Contents :

What is a student loan? What about student banking?

Shopping around for student banking packages

Applying for your student banking

FAQ’s

Where can I go to get more help?

What is a student loan?

The term student loan relates to several types of financial assistance available to students to help support themselves while they are studying, to assist with living and accommodation expenses and course fees and related costs.

The most common type of student loans in the UK are those offered by the Government through The Student Loans Company (SLC) which is a UK public sector organisation established to provide financial services relating to loans and grants, to students in colleges and universities across England, Northern Ireland, Scotland and Wales.

To be eligible for a student loan or grant from the Government you need to be:

a UK National or have 'Settled Status' (i.e. there are no immigration restrictions on how long you can stay in the UK)

60 years of age or less when you start your course

completing your first higher education qualification or topping up a lower level higher education qualification

The University or College you attend, and the courses you are completing also have to be eligible to enable you to qualify for government assistance with course fees and costs. There are different application procedures and requirements depending on whether you are studying full or part-time. You will also need to make a new application for each year of your course, to adjust your loans up or down depending on your financial circumstances.

If you are studying full-time you can apply for two government student loans per academic year, these are:

Student Loan for Tuition Fees - in most cases this will cover your tuition fees in full.

Student Loan for Maintenance - towards accommodation and other living costs, the amount is dependent on your household income.

Government student loans work differently to bank loans in several ways, as shown in the table below:

Student loan Bank loan

Interest rate

Very low or zero interest (currently student loans are at 0% interest until 31 August 2010)

Higher interest rates

Repayment time

Don't have to start repayments until the April after your course has finished (and only if you earn over £15,000)

Repayments due from date loan is drawn down

Repayment amount

9% of your earnings over £15,000 (you can pay more if you want to repay the loan faster)

Agreed in advance with lender for usually a fixed amount

Managing the repayments

Automatically deducted from your salary by your employer before you receive your pay

You are responsible for setting up a direct debit from your bank account and ensuring sufficient funds are available to make the repayments

With a student loan the more you earn, the quicker you repay the loan. So, someone earning £18,000 a year (the average starting salary for a graduate-level job) will have to pay back nine per cent of £3,000 (£18,000 minus £15,000). This works out at around £5.19 a week.

Apart from being able to take advantage of the lowest lending rates you're ever likely to get, using Government loans and grants provides you with a level of support and assistance you don't get from banks and finance companies. For example, if you get a Student Loan for Tuition Fees this is paid directly to the University or College so you don't need to worry about paying your course fees. Likewise your Student Loan for Maintenance is paid directly into your bank account in three instalments (one at the beginning of each term) to help you manage your income for the academic year. In addition to student loans the UK Government provides several types of additional grants (one off payments which don't have to be paid back), as well as further financial assistance and support for students who, for example, are disabled, have dependent children or adults they care for or are suffering financial hardship. Funding may also be available to students via other grants, scholarships and bursaries, which provide assistance to students on the basis of academic merit and/or financial need to enable them to attend higher education. These do not have to be paid back and are awarded by Universities, Colleges, Educational Trusts and Charities.

What about student banking? As well as Government and grant based assistance, students are supplementing their finances by taking advantage of student banking packages which are available from most major banks. These packages are aimed at students aged 18 years and over and include:

Bank accounts with interest free overdrafts Debit cards Personal Loans Professional and Career Development loans Credit cards

In addition Banks often offer incentives which can include cash, mobile broadband offers, free travel insurance and retail and entertainment discounts when you open an account, which can be very enticing and useful!

The most common type of overdrafts offered to students are 'tiered' personal overdrafts where interest rates and overdraft limits are gradually increased over time. Students can take advantage of interest free overdrafts which start off at an agreed limit of between £300 and £500, subject to status and application criteria. If your account is managed well you get the option to apply for higher overdraft limits of up to £3,000. A key requirement to getting an overdraft is you must have income deposited into the account regularly, for example your student loan, any wages or payments from parents or guardians.

