Uk Financial Student Guide

7/31/2019 Uk Financial Student Guide

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S T U D E N T

G U I D E The true cost of full time higher education study in England from 2012

YoU caN afforD

To Go To UNI


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The in ormation in this guide is or ull-time students starting a higher education course in 2012with no previous history o higher education studies. I you have previously studied on a highereducation course, contact the advisory service at the university you are applying to.

In ormation in this booklet is correct at time o writing (October 2011) and can be subject to change.

Written by Martin Lewis and Brightsidewww.thebrightsidetrust.org


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Introduction

The loudest shouts have yelled that some 2012starters will leave University with a monstrous50,000 o debts to their name. I wish I couldsay that wasnt true, but i you take the maximumloans over three years it is. However, that gureis mostly meaningless, since student loans areone o the very ew areas where the price tagbears little resemblance to the real cost.

This is because your repayments depend solelyon how much you earn once you graduate.Regardless o what you borrow, i you choosea career that isnt highly paid, you wont needto repay much at all some wont pay a penny.Whereas earn big bucks and youll pay back morethan you borrowed, but obviously will have morecash to pay it with. Some call it no win, no ee.

So orget the headlines. The aim o this booklet isto give you enough in ormation to understand howmuch YOU will repay. A ter all, i you dont know howmuch it costs how can you work out i its worth it?

No annel, youre guinea pigsor a new and di erent system

o paying or university. Worsestill, these changes are massivelymisunderstood, not just by youngpeople but by many parents,teachers and right across society.

Weve seen protests in the streetand spit ying between politicians so you couldnt be blamed orbeing put o by the whole thing.Yet while its not all owers andchocolates, ew have discussedthe actual practical everydayimpact on your pocket, and thatisnt nearly as harsh as many ear.

Ma r T I N L E W I S

M o n e y S a v i n g E x p e r

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Whether to go to university or not will be one o the biggestdecisions o your li e. And like all big decisions, it can seem prettyscary. You need to think about where to go, what to study andi you can a ord it. While we cant help you decide about the rsttwo questions, we can give you a quick answer to the third

OK, some o the costs seempretty huge like up to 9,000

in tuition ees per year, be ore you even begin to think aboutliving costs. However, be ore

you start worrying about where youre going to nd the money,remember two big acts:

No-one hasto pay upfront

The government will provideloans or your time at universityso its not like you or yourparents have to save up allthe money be orehand.

Before you go to University

If you want to go touniversity, then youCAN afford to go.

Y E S

You only repaywhen you earn enough

Once you leave university youonly repay the loan i you earn.I not, you dont repay. Andi you never earn enough(although we hope or you thatyou do) you never repay a thing.


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What loansare available?

Applications or loans and grants need to be done separately to your UCAS application. You can normally apply in theJanuary be ore you go to university and you dont have towait until youve got a con rmed place to apply. Applicationsare made to the Student Loans Company through the StudentFinance England website www.direct.gov.uk/student nance

Maintenance Loans

Money is also available oreligible ull-time students topay or things such as rent,

ood and bills. The way this isdecided is by means testing,which is where they look athow much your householdearns each year, usually basedon your parents income (seethe Q&A or exact details).

In general, the less your parentsearn the more unding youre

entitled to. Many students romlower income householdswill also get a grant (thoughit replaces some o the loan).This works in the same way,except the big di erence isit NEVER has to be repaid.

2Tuition Fee Loans

These cover the ull cost o tuition ees and are available toall eligible rst time students.They are paid directly to youruniversity every year by theStudent Loans Company.

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T h E r E a r E

T W o T Y p E S


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A 9,000 course wontalways cost morethan a 6,000 oneIt sounds odd, but its true. I youre planningto go or a course just because its cheap, its

important you understand this rst. Once you addin maintenance loans many students who ARENThigher earners a ter university wont repay in ulleven on 6,000 courses, which means theresno additional cost in going or a 9,000 course.

Try www.student nancecalc.com which allowsyou to see whether its likely youll be someonewho repays or not and see the How do I repay the loans? section or more explanation.

What do tuitionfees pay for?Universities and colleges need to be paid or.They have to pay sta to teach and assess you,keep buildings in good condition and provide

acilities such as libraries and laboratories.Over recent years its been decided that ratherthan the taxpayer paying, students shouldpay i they earn enough a ter graduating.



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Part-time students repay tuition fees in the same way

Universities can charge up to 4,500 a year or apart-time course, or up to 6,750 i they o er bursariesor other nancial support. Part-time students can get atuition ee loan that works exactly the same way as or

ull-time students, but not a maintenance loan, so they

have to think about saving up to cover their living costs.See the Q&A section at the end or more in ormation.

