University is a time to have fun, meet new people and to become a fully independent adult. Along with the fun however, university is also a time when many students have to take on new responsibilities for the first time. One of the biggest responsibilities students have is managing their finances, especially as a graduate education can cost up to £50,000.
For students who have never had to fully manage their finances before, this can be a steep learning curve, however getting your finances in order at the start of your degree will help to make your university life much less stressful.
Managing your university finances is simply making sure you have enough money going into your student bank account (your income) to cover all your costs (your expenditure or outgoings). It is vital to ensure that you have enough to cover what you need to pay out each month because if there is a deficit of just £20 per month, this mounts up to £240 per year, which leads to £720 after a three-year degree course and, if left unchecked, £1,200 after five years – and this doesn’t even include the potential interest you will have accumulated on the debt you owe.
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Universities will charge each student for attending the degree course. This is known as tuition fees and is what the university uses to ensure everything that is needed to teach the course is in place. Different universities charge different amounts of tuition fees and they can also vary within universities depending on the course that is chosen. The maximum universities are allowed to charge students is currently £9,250 per year.
Students will normally be able to cover the cost of their tuition fees through a student loan, which is paid directly by the student loan company to the university, meaning that you will never see this money.
Students who take out a student loan this academic year only have to start repaying their student loan once they have got a job that pays over £524 a week or £2,274 a month (before tax and other deductions).
If you haven’t repaid your loan after 30 years from the first April you are eligible to repay, then the debt is written off.
Unlike the student loan, the maintenance loan is paid directly into your bank account and is normally paid in three instalments throughout the academic year. Its purpose is to help with living costs during studying at university. The maintenance loan has to be repaid in exactly the same way as the student loan.
Whether or not you are entitled to a maintenance loan or how much you will get depends on your families’ financial circumstances if you are under the age of 25 or your own financial circumstances if you are above this age. In addition to this, the maximum amount of maintenance loan you will receive depends on a number of circumstances, such as if you live with your parents while at university or not.
This is the maximum maintenance loan you could receive:
|Academic year||Living at home||Living away from home (outside London)||Living away from home (in London)||Studying overseas|
You can see an estimate of the maintenance loan you will be entitled to using the student finance calculator on the Government’s website.
As the maintenance loan is paid in three instalments during the year, it is essential that you budget carefully to ensure that it lasts until the next instalment is paid. You should be given information about when each instalment is due to be paid into your account.
Once you find out if and how much maintenance loan you will receive, you can then start to work out if it will be enough to cover your finances. You will need to calculate all your potential expenditure, including everything from accommodation costs to luxuries such as nights out. Once you have the total cost of your expenditure, you need to subtract this against your maintenance loan. If your maintenance loan isn’t enough to cover all your outgoings, you need to supplement your maintenance loan with additional money. This can come from parents, existing savings or a part-time job.
As a student being able to manage your money will be key. Creating a monthly budget will allow you to see exactly what you have to pay out each month, along with the amount you will have available to spend. Sometimes unexpected costs can arise throughout the month that you didn’t plan for, such as needing to buy extra books for your degree course or having to make an emergency trip home. In these cases, having access to emergency money is vital. Ideally you should have money saved up for emergencies, but as a student budget is usually pretty tight, this is probably not feasible for most students. Instead, having a student bank account that offers an interest-free overdraft provides a source for emergency funds. It is important to note that an overdraft is not free money and instead is a debt that will have to be paid back and once you are no longer a student, fees could be charged on your overdraft that could result in you getting into significant debt.
Another alternative to accessing emergency money is with a student credit card. Again, it is important to remember that the money spent on credit cards has to be paid back and ideally to avoid interest being added to your credit card debt, balances should be paid off each month.
As a student your budget will likely to be very tight, meaning that there won’t be much money left once you’ve subtracted your outgoings compared to your income, it is vital for you to stay within your budget as being just £20 over each month will lead to the debt highlighted above. To keep within your budget, you might find you have to cut back on luxuries, such as new clothes, gym memberships or takeaways, and look for cheaper alternatives to many everyday essentials. Learning to cook from scratch, for example, will not only provide you with healthier meals than takeaways but also save you substantial amounts of money.
If you find you are going over your budget, it is important to reassess how much you are spending and look at where you can cut back further. This might mean having to give up your daily coffee at your local coffee shop (which if costing just £2 per cup will save you £14 per week).
Books and other essentials you need for your degree, for example laptops, can also eat into your budget. To save money on books aim to borrow as much as you can from your university library and consider buying the rest second hand. With laptops, try and buy one that will last throughout your degree course, and ideally have saved up for this prior to setting off for university (winter and summer sales can be a good time to look at picking up a discount).
If you find that no matter how much you cut back on your spending you are still going over your budget, then you need to increase your income. This means finding a way of making money as a student. Some students will be fortunate enough to be able to get financial support from parents or other family members, however if this is not an option, looking around for part-time work, especially during the holidays (such as the Christmas break or summer holidays) provides an opportunity to save money ready to supplement your student income when you need it. If you are able to save money, it is a good idea to put your savings into an easy access savings account as they will allow quick access to your money but usually offer a better interest rate than a bank account. Another way students can make money is selling stuff they no longer need, for example old books that are no longer needed for your degree course or gadgets if you’ve upgraded to a newer model.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.