Student money and debt

 April 2017

Fact sheet no. 30 EW Student money and debt

This fact sheet gives information about managing money when you are a student. Use this fact sheet to:

  • help you work out a realistic budget;
  • find out how to choose a bank account;
  • understand how student loans work;
  • find out about other types of financial help; and
  • deal with problem debts.

This fact sheet includes links to help you find more detailed information.

 

Important:

is this fact sheet for me?

This fact sheet does not cover student loans taken out under the old system of fixed-term loans. These were available between 1990 and 1997. If you took out a loan during this period, contact us for advice.

Budgeting

Budgeting is one of the most important skills you can use while you are a student. It may be your first time away from home or the first time you have to be completely responsible for all your own finances.

Extra advice:

it's your budget

The most important thing when doing a budget is to be realistic. You will have more chance of sticking to it if you are honest with yourself before you start. Contact us for advice.

It is a good idea to try and work out a budget to include all your income and expenditure while you are studying. This will help you to make sure you stay on track and don’t get behind with payments. Most universities, colleges and students’ unions provide information about average student costs. Alternatively, contact the National Union of Students (NUS). See Useful contacts at the end of this fact sheet.

Before working out your budget, you need to decide the following.

  • What period does the budget cover? For example, only term-time or including holidays?
  • Is the budget weekly or monthly?

Bank accounts

Choosing the right bank account is very important. Most of the major banks offer student accounts.

When looking at bank accounts, consider:

  • the amount of interest-free overdraft you can have;
  • the charges and interest on authorised and unauthorised overdrafts and loans; and
  • how long you can keep using the same account after graduation. Some banks may offer you a graduate account, while others may start charging you interest on your overdraft or turn it into a loan.

Information:

overdrafts

An overdraft is a facility on your bank account that gives you extra money if you run out. Your bank lends you the money, so you must pay it back. An agreed, or authorised, interest-free overdraft can be useful to avoid paying bank charges or taking out expensive credit. However, the charges for going above your limit, or into an unauthorised overdraft, can be very high, so watch out for these.

Important:

watch out for 'freebies'

Banks will often try and tempt you into getting an account with them by promising freebies or extras on your account. For example, mobile phone insurance or a rail card. Make sure you would actually use such extras, and that you can't get them cheaper elsewhere.

 

 

 

 

 

Try using www.moneysavingexpert.com to compare accounts. This will help you find the best one for your needs.

Student loans

Student loans help to pay for the cost of your university tuition fees and living costs. The type of help, and how much you can get, depends on when you started your university course. In this section, we cover what you can get and the repayments you will need to make. We also provide links to further sources of helpful information.

Extra advice:

extra help

Contact your university or college for information about further financial help that you may be able to get from them.

What type of help and how much you can get depends on:

  • when you started your university course;
  • whether you are a full or part-time student;
  • whether you live in England or Wales;
  • the type of course you are studying; and
  • your personal circumstances.

For more information about the type of help you can get and how to apply, see www.gov.uk and search for student finance.  

Extra advice:

apply as soon as possible

Don't wait until you have confirmed your place or started your studies before applying for funding. The earlier you apply the more likely it is that you will receive your first loan or grant payment in time for the start of term. Remember you will need to reapply for each year of study.

In England, you may be able to get a loan to pay your tuition fees. These loans are not means-tested. This means that the amount you get is not based on your income, or your parents’ or partner’s income. However, you have to pay these loans back. This type of loan is often called a ‘tuition fee loan’. If your loan does not cover all of the fees, you are responsible for paying the rest. If you study full time in Wales, you may be able to get a grant as well as a loan to pay your tuition fees.

If you are a full time UK student, you may also be able to get a loan to help you with your living costs. These loans are called ‘maintenance loans’. You have to pay them back. In Wales, you may also be able to get a grant to help with your living costs. You do not have to pay this type of grant back.

 

Repaying your student loan

Warning:

quitting your course?