You dont have to take a loan

You dont have to take a loan i you already have themoney to pay or your tuition ees and living costs. But youcould actually end up spending more than needed i youpay up ront because, i you do take out a loan, you mightnot have to pay it all back be ore the debt is wiped.

D o w n l o a d t h e

s e p a r a t e p a r t - t i m e

s t u d e n t s g u i d e f o

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O course paying or the ees isnt everything. Aswell as nding innovative ways to cook baked beans and whatever youre there to study managing

your money is one o the most important things youll learn at university, especially i you dontwant to eat those beans EVERY night o the week.

Like everyone else, students should not spend morethan they earn, and knowing how much incomeyoull have is essential. Once you get the in ormationback rom Student Finance England you shouldknow exactly how much youll be getting eachyear, making it easier to plan your spending. Mosto your income will come rom one o ve places:

So the big question is -where does the money for day to day life come from

While youre at University


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Maintenance grants

do not need to be repaid. 3,250is available to students with ahousehold income o 25,000per year or less, and students witha household income between25,000 and 42,600 will beable to get some grant, althoughthe higher your householdincome the less you get. You canonly get a maintenance granti you make a means-testedapplication or unding. I youquali y or a maintenance grant,

the amount o loan you receivewill be reduced (the amount o loan that is taken away makesup part o your grant, meaningyouve less to repay overall).

Bursaries and scholarships

are extra cash provided byuniversities and colleges, or otherorganisations like charities andbusinesses, which you dont haveto pay back. Not everybody canget a bursary or scholarship, andthey are awarded to di erentstudents or di erent reasons like your household incomeand how well youve done inyour exams. Ask your choice o university what extra unding theyprovide and how you can apply.

Some universities might o er you a reduction on your ees or a ee waiver instead.

I you are given a choice, witheverything else being equal, it is

usually better to go or a bursary.

32Maintenance loans

are to help you pay or ood,rent and other living costs.They are paid into yourstudent bank account in threeinstalments one at the starto each term and are repaid

just like tuition ee loans.

The maximum amounts are:5,500 or students living away

rom home outside o London7,675 or students livingaway rom home in London

4,735 or students living at home

Any ull-time student canapply or up to 65% o themaximum amount. How mucho the remainder you getdepends on means testing .

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f o r M o r E

I N f o r Ma T I o N o N

M Ea N S T E S T I N G S E E

T h E Q &a S E c T

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a T T h E E N D S e e t h e Q

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Part-time job

Many students supplement theircash when studying by gettinga part-time job or working inthe summer holidays. This canmake a big di erence to theli estyle you can a ord andmany also provide valuableskills that are help ul or gettinga job later. Do think realisticallyabout how much time you willhave or work though, so thatit wont damage your studies.

4 Contributions from parents

Your parents may also decide togive you money i they can a ordit. However its also worth notingthat the amount o maintenanceloan you get depends or mostpeople on their parents income;those who come rom wealthierhomes get a smaller loan. This isdone because your parents areexpected to contribute. So i youdont get the ull loan, while thereis no way to orce them, and theyare not legally required to give

you money, it is certainly worthhaving the conversation with themin advance about whether theyllcontribute. Feel ree to showthem this paragraph i it helps.

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B u t n o m a t t e r w h e r e

t h e m o n e y c o m e s f r o

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N E v E r S p E N D M o r E

T ha N Y o U r I N c o M E



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Doing a budget is crucialThis is where you match up what money is coming in withwhat is going out. Its incredibly important or you may endup having a great rst week splashing the cash thenspending the rest o term struggling to survive.

O course, its tough right now to work out exactly what youllspend on things like books, transport, course equipment andpartying. Plus, there are other costs people o ten orget, likeTV licence or toilet roll (none o which are much un to buy, butare even less un i youre caught without them at the wrongtime). Once you know what your situation is why not trywww.studentcalculator.org.uk , a ree interactive tool to help you.

What doesnt countas your income?

The ve categories on the lasttwo pages, and any savings youmay be lucky enough to have,should count as your income butthis DOESNT include things likeinterest ree overdra ts, or arworse, credit cards. They are debtand will need paying back. Sowhile they may help get over any minor cash fow problems in theshort term, i you know money iscoming soon, its important not tosee these as part o your income.