Interest free overdrafts can be a good financial buffer if

you stay within your overdraft limit as they

won't cost you anything to have.

Managing your finances as a student can be tricky for several reasons; you may have just left school or still be living at home and not have much experience managing your own bank account, living expenses and bills. It's also a busy time moving to a new place of residence, meeting new people and getting to grips with your course work, so always think carefully about what you will be able to afford to repay before committing to student banking packages. Unauthorised overdrafts and other debts such as personal loans and credit cards can quickly become difficult to manage and repay because of their higher interest rates and penalty charges, you could unexpectedly find yourself in a large amount of debt. Adding worry and stress about unpaid debts can negatively impact your time at University or College and also damage your credit rating, which will become important later on in life if you want to apply for credit, personal loans or a mortgage

The key to avoiding student debt is good budget management; make sure you know what income you will have from things like your student loans, grants, part-time work etc., then work out what your expenses will be, things like rent, food, power and phone bills, books and course materials. Use our Student Budget Calculator to balance your income against your out goings and see if you can cover the additional costs of having a student overdraft, personal loan or credit card. If you're not sure what a personal loan or credit card might cost you, use our calculators to see what borrowing different amounts might cost you to repay.

Shopping around for student banking packages Knowing how much you can afford to borrow and for how long, will make looking for a student banking package easier. There are so many banks offering student deals it can seem difficult to know where to start, stay focused on what you know can afford.

The safest approach, to maximise the amount of support you will get with your student banking is to try and build a personal relationship with a trained student advisor at one of the high street banks.

Ask your University or College which high street banks have branches on

or nearby campus, this will make managing your banking a lot easier.

If there are several banks close by, it is still important to shop around and compare packages to make sure you get the best products for your needs. The following resources can provide a good place to start:

High street advertising Student magazines Newspapers University or College websites

Check out each Bank's costs, fees and interest rates as they may differ, for example a current account alone can have the following fees and charges associated with it:

Type of charge Description Sample costs Account charges

A monthly account fee for using the account Up to £15.00

Service charges

Charges for services like: Cheque clearance Money transfers Banker's draft Stopped cheque Copy statements (per request) Replacement/additional PINs A charge is made each time a service is used.

Costs can range from £5 for a copy statement to £25 for money transfers.

Personal overdraft rates

The monthly and annual interest rates that will apply to your agreed overdraft and any unauthorised overdraft amounts.

See example below

Personal overdraft charges

A charge may apply to set up the overdraft on your account. You can also be charged penalty fees if you go over your agreed overdraft limit.

See example below

Debit card rates and fees

You may be charged for things like: Cash withdrawals Debit purchases Cash out transactions Purchasing foreign currency or travellers cheques

Around 2% (min £1.50, max £4.50) for cash out and foreign transactions

Other fees

Other services such as text alerts, mobile phone banking and internet registration may have charges.

Around £2.50 per month

All Banks provide key information about their accounts and overdrafts detailing interest rates and charges that will apply, use these to compare student products and packages. The table below gives an example of the key information for a personal overdraft:

Key information Personal overdraft example

Interest rates for arranged overdraft

£3,000 or less nterest free (0% EAR) I

Over £3,000 0.58% a month (7.2% EAR)

Interest rates for unauthorised overdraft

£3,000 or less .82% a month (24.2% EAR) 1

Over £3,000 1.82% a month (24.2% EAR)

Unauthorised overdraft fee

£28 for every month in which you at any time have an unarranged overdraft

Paid item fee

£20 charged (no more than once a day) if a card transaction, cheque (whether guaranteed or not), standing order, direct debit or other instruction paid results in or increases an unarranged overdraft.

Unpaid item fee

£20 charged (no more than once a day) when any cheque, card transaction, standing order, direct debit or other instruction that would result in or increase an unarranged overdraft is returned unpaid, or is not paid by the Bank.

