Valuable lessons learnt the hardest way (Student Loans Co.)

Member Name: judithritchie

Product:	Student Loans Co.
Date:	01/05/01 (288 review reads)
Rating:

Advantages: gives you financial freedom, enough funds to fund being at uni, costs of living, textbooks etc, interest rate is same as inflation so no hefty interest, can put off paying after course apparently but I havent got that far as yet to find out

Disadvantages: it givesyou financial freedom you may be unprepared for

Since the dawn of time students have been skint. Lets face it, debt is part of the sacrifice you must make to further yourself a little, in addition to leaving home and moving to a whole new place all alone. The student loan is the most important part of the students new life. First for non-students, a quick overview on how the system works.

The Students Loan Company originally gave loans of up to around £3000 per year to students when the grants system was still running up to 1998 and students could choose how much of that money they wanted to receive with an option of receiving the rest if they needed it in financial hardship. Now however the amount of student loans given out are assessed by a students LEA (Local Education Authority) depending on your parents' or your own financial situation (depending on your age there), and that is what you get. Since the abolishment of grants, the loan entitlement has increased by up to £1000. The loan is received in 3 instalments about 4 months apart, the first being one you pick up from the university and the following 2 received via BACS directly into your bank account. I think the thing that makes these loans so student-friendly and such a popular choice of income is that they are interest free (although the amount you owe increases with inflation), and that after graduating, dropping out etc. while you earn less than £10,000 you don't have to make any repayments. After 10 years of this your debt is wiped clear too. AND if you get into financial trouble then you can get a £500 hardship top-up to the loan (that not many people know about).

OK, so if like me you are assessed as your parents making zero contribution towards your living costs, etc., thus getting your £1050 fees paid for by the LEA, then you get the maximum loan entitlement of £3735. Great. In the first year of university that figure was the largest sum of money I had ever received, and the temptation to spend! spend! spend! is all to
o great. Who wouldn't when you had spent 2 years spending long Saturdays waitressing to keep yourself afloat, this seems like free money. Costs of housing differ in different university towns, often being very high in places like Bristol where it can cost £60-70 a week! Here in Sheffield £30-45 is average, and then bills on top of that ..... the money soon drains away. I am no saint, I have wallowed in huge debt before (and still am to an extent) but I would like to share some hard earned tips and tricks to avoiding the utmost debt and despair.

1. Get a student account with an overdraft. Get a good account with a good bank - find out all the conditions and services provided from each account provided by each high street bank. I am not going to go on about this because when you get to university you are going to be BOMBARDED by banks and their reps who will have stalls, give-aways, goody-bags etc. to shower you with in order to get your favour. Do NOT sign anything until you know all you need to know. Otherwise you might think that the Halifax student account is good, and not mind that they want £400 every 3 months to be put into your account. That's fine when you think about the student loan going in, but seriously other banks do not put such silly conditions on your account! Look around! I would advise going for the ones who can give you the highest interest free overdraft, and it would be more in your favour if that could be the bank you were with before you went to university. I stayed with Lloyds (see my previous op) who I had been with since 1990, and they gave me £40 for staying with them. That kind of money is not bad, because you can always put it in a savings account or buy your pans with it!

2. Get an overdraft even if you don't need it. Arrange an overdraft with your new student account. The majority are interest free, although I am aware that barclays do an arranged overdraft beyond £1300 up to £3000 at a small interest ra
te of 3%. Stick with interest free. I say get one even if you think you don't need it, because it is easier than having to arrange one when you realise you are going to go overdrawn and they don't charge you for the privilege of having one there just in case! Sometimes you can go overdrawn without realising it, and it costs! If you go overdrawn with my bank over the pre-agreed limit (or at all if you don't have one), each £10 you go into the red then they charge you a £10 unauthorised borrowing fee. Lloyds made a mint off me last summer on these charges. It sounds steep, but with other banks you can get charged per letter they send you (Lloyds don't charge you), and per day that you are overdrawn! You might think "That'll never happen to me, I'm not that stupid" but I urge you to enquire when asking about bank accounts and overdrafts in general, what and how do you charge me if I go over the agreed limit?