Not all debt is the same

Its easy to think, Ive got toget a student loan, why notborrow a little more? but youhave to understand how specialstudent loans are. No otherloan only needs you to repay i youre earning enough.

With others, itll never go away,theyll chase you even i youcant a ord it the interest ishigher and will multiply at speed.Be very care ul about takingany other orm o borrowing.



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How do I repay the loans?This a long time away, but its worth understanding now. Onceyouve graduated (or even i you dropped out) you may worrythat youve got an enormous debt hanging over you.

But dont panic! You dont have to repay a penny until you get a job and are earning more than 21,000 a year.

Once youre past that point youll pay back 9% o everythingyou earn above 21,000. So i you earn 22,000, as its onegrand over the threshold, youll pay 90 o it a year.

What youll pay back

Its worth thinking about this or a second. It means the amount yourepay each month ONLY depends on what you earn, not on howmuch you borrowed in the rst place (though borrow more andit may mean you repay more in total and over a longer time).

20,000 0 0

25,000 30 360

30,000 67.50 810

35,000 105 1,260

Salary Monthly repayment Yearly repayment

After University


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Actually you wont even see this cash.

Unlike normal borrowing, where you haveto hand over the cash, with student loans,

if youve got a job your employer takes theamount you owe from your salary eachmonth (its called a payroll deduction) inthe same way they do with any tax you needto pay (see the Q&A section at the end for what happens if youre self employed).

So you might not even notice the money hasgone, since youll never actually have it in the

rst place youll just take home less eachmonth than someone who doesnt have to makeloan repayments. This is a very important point,because it means the rather scary debt collectorswho normally en orce loan repayments wontcome knocking at your door or student loans.

After University


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What is inflation?Infation is a measure o the rate at whichprices change over time. Usually, though notalways, they are increasing. So i infationis 4%, then a basket o shopping costing100 this year will cost 104 next year.

There ore, i the interest on a loan is set at therate o infation its like saying you were lenta basket o shoppings worth o money this

year, but when it comes to repaying youd only have to give the cash thatd buy that samebasket back. This means your actual spendingpower hasnt been diminished by taking outthe loan so it hasnt cost you anything.

W ha T I S I N T E r E S T ?

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You will pay interest on your student loan as soon

as you take it out, at the rate o in ation plusan extra 3% a year. How much interest you paya ter studying depends on how much you earn.A terwards, interest starts at the in ation rate(when you earn less than 21,000) and goes up toin ation plus 3% (when you earn over 41,000).

Interest is added to what you owe: its notan up ront ee and it wont a ect how much

you pay each month. However, it might meanpaying or longer and paying more overall.

You will be chargedinterest though

After University


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Whatever you borrow, regardless o what youve repaid, inthe April thirty years a ter you graduate the loan is wiped.You wont owe another penny. So even i you havent repaideverything you borrowed, the rest o the debt is gone.

What happens i I dont get a job,lose my job or take a career break

I your income ever alls below 21,000 a year, or i you dontget a job, lose your job or decide to take a career break,your repayments will simply stop, no questions asked.

The loan is wiped thirtyyears after you graduate

After University


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Q. How does means testing work?

A. Means testing is used todecide how much nancial helpyou are entitled to. For moststudents its based on the jointincome o your parent(s) be oretax (they are allowed to takeo their pension contributionsand some allowances or eacho your younger siblings, i youhave any). I you have a lot o savings in your own name thiswill also be taken into account.

There are a ew situations that

mean the testing is based onyour own income (and yourhusband, wi e or civil partner i you have one) including i youare over 25, or have nanciallysupported yoursel or morethan three years, have no livingparents or are caring or a child.See the Direct.gov link at theend or more in ormation.

Q. If my parents are divorced/ separated whose income ismeans tested?

A. I this is the case in your amilythe income o the parent youlive with most o the time will be

used (i thats not clear, this is

normally the parent who claimedchild bene t or you be oreuniversity). I the parent youmainly live with remarries or hasa cohabiting partner, their jointincome will then be looked at.

Q. Will the student loan go onmy credit file?

A. Whenever you apply or anancial product which involves

lending you money, be it a bankaccount, contract mobile phoneor monthly paid car insurance,the company youre applying towill check your credit le to helpdecide i they want to lend to you.Your le is a record o things likehow much debt you already haveand whether you have missedpayments on credit cards or utilitybills. Having a lot o outstandingdebt on your le can make ithard to get a loan or credit card.

Unlike other loans, student loanswont appear on your credit le,so lenders wont know about it

unless they ask and they o tenwont. Even i they do, though,in the bigger scheme o things

due to how its repaid its only

likely to have a limited impacton your ability to borrow.