Most personal overdraft interest rates are advertised using a monthly interest rate and an EAR (Equivalent Annual Rate), this is an overall percentage interest cost applied to your account. For example, an EAR of 7.2% means that for every £100 you are overdrawn you will pay £7.20 per year in interest and charges. This is an important rate to compare as it represents the largest cost.

As well as the key information there may be additional charges and services included in a bank's student package so some good questions to ask are:

Is there a cost to register for Internet and Phone banking?

Do they offer text alerts, for example to let you know if your bank account is about to go over it's overdraft limit?

Do they have mobile banking packages to let

you manage your banking via your mobile phone?

Is there a grace period when your account

goes into unauthorised overdraft before overdraft fees are applied?

Do they charge for replacement debit cards if

yours gets lost or stolen?

Are their any conditions relating to the account opening incentives, free offers and gifts?

Most high street Banks have online sites you can use to search and compare student products. Alternatively if you don't know which Bank you want to use, just doing a search from your home page, for example typing in “UK student banking deals” will bring up several links for you to investigate.

Many online companies also offer comparison sites which enable you to compare student banking packages. You may also get an indication of the likelihood of being approved for lending and credit in some cases. We've included links below to some independent comparison sites to help start your search:

www.student-finance.co.uk/accounts/compare Compare Student Accounts Deals

www.moneysupermarket.com Compare over 300 banking accounts

http://www.moneysavingexpert.com/banking/Student-bank-accounts Top student accounts

Applying for your student banking So once you have decided on which student products and which Bank, it is now down to the actual banking application!

You'll need to get some documents together before you start, in most cases Banks will require you to:

provide some form of identification (i.e. driver's licence or passport)

provide proof of your home address (i.e. a bank statement or letter from a university or college which is less than 3 months old))

provide proof of your student status (a UCAS confirmation of place letter or letter from your university or college confirming your place).

Check with your Bank exactly what documentation

they require from you as different Banks may accept

different types.

As part of the application process Banks may also check your credit score, this is a score that is given to you based on your past credit history. If you want to find out what your credit score is for yourself, you can do this at www.experian.co.uk, be aware though that most students who've just left school won't have a credit score yet.

Bear in mind that not all student offers advertised will automatically be given to all applicants, the banking services and products you may be approved for are dependent on your personal circumstances and the Banks' assessment criteria.

In addition to the general application requirements above, the table below outlines what to expect when applying either in a branch or online:

Applying for student banking via....

What to expect......

High Street Banks, Building Societies and Finance Companies

After making an appointment, a specialist student advisor will take you through the application process step by step. Your account will usually be opened on the spot but overdraft and other lending applications may take longer.

Online

You can compare student packages in your own time online and use online application tools and forms, some online banks promise instant decisions for lending and credit applications. Secure websites have a yellow padlock or key icon in the bottom right-hand corner of the page.

If you are approved you will need to provide your signature confirming acceptance of the student banking terms and conditions, make sure you have read and understood these because once you sign you have entered into a binding contract. Once your account is opened you will be issued with a cheque book, debit card and a PIN. Make sure you sign your card(s) as soon as you get them. Keep your cheque books and cards in a safe place but not together to avoid anyone else being able to use them. Banks advise customers to never write their PIN down and if you do to disguise it so it doesn't look like a PIN and not to keep it with your card. Never tell anyone else what your PIN is.

If you have a Visa debit card and/or credit card keep your receipts in a safe place or destroy them securely to stop anyone obtaining and using your card details. Check your current account and credit card statements regularly and contact the Bank immediately if you see any transactions that weren't made by you.

FAQ’s about student loans and banking Here are some frequently asked questions and their answers which may assist:

What are the criteria for a University or College to be eligible for me to get a Government student loan?

