The Facts: It's your biggest source of income. But what
is a student loan, and how do you make it cover all those bills?
What is a student loan?
Since maintenance grants were abolished in 1998, the main form of government
funding available to full-time students has been the student loan. Student
loans allow you to borrow up to £4,000 per year (or up to £4,930
if you’re studying in London), but all the money you borrow will
need to be paid back when you graduate, plus interest. However the minimum
threshold that you need to be earning before you’re obliged to start
paying it is about to rise from £10,000 to £15,000.
Do I really need one?
For most students, a student loan is their largest single source of income.
So unless you have very generous parents, you’ll need to apply.
How do I get one?
You need to apply to your Local Education Authority using an HE1 form.
They will then calculate how much you’re entitled to receiving –
as well as working out whether you need to pay tuition fees. They’ll
then send you back a form that you need to forward to the Student Loans
Company (the government organisation that administers your student loan)
who will process your application. This usually takes a month, so make
sure you get the paperwork done well in advance of the start of term.
Details of how to pick up your loan once you get to uni will should be
made available to you once you get there – but expect to wait in
lots of queues.
For 2003/2004, the maximum amount students will able to borrow is £4,000
(or £4,930 if you’re studying in London). A quarter of this
is means-tested, but regardless of background, all students are entitled
to borrow £3,000.
What are the benefits?
There’s nothing sweeter than the sound of a grand making its home
in your bank account at the start of every term, and you won’t have
to slave away flipping burgers or scanning frozen peas late into the night
to earn it. Although it is only a loan, you’ll never be able to
borrow money more cheaply, so it’s the most cost-effective way of
borrowing money while you’re studying to pay for all those bills.
The interest charged is only equal to the rate of inflation, which at
1.3% is far lower than any commercial bank loan rates.
And the pitfalls?
The temptation to think you’re loaded, hence able to splash out
at the start of every term, is a real problem. It’s all too easy
to fall into the trap of over-extending yourself, which will cause you
problems at the end of term.
The application process can take a very long time. You will need to apply
for your loan at least a month before you start the academic year to be
sure of getting your first instalment through for the start of term –
there’s nothing worse than being broke for Freshers Week.
Loans also have the unfortunate tendency to mount up your debt. If you
take the full £4,000 a year for three years that means you’ll
be £12,000 in debt by the end of your course – and if you’re
on a longer degree programme, that total could be even higher.
Jamie Smith, who graduated from York University this year, warns against
flippantly applying for loans. “Most people have to get a loan to
pay their way through uni,” he said, “but think twice about
whether you really need it – if it’s just beer money or a
PlayStation you’re after, get a job.”
Top Tips:
To avoid blowing the whole lump sum in the first few weeks of term, make
sure you budget properly – otherwise you’ll only cause yourself
grief later on. Ian Villiers from NatWest – who graduated from Leeds
Metropolitan in 1997 – advises students to draw up a weekly budget
planner to ensure your loan covers your expenses up to the end of term.
“It’s far more difficult to get into trouble if you know how
much money you can spend each week,” he points out, “I wish
I had!”
If you’re lucky enough to have parents who will support you through
university, it may be worthwhile to take out your loan and then invest
in a savings account.