Q. Will it be more difficult to get amortgage later?

A. Once youre earning enough to

repay the student loan youll haveless income than i you didnt haveit, so this will have a minor impacton your ability to get a mortgage.However, its worth noting thatthis has always been the case.One o the ew advantageso the new 2012 system is,because you repay at 21,000,compared to current graduateswho have to start repayingwhen they earn 15,000, youllactually have more money inyour pocket. There ore, in theearly years, compared to now, its

actually a minor improvement.

Q. If weve got the money should wesimply pay and not take the loan?

A. I you or your parents decideto pay your tuition ees withouttaking a loan theres a ew thingsto bear in mind. Its de nitely abad idea i you or your parents are

Q&As


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borrowing the money elsewhere

to do it as student loans area very cheap long-term orm o borrowing, and you only have torepay them i you earn enough.

Even i you used savings, itsworth remembering that i ,

as an extreme example, younever earned over 21,000youd have e ectively paid thatcash or no reason as youdnever have needed to repaythe loan. This is a complexsubject though, so i youreserious about doing it, or morein ormation on the pros and conssee www.moneysavingexpert.com/students2012

Q. Why does a bursary beat afee waiver?

A. Unless you earn a highersalary on graduation, a eewaiver is unlikely to reducethe amount you repay at all. Sowhile it may eel like your eeand debt is lower, there may wellbe no material impact on yourpocket. Yet a bursary will providecash now, which could reducethe need or any commercial

borrowing. So as one is a certain

gain, and the other a you maybene t in the uture but mightnot, the choice is a no brainer.

Q. How do you pay back the debtif self employed?

A. I you set up your ownbusiness or work or yoursel your repayments will be collectedvia HMRCs Sel Assessmentscheme. This means you willneed to make payment at theappropriate deadline to ul lyour legal obligations. I youdo not pay, HMRC will pursueyou or any amount overdue.

Q. If Ive got savings or other earnings after I graduate dothey count?

A. I you have additional incomeo 2,000 or more rom savingsinterest, pensions or sharesand dividends, this will also betreated as part o your income

or repayment purposes andyoull need to repay 9% o that,again via sel assessment.

Q. Do I still have to repay if I

move abroad?

A. Yes is the simple answer. Yourestill obliged to repay the studentloan based on 9% o all earningsabove the equivalent o 21,000in the country you are in andcan ace a ne i you dont. Bytaking out the loan you have acontractual relationship to repayit. You may have heard that somepeople dont repay loans whenthey move abroad. I that happensits because there are practicaldifculties in the government

pursuing them or the money but that doesnt stop them beingresponsible or paying it back.

Q. What happens if I drop outof university?

A. I you dont complete yourcourse, any tuition or maintenanceloan you have taken up to thatpoint will still need repaying.The repayments and interestwork in the same way as i you had done the course inother words you repay 9% o everything earned above 21,000

rom the April ollowing thethree years a ter you started.

Q&As


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Q. What happens to the loan if I die?

A. While it sounds morbid, itsworth knowing that i you die, orare permanently injured, the resto your loan is wiped, meaningyour kids or parents will neverhave to pay it on your behal .

Q. Can I pay back the loanmore quickly?

A. The government has said thatyou will be able to repay theloan early. Yet it is consideringadding penalty charges i you

do so (still undecided at thetime o publication) which couldmake it much more expensive.

Q. Is the 21,000 threshold fixed?

A. The threshold will start to rise

with average earnings rom 2017.In other words, as the amountpeople earn increases (andprices go up due to in ation)the 21,000 salary level rises inproportion so youre e ectivelypaying the same each year.

Q&As


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Bright Knowledgewww.brightknowledge.org- the essential guide to careers,education and student li e

MoneySavingExpertwww.moneysavingexpert.com/students2012- key acts and gures about student

nance and tuition ees

DirectGov

www.your uture.direct.gov.uk/- in ormation about applying touniversity and student nanceOR www.direct.gov.uk/student nance ordetails on applying or grants and loans

NASMAwww.NASMA.org.uk- the National Association o Student Money

Advisers who work in universities, studentunions and urther education colleges

NUSwww.nus.org.uk- National Union o Students, a voluntarymembership organisation whichrepresents the interests o students

UCAS www.ucas.com- the organisation responsible or managingapplications to higher education courses in the UK

See our other guides for specific details

- Part-time students guide

- Teachers guide- Parents guide

Further reading


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Documents

Uk Financial Student Guide