, what you have to remember is that the interest rate doesn’t affect what your repayments will be as they are based on what you earn (9% of your income above the repayment threshold) and not how much you borrowed. So even if the interest went up to 15%, you would still be repaying the same amount and would be even less likely to pay off the whole amount of the loan in 30 years.
Applying for Student Finance
You can apply for Student Finance either online or by post (with the exception of Scotland, which is online-only). Whichever you choose, it’s important to keep in mind that you may be required to post evidence to support your application, such as your passport, birth certificate or any additional paperwork that may be required, so you may prefer to upload them rather than send them in the post.
In order to adequately complete your application, you will need:
● A valid UK passport
● A valid email address
● Your bank account details
● Your National Insurance Number
● Your school, university and course details
● Your household income information – your parents will need to provide this so give them plenty of time to find the relevant documents
● Information about any support you receive already
How long does it take?
Student Finance can take up to 6 weeks to process your application, and more at peak times, so be sure to give yourself plenty of time to get your application in. The deadline for applications is usually around the end of May. If you miss that deadline, it doesn’t mean you can’t still apply but you just won’t be guaranteed to get the money in time for the start of term.
Other sources of funding
- Scholarships, grants and bursaries
As well as the loans, there are also lots of alternative funding opportunities from scholarships, grants and bursaries and this is free money that doesn’t have to be repaid. There are scholarships given for all sorts of reasons, including some which are open to all students and the application process is just writing a short essay.
Each university offers their own scholarships but there are also plenty of others offered by companies, professional associations and charities which are not generally advertised by the universities. You can learn more about these at https://www.thescholarshiphub.org.uk/blog/how-find-scholarships-grants-and-bursaries-university or by watching this video.
This scheme allows students to raise additional funds for your university costs every time you, your friends and family shop online at over 4,000 retailers. Retailers signed up to the scheme make donations towards your university costs each time you make a purchase and it doesn’t cost you anything extra. Find out more at https://www.easyfundraising.org.uk/funds4uni
Managing your student finances
Cooking, budgeting, managing money and shopping around
If you know how to shop, cook and budget your money will go a lot further than it would in the hands of a student who doesn’t look at prices, buys ready-made meals and doesn’t keep an eye on their bank balance.
These skills are of course valuable life skills that will not only serve while you are a student but throughout your life.
Make the most of discounts.
As a student, you are entitled to lots of discounts. Take advantage of these and make it a part of your everyday shopping habits. Many universities have their own discount arrangements with local businesses and shops, which students can take advantage of simply by showing their Student ID, but there are also some national websites and discount cards which can save a lot of money over the course of your student life.
Don’t forget there is also the 16 – 25 Young Person’s Railcard and the National Express Student Coach Card which can save money on travelling costs to and from home.
To work or not to work?
Most students these days have some sort of part time job to supplement their income. As you can see from all of the above it is not easy to manage on the Maintenance Loan alone and if your parents are unable to give you extra, they will probably need to work to earn some additional money.
University is stressful, especially around exam time, or when coursework is due and having the additional stress of having to go to work when you should be studying is not ideal, but you will certainly no be alone. Over X% of students currently work part time and even just a few hours a week on the checkout can make all the difference to struggling for money or managing…..plus as a staff member of a supermarket you will get a staff discount!
Student Bank Accounts
Banks love students because many people stay with their first bank for life – unless they really mess you around of course – so if they can get you to open a student account, they’re very happy.
As a result they offer lots of incentives to encourage you to choose their bank over the others, but don’t be tempted by that carrot. Do your research and work out which bank is going to be best for you. This could include questions such as whether they even have a branch near your university and the size of the overdraft (more about this later).
Banks usually change their student package every year, so if you’re looking ahead to next year, details might not be out till the summer.
Managing your household bills
Another new experience for most students is setting up and managing your household bills. Most students in university accommodation don’t need to worry about this for the first year, but as soon as you move in to shared accommodation with your friends you will need to learn quickly what bills you have to pay, how to pay them and how to manage this between a group of friends.
Learn more about managing your student household bills.
What you need to know about credit cards and overdrafts
A student overdraft can be useful way for students to manage finances. Most student bank accounts have a free overdraft facility, which means you can borrow money to cover you when things get tight maybe towards the end of term and you’ve used up all your money. But don’t forget, this is not free money and it will have to repaid, but since an overdraft does not charge interest, you will only be paying back the amount you borrowed.
Student credit cards on the other hand, do charge interest if you do not pay off the full amount each month. Don’t forget, a credit card is a way of spending money you don’t yet have so if you won’t be getting that money in time to pay of the balance, you will be charged interest. Credit cards approved for students tend to have lower spending limits than standard credit cards, and will often charge a higher interest rate on the money you borrow, which is even more reason to use them responsibly and pay off the outstanding balance in full every month.
What to do if you run out of money
Research has shown that 11% of students will spend their entire term’s loan within the first two weeks of term and more than half spend it all before the end of term. So what do you do if that is you?
Firstly go to your University Student Money Advisor. Every university has one and they will be able to advise you if they have any hardship funds or grants you could be eligible for. But they will want to know where the money has gone and will help you learn how to manage you money better. You won’t automatically get a grant just because you ran out of money.
Secondly you should also look for scholarships, grants and bursaries on our database. These are given for all sorts of reasons, including financial hardship so it is definitely worth checking out to see if you are eligible for any of them. And don’t forget to think about charities and trusts too, which often give money for educational purposes.
There are also lots of jobs for students you could look at, including ways of making money from home.
Most importantly, don’t suffer alone. Talk to someone, your parents, student money advisors or the Money Advice Service. Do not be tempted to borrow from Pay Day Lenders (short term loans). The interest you will be charged soon starts to build up, so you will have to find even more money to pay it off.