If you leave university before the end of your course, you may still have to pay back the full loan you took out for the year. Contact us for advice.

You are not expected to make repayments until the April after you graduate. Even then, you will only begin repayments if you earn over a certain amount (your ‘income threshold’).

 

 

 

Calculation:

how to work out repayments

  • Robert earns £31,000 per year.
  • This is £10,000 more than the £21,000 threshold.
  • 9% of £10,000 is £900.
  • Robert will repay £900 per year, as long as he stays on that salary.

For students starting their course on or after 1 September 2012, the income threshold is:

  • £21,000 per year; or
  • £1,750 per month; or
  • £403 per week.

The amount you pay towards your loan is 9% of the difference between your actual income and the income threshold.

Any loan you still owe 30 years after your repayments were due will be written off. Also, if you can prove you are permanently unfit to work, your loan may be written off. Contact us for advice.

Your repayments will usually be collected by HM Revenue & Customs (HMRC) through your employer. This means the money will be taken from your wages before you get them.

Information:

interest

The rate of interest that is added to your loan depends on whether you are still studying or have graduated. If you have graduated, interest will depend on your earnings.

Information:

if you are not part of Pay As You Earn (PAYE)

  • If you are self-employed, you will repay your loan through your self-assessment tax returns.
  • If you are outside the UK tax system, you will have to repay the Student Loans Company directly.

​If you started your course before 1 September 2012

The system for those who started before 1 September 2012 is similar to the system for those that started on or after 1 September 2012, but there are important differences.

If your course was full time, repayments still only begin in the April following graduation, but the gross income threshold is:

  • £17,775 per year; or
  • £1,481 per month; or
  • £342 per week.

The amount you repay is 9% of the difference between your actual income and the income threshold.

Interest is linked to the rate of inflation and is added daily from the date you get your first loan instalment.

Calculation:

how to work out repayments

  • Refat earns £20,000 per year.
  • This is £2,225 more than the £17,775 threshold.
  • 9% of £2,225 is £200.25.

  • Refat will repay £200.25 per year, as long as she stays on that salary.

Extra advice:

when will my loan be paid off?

Your repayments are not over a fixed period. The level of your repayments will rise or fall directly in line with your income. The length of time it takes to repay your loan will depend on:

  • your income after graduation;
  • the total amount you borrowed; and  
  • the interest rate.

You can choose to make extra repayments to pay your loan off quicker.

 

 

 

 

 

 

 

 

 

  

If you took out your first loan during or before the 2005–2006 academic year, any remaining loan will be written off when you reach 65. If you took out your first loan during or after the 2006–2007 academic year, any loan not repaid will be written off 25 years after you started repayment. Your loan may also be written off if you can prove that you are permanently unfit for work. Contact us for advice.

Other types of financial help

There are a range of grants, bursaries and allowances you may be able to apply for as a student. It is important to make sure you are getting everything you are entitled to as this will make it easier for you to manage your finances. The support available will depend on your circumstances, such as disability, family situation or the type of course you are studying.

We list some examples in this fact sheet, but you could also try asking at your student union, the National Association of Student Money Advisers (NASMA) or the National Union of Students (NUS). See Useful contacts at the end of this fact sheet.

  • Disabled student allowance – this can help with the costs of attending your course. It is available to full and part-time students, and does not have to be repaid.
  • Childcare grant – this is money to help you pay your childcare costs while you are a full-time student. How much you get depends on your household income, how old your children are and your actual childcare costs. It does not have to be paid back.
  • Adult dependents grant – this is extra help if you are a full-time student and have an adult who depends on you financially. This cannot be an adult son or daughter. It depends on your family circumstances and income. It does not have to be paid back.
  • Parents’ learning allowance – if you have dependent children you may be able to get help with the costs of studying. The amount will depend on your income. It does not have to be paid back.

NHS and social work bursaries

If you are training in social work, medicine or certain areas of healthcare, you may be able to get a bursary from the NHS. See Useful contacts at the end of this fact sheet.