A: Both the course you are taking and the institution needs to meet certain criteria for you to qualify for a government student loan. The course you are taking should lead to one of the following qualifications:

First degree Foundation degree Certificate of Higher Education Diploma of Higher Education Higher National Certificate Higher National Diploma Initial Teacher Training Further training of youth and community

workers

The institution has to be a:

UK degree-awarding institution college that receives government funding and

provides a course leading to a degree qualification

private institution offering specifically designated higher education courses (ask your university or college if it qualifies)

group of schools taking part in the School-Centred Initial Teacher Training (SCITT) scheme

Ask your University or College if they qualify.

How does a Debit card work?

A: Debit cards are linked to your current account and they can be used to:

Make purchases (up to a daily limit) Obtain cash out when you purchase goods (an

additional amount is added to the cost of your purchase and then given back to you in cash)

Withdraw cash from ATMs Guarantee cheques

For each transaction on your debit card your account balance is checked and if there are sufficient funds available the amount is taken out (debited) almost immediately. You will use a PIN (personal identity number) or sign to confirm the transaction. If you have a Visa debit card this can be used anywhere credit cards are accepted, including online. Contactless debit cards are also progressively being introduced across the UK for small purchases of around £10. These enable you to pass your card across a sensor on the till in shops and cafes and the purchase amount is automatically debited from your account, significantly speeding up the process for small purchases.

What is a Career and Personal Development Loan?

A: A Professional and Career Development Loan is a bank loan you can use to help pay for work related courses learning to help with career advancement or improve job prospects. You can borrow from £300 to £10,000 from a participating bank to help pay for your course. Like any loan you need to repay the money you borrow but, with a Professional and Career Development Loan, the Learning and Skills Council will pay the interest on the loan while you are on the course and for one month afterwards. Even when you start to repay the loan to the bank, the interest rate for the repayments are set at a fixed, competitive rate of interest, compared with most other personal loans.

What is a UCAS confirmation of place letter?

A: UCAS stands for Universities and Colleges Admissions Service and is a central organisation through which almost all applications for entry into Higher Education are processed. If you apply through UCAS and are accepted by a University or College, UCAS will issue a letter confirming this usually after your A Level or Higher results in August.

What funding is available to me if I am a Post gradate?

A: You may still qualify for UK Government assistance refer to their Postgraduate funding website. You can also apply for financial help for postgraduate and post doctorate research from Learned Societies such as:

British Academy (for humanities and social sciences)

The Royal Academy of Engineering The Royal Society (for science)

More postgraduate funding options can also be found at: www.postgraduatestudentships.co.uk/

Where can I go to get more help? The following links may also provide additional help and information: The UK Government's website www.studentfinance.direct.gov.uk has comprehensive details of what's available to students. Follow this link on the UK Governments website for their application procedures and requirements. If you live outside England, select your UK region here to go to the appropriate student loans organisation: Northern Ireland, Scotland and Wales. You can search for funding from educational trusts via the Educational Grants Advisory Service (EGAS) on the Family Action website. Charities and trusts that offer educational grants can also be found at your local library, publications include the Educational Grants Directory, Charities Digest, Grants Register and Directory of Grant Making Trusts. The Learning and Skills Council is responsible for planning and funding high quality education and training for everyone in England other than those in universities and can provide information and assistance for adult learners and employers. Student debt advice: The UK Insolvency Helpline www.insolvencyhelpline.co.uk has a specialist Student Debt Support Team. There is also the National Debtline at www.nationaldebtline.co.uk/ or the Consumer Credit Counselling Service (CCCS) at www.cccs.co.uk/ The National Union of Students has fact sheets on its website www.nus.org.uk/en/ to help you with financial planning and provide support and advice. The Citizens Advice service provides help to resolve legal, money and other problems via free, independent and confidential advice, contact the Citizens Advice Bureau at www.citizensadvice.org.uk The UCAS (Universities and Colleges Admissions Service) website www.ucas.com/ enables prospective students and parents to search for Universities and Colleges, apply online and track application progress.