Conal Gregory: Three financial essentials that every student needs to know

Photo: PA
Photo: PA
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The start of a university year is exciting for both the new student and those returning to college. Yet far too few plan their finances and the sudden demands on their money can mean poor decisions are made.

The three financial essentials are to make a budget, start a current account and ensure adequate insurance is in place.

Once the euphoria of the confirmed place calms down, check the accommodation costs as few students wish to follow the constrained conditions shown in Channel 4’s Fresh Meat, even if earlier generations saw that as a rite of passage. Many expect en-suite bedrooms, on-site gyms and even a games room.

London is the most expensive city with average weekly rents of £306.94, up 25 per cent in five years, according to estate agent JLL. It predicts a further four per cent rise in 2018. Knight Frank, another agent, says there are 76,383 purpose-built student beds in London, an increase of only 398 this year, which is far short of the number needed.

Annual tuition fees can reach £9,250 after being capped at £9,000 since 2012.

Watch the cost of borrowing. The Student Loans Company will charge 6.1 per cent this autumn, up from 4.6 per cent last year. The rate is based on inflation, using the Retail Prices Index (RPI) in March plus three per cent, even though the Office for National Statistics has called the RPI “flawed” as it is usually higher than the more accurate Consumer Prices Index.

Such loans accrue interest on a daily basis immediately and so only apply for the sum really required.

After graduation, students refund their loans on a sliding scale which depends on their earnings. Currently repayments start when a graduate’s earnings reach £21,000. Nine per cent of income above that threshold is liable which means that a graduate earning £25,000pa will repay £360 annually. Employers will deduct this sum through the payroll whilst self-assessment tax returns can be used for the self-employed. Loans unpaid after 30 years are wiped off.

A maintenance loan is available for full-time students to assist in the costs of accommodation, travel and food. It is means-tested and based on parental income. The loan can be up to £8,430pa for students living away from home (increased to £11,002 for studying in London) and £7,292pa for those who continue to live at home.

Even students whose parents’ combined annual incomes are £62,187 or more are entitled to one of these loans and can borrow up to £3,928 outside London or £5,479 within.

Check on bursaries available which may be linked to your home town or city, and is often related to the subject to be studied. Quite often universities have funds which assist those who have shown academic or sporting prowess or where the family background is unusual. A good online source is The Scholarship Hub whilst it is also worth enquiring through local reference libraries.

After taking loans into account, there is likely to be a significant gap in the budget for daily costs. This is where a helpful current account comes into play. Look for a bank or building society with both a well-informed money advisor and a low or nil cost overdraft facility. This is far more important that a short-term gift.

Interest-free student overdrafts up to £3,000 are available from Barclays, HSBC, Halifax (with a bank licence provided by Bank of Scotland, forming part of Lloyds Banking Group) and Nationwide (the largest building society). The same facility but up to £2,000 is offered by Lloyds, NatWest/Royal Bank of Scotland and Spanish-owned Santander.

The length of facility varies with several banks increasing the sum available as the course proceeds. Several extend or increase the overdraft for longer courses such as architecture, medicine and veterinary.

Ensure the limit is not exceeded as penal rates, often accompanied by fees, apply if more than the authorised sum is withdrawn. If there is a problem, see the specialist advisor immediately.

For periods when a student is likely to be in credit, such as perhaps summer employment, open a savings account. If it is linked to the current account, the provider is likely to look favourably upon a request for help, notably upon graduation.

When budgeting, do not overlook a television licence. This is required to watch or download BBC, even using iPlayer. The annual fee is £147 which can be paid weekly, monthly, quarterly or annually. A refund can be applied for in respect of unused months when away from student accommodation.

Thieves target students, particularly in their first weeks at university when doors and windows are often left unlocked. Make a total list of all likely items to be taken from home and allow for new purchases, such as sports equipment and scientific items. Do not overlook expensive gadgets from laptops and cameras to mobile phones.

Mark as much as possible with your name and postcode and photograph any individual items of value. The local police can give advice. The home contents policy usually allows a certain amount to be outside the property but check on the overall limit, the single article restriction (such as for jewellery) and length of time which may not be 12 months.

Insurers do not usually protect for time away from college unless the property is locked. With many universities letting out their premises in vacations, a student bedroom is likely to be used by someone else. If the contents is placed in a general store where many have access, an insurer will withdraw liability.

Ask your current home insurer for advice as it may have an extension clause or alternative student policy available. Consider paying a slightly higher premium to reduce the excess. Some student current accounts come with insurance but this is unlikely to cover higher value articles such as a necklace or watch, camera or bicycle.

Keep original receipts. One well-known insurer, represented on almost every university campus, insists on such evidence before it will consider any claim. A credit card or bank statement is insufficient.

Look for student discounts. A Railcard for 16-25 year olds costs £30pa or £70 for three years and discounts off-peak journeys by a third. A free four year one is given by Santander when opening its student account. An additional discount is offered by some rail companies for online purchases using an NUS Extra card, which costs £12pa.

For coach travel, National Express gives one-fifth discount for tickets bought three or more days ahead. Some bicycle manufacturers, such as Raleigh, and retailers will give student discounts, often up to 10 per cent on production of a NUS card.