Financial Tips for Students

June 2018
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With the end of exams many students will be looking forward to a long summer break. Those applying to university for the first time may not know their destination until August, when results are due, but they and their parents need to plan now for the next phase of their education and returning students need to source accommodation for next year now.

For parents, here are some of the things you and your children need to consider from a financial point of view.

Maintenance Loans

The amount of maintenance loan they qualify for will depend on household income of their parents. There is a sliding scale of loan available which reduces, once household income exceeds £25,000. The amount of loan also depends on whether the student will live at home while studying or away and there is an extra allowance for those studying in London (see table). Where parents are divorced or separated the income of the parent with whom the child lives is designated the household income.

Location

Household income up to £25,000 maximum loan per year of study

Upper household income threshold

Minimum loan

Per year of study

Living at home

£7,324

£58,215

£3,224

Living away from home (outside London)

£8,700

£62,215

£4,054

Living away from home in London

£11,354

£69,860

£5,654

 

Students who study abroad may also receive a maintenance loan of up to £9,963 for the year spent abroad.

Even though the student may not yet be certain which course they will be on, it is advisable to apply as soon as possible for a maintenance loan as these take 6 to 8 weeks to process. The loan is paid in three instalments at the beginning of each term. Interest accrues from the date it is paid at 3% plus RPI inflation adjusted once a year. Unlike other types of loan, the outstanding balance is only paid back once the graduate earns more than £25,000 and is written off after 30 years.

As with tuition fee loans, a 9% deduction of graduate earnings above £25,000 will be made. Even though the student may have borrowed the maximum they do not pay more than the 9% levy, so this and the write off after 30 years mean that over 70% of student loan debt is never repaid. Parents should bear this in mind when considering whether to fund their child’s costs or to apply for a maintenance loan. See Should the Bank of Mum and Dad Pay Tuition Fees?

Student Accommodation

Especially for those living away from home, the maximum maintenance loan is unlikely to be enough to fund living costs. Accommodation costs alone can often exceed this. Many first year students prefer to stay in a hall of residence if possible, as this is a good way to meet other students. Those with conditional offers may need to check that they have a guaranteed place in a hall at the university of their choice, as some do not confirm this until the results are out. Those who do not achieve the grades required for their first choice should also prioritise confirming accommodation with their second and third choices as sometimes oversubscribed universities cannot provide student accommodation to all applicants. This leaves the student with the dilemma of deferring entry for a year to secure a student hall place or venturing out into the private rented sector.

Returning students and those not able to secure university rooms may need to find alternative accommodation. Starting the search early is advisable as most student let’s get booked up by June/ July for the following academic year. It is normal to require a deposit of one month’s rent in advance. The landlord will also require a deposit of one month’s rent which is held against damage to the property and only released at the end of the tenancy if the property is handed back clean and in good order. Letting agencies may also charge tenants fees for checking references etc and some landlords may require parents to guarantee the rent.

As well as the rent, students sharing accommodation need to agree how other utility bills will be paid. Utility providers will usually require one of the residents to take responsibility for the whole bill. However this does not need to be the same person for each utility and sharing the responsibility is a good way to make everyone honour their commitments. Any unpaid or late paid bills could affect the individual’s credit rating.

Sharers need to agree how they will split the bills and how they will budget for them. Utility providers or the letting agents may be able to provide an estimate of the likely costs. The bill payer can then set up a regular direct debit payment from their account and also ask their housemates to pay them monthly via a regular standing order. At the end of the tenancy reconciliation can be made.

Insurance

Student accommodation can often be targeted by thieves as communal living can provide easy access to laptops, phones etc. Students can obtain contents insurance for their personal possessions. If taking a car or bike to university they will also need to arrange insurance for this or notify their insurer of change of address.

Kay Ingram
Director of Public Policy, LEBC

Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of a product for your circumstances please contact an adviser. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. 

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