3. Say a big NO to credit cards! They are the best thing in the whole damn wide world, and they are SO easy to get hold of. When you get a student account they will offer you a credit card. When I got the card I held it and gazed at it admiringly, feeling completely grown up now someone was giving me serious credit. And for the first year I used it sensibly, paying the balance off each month on time. However, you will learn that money is easily depleted and when that happens you are tempted to turn to your credit card for support. DON'T! If its a choice between the card and your overdraft use the overdraft - remember it's interest free and eventually the money will come out of your overdraft to pay off the credit card so why delay fate? anyhow when you're a bit tight for money it becomes EASILY tempting to hold off and pay in instalments, and this always breaks down. The interest is small for small amounts, but it's so easy you could pay for other things on it in instalments ... you don't want to find
yourself thinking this because it could be you with a minimum monthly payment of £50 like me!
But if you are insistent on having a credit card, or you are just lucky enough to be rich and not need overdrafts etc. remember that its better to pay less even if you do have money, and so beware of APRs. This is the Annual Percentage Rate, the interest you pay on your balances on your credit card. Until VERY recently I never questioned that the Lloyds Asset Mastercard I received alongside my student account was set at reduced student interest rates. One day my eyes happened to fall onto the actual APR - and they popped out of my head! The APR was almost 19%! ALWAYS ask about the APR, and shop around. You may realise the new wave of online credit card is the way to go. I got myself an Egg card at 11%. Online credit cards usually don't send you rpinted statements, as you access them through the internet and have to set up a direct debit to make minimum payments per monthm and cutting out these administration costs means the money saved benefits you with lower APRs. Another card to check out is Cahoot too.
Another tip - never learn your credit card account number off by heart, nor the expiry date or the starting date! You may be aware there are some great online bargains, especially at bookshops like Amazon (see earlier review) so tapping in your credit card details repeatedly may mean like me you learn them off by heart. So after I had locked my cards away at home so I couldn't get to them and use them, I found that the urge to get that little thing that "only" costs 7 quid or whatever was easier to get as I had the card details programmed into my brain. (I have taken decisive action by ringing Mastercard and telling them the card was stolen!!)

4. Get a savings account. OK so if you get skint what would you need one of these for? well, you may find that att he beginning of your very first year you'll have money you earned through ha
rd labour over the summer, or excess student loan because your proud parents gave you a bumper cheque or helped you with your first rent cheque. Put the excess into a savings account. You will not regret it when you get stuck for cash, or if you manage to avoid severe debt if you want to put a deposit down on a holiday or work scheme such as Camp America. It is also extremely comforting to know you have something to fall back on, because I have been there when I have had nothing to fall back on and it is NOT nice. Remember as a student you shouldnt be paying tax so if you were saving a few hundred quid you should ask your bank for an R85 tax form, fill it in and hand it back. If you have a few thousand, get an ISA, which allow you to save up to £3000 or so tax free per tax year. You can open one of these with a pound, and it is a good thing to have. Shop around the savings accounts for the best interest rates. Online savings accounts are another good idea, looking at smile.co.uk, cahoot or egg.com, and also the Halifax has the highest interest rates for savers at the moment. Ask about their WebSavers, which give 5% gross for any amount for an account with a card, and 6% for one without a card.

5. Get a job? Maybe you want a job? You can find jobs with just a few hours a week, say about 4, even if you didn't need the money 4 hours a week gives you 1. something to put on your CV and make yourself more employable, asa recent survey revealed that more and more employers prefer people who have worked during their university years, and you can always put the money in a savings account.

6. Get a Dooyoo account. Write good reviews between lectures, get the advantages of contributing to an excellent site and get paid for it! It works for me!

7. Never ever EVER shop when you're hungry! Food shopping is a temptation these days anyway but when you are hungry you will buy MUCH more than you need. This is experience talking. Set yourself a fo
od budget and stick to it. Scout the aisles for discounted foods, e.g. tins with dents. And what harm did a dent do? 3 for 2s, 2 for 1s etc etc etc.

8. Make a packed lunch to take to university. Consider this. Union shop - sandwich and drink can be around £1.50 more or less. You have on average 3 full days a week, 3 lunches, thats £4.50. 24 weeks in the year (Sheffield have 2 12-week terms) thats £108 a year! You can incorporate packed luched into your food budget and save money. And its healthier for you too.

9. Don't get too obsessed with money. If you get too obsessed with saving money you'll find that you won't be having as much fun going out with your friends. I like going out clubbing or staying in an ordering take out as much as everyone does!

10. Do be careful. I wish I had planned ahead a little and been more careful with my money instead of buying 2 computers in my first 2 years of university! Last summer I managed to transfer onto the course I wanted to do, but the LEA decided because I had had 2 years of tuition fees paid they wouldn't pay my fees for the next 2 years and then they'd pay the rest. So there I was, at the border of £1500 overdraft, student loan held up until November until the LEA and Student Loans company got the details thrashed out, with £1050 fees to pay. If I had organised myself better, saved a little money I may have had the £500 for the first payment. I had to go to Lloyds and take out a BMA Professional Studies Loan of up to £10K at 11% APR, which I must start paying back at the end of 2006 whatever happens, e.g. if I drop out, take a BMedSci year etc. and must pay in full by 5 years! It paid the fees and the overdraft and now I'm getting myself much more organised.

OK, so I hope Ive helped give some valuable advice and some tips I learnt the hard way. The student loan is your best friend. Treat it like one - with respect!

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