Trusts and charities

There are a number of organisations who may provide financial help to students. Many of these will be available if you study a particular subject, or have links to a certain geographical area. Search for grants at www.turn2us.org.uk or for scholarships at www.scholarship-search.org.uk.

Welfare benefits

Most students do not qualify for means-tested state benefits. However, if you are a single parent or have a disability, you may be able to get certain benefits. Ask your student union, or try doing a benefit check at www.turn2us.org.uk.

Help from your university or college

If you are struggling financially, make sure you ask about help from your university or college. They should have access to money they can either give as a grant or a loan, and you may be able to apply more than once.

Extra advice:

part-time work

You may need to try and get some paid employment to help you manage. Most university towns and cities will have employment options in shops or restaurants and many universities will employ students on campus. Ask your careers service or your student union. Paid work should not affect your student funding, but if you are getting any benefits you will need to check if they will be affected by working.

Career development loan

Professional and career development loans are bank loans to pay for courses and training that help with your career or help get you into work.

• You may be able to borrow between £300 and £10,000.

• Loans are usually offered at a reduced interest rate and the government pays the interest while you’re studying.

• For more information about professional and career development loans, contact the National Careers Service on 0800 100 900.

Debts

Going to university usually involves getting into some sort of debt. Not all debt is problem debt, so it is important to understand when you might need help to deal with your debts and what your options are. Also, some debts are more important than others. This is because if you do not pay, you could lose your home, be disconnected from an essential supply such as gas or electricity, or be sent to prison. These are called priority debts. Common examples include rent arrears, council tax arrears and gas or electricity arrears with your current supplier. It is important to use the money you have for your creditors to make agreements to settle these debts first.

Extra advice:

complete a budget

Do a budget and work out what you can afford to repay to your debts. Use our self-help pack to work out a budget and understand your options. Contact us for advice.

Other debts are called non-priority debts. This is because the creditors do not have extra powers to make you pay. For example, they cannot take your home. Common examples include credit cards, bank loans and some overdrafts.

In the following sections, we have explained where certain debts may need to be treated as priorities. If you are unsure whether to treat a debt as a priority or if you need help and guidance about how to make offers of repayment, contact us for advice.

Council tax

Most full-time students should not have to pay council tax, but there are some exceptions. For example, you may have to pay council tax if: 

Extra advice:

if you owe council tax

Councils have strong powers if you do not pay, so do not ignore this type of debt. Get advice from your university advice centre, students' union or contact us for advice.

  • you are the sole owner or sole tenant of your home; and
  • you live with an adult who is not your partner and who is not a student.

Make sure you know what you are liable for. Check what you need in order to prove to the council that you are exempt because you are a student. If you think you might be liable, for example, because you are a part-time student, ask the council to confirm how much you have to pay. You can then budget for the payment.

Debts to your university or college

Debts may include accommodation costs, tuition fees, hardship loans or library fines. The consequences for non-payment will depend on the type of debt and the policy of the university or college. Some may threaten to withhold your qualification if you do not pay, or prevent you from going on to study further. Such policies may be considered unfair if the money is not owed for tuition. Your students’ union is independent, and should be able to advise on your options.

Accommodation

Most colleges and universities provide some kind of accommodation for students. The tenancy is often only for one academic year, excluding the summer holiday. Accommodation arrears should be treated as a priority. If you fall behind with rent payments, you risk being evicted from the accommodation. Even if this does not happen, the university or college may not want to provide you with accommodation in future years. This means you should try and come to an agreement to pay back what you owe.

Tuition fees

Warning:

outstanding tuition fees

If you owe tuition fees, your college or university may threaten to withhold your degree certificate or tell you that you cannot return to study the following year. Contact us for advice.

Universities and colleges in England and Wales are able to charge different fees for different courses, up to a maximum set by the Government each year. You can apply for a loan to cover all or part of this cost. See the earlier section Student loans. If your loan does not cover all of the fees, you are responsible for paying the rest.

Credit debts

Credit debts are things like bank loans, credit cards and overdrafts. These are usually a lower priority than debts to your university or college, or council tax. This is because these companies do not have the power to evict you from your home, send you to prison or disconnect an essential service such as gas or electricity.
Overdrafts

Extra advice:

do a budget

If you are behind with payments towards credit debts, you will need to do a budget so you can work out what you can afford to repay. Use our self-help pack to complete a budget and understand your options. Contact us for advice.

If you have an overdraft, you may also have other debts, such as a credit card, to the same bank. If the overdraft is interest-free, you could treat such debts as priorities so that you keep the overdraft. This is because if the bank starts charging interest, your overdraft could increase very quickly. If you are unable to do this, for example because you cannot afford the minimum repayments, contact us for advice.

Your bank may be willing to extend your overdraft, or you could make an arrangement to pay it back once you have graduated.

Information:

your credit rating

If you are behind with certain types of debt, this information will be recorded on your credit file. Lenders use your credit file when they are deciding whether to lend to you or not. Student loans do not go onto your credit file. If you are worried about your credit rating, or have been refused credit, contact us for advice.

 

 

Utility debts

Extra advice:

only pay for energy you have used

Contact your utility suppliers with up to date meter readings when you move in and out of a property. This will help make sure you do not pay for energy previous or future tenants have used.

Utility debts include gas, electricity or water bills. If your income is low, you may find it difficult to pay this type of bill, especially if the bills are in your sole name and you rely on contributions from other students who do not pay. To avoid these problems, it is a good idea to ask for bills to be put in joint names so that each person named on the bill is jointly responsible.

If you have a utility bill you cannot pay, contact your utility supplier straight away to see if you can come to an arrangement. Contact us for advice.

 

Important:

water cannot be disconnected

Unlike gas and electricity, water companies cannot disconnect your supply if you do not pay your bills. However, they are able to make a claim in the County Court if you don’t come to a repayment arrangement. Contact us for advice.

Treat gas and electricity debts to your current suppliers as priority debts, because suppliers are able to disconnect your supply if you do not pay. They are also able to force you to have a pre-payment meter if it is safe and reasonable for you to have one. If you are being threatened with either of these options, contact us for advice.

TV licence

Important:

your TV licence is a priority

If you are behind with your TV licence payments, you must treat this as a priority debt. This is because TV Licensing has strong powers to make you pay and you may get a criminal magistrates' court fine. Contact us for advice.

If you have a television, or watch programmes online, you must have a valid TV licence. If you live in halls of residence, your university or college may have a licence for televisions in communal areas. If you also have a television in your own room, you will need a separate licence.

If you live in shared accommodation, you probably only need one licence for the whole house. If your accommodation is self-contained, or you have a separate tenancy agreement for your room, you will probably need a licence of your own. If you are not sure, contact TV Licensing. See Useful contacts at the end of this fact sheet.

Useful contacts

Student loans, grants and bursaries

GOV.UK
Official website for public services.
NHS and social work bursaries
Phone: 0300 330 1345
Student Finance England (run by the Student Loans Company)
For loan and grant information and applications.
Phone: 0300 100 0607
Student Finance Wales
For loan and grant information and applications.
Phone: 0300 200 4050
Student Loans Company
For loan repayments.
Phone: 0300 100 0607 (England)
Phone: 0300 200 4050 (Wales)

Other sources of help

National Association of Student Money Advisers (NASMA)
For information, advice and signposting on student money matters.
National Union of Students (NUS)
Information and advice on all aspects of being a student.
Phone: 0845 521 0262 (England)
Phone: 0292 043 5390 (Wales)     
 
Turn2us
For benefit entitlement checks and charitable grants information.
Phone: 0800 802 2000
TV Licensing
Phone: 0300 790 6130
UK Council for International Student Affairs
Information, advice and signposting for international students studying in the UK.
Phone: 020 7788 9214