Student money and debt

 April 2017

Fact sheet no. 33 SCOT Student money and debt

Important: 

Is this fact sheet for me?

This fact sheet is for students who: 

  • either live and study in Scotland; or
  • normally live in Scotland, but are studying elsewhere in the UK.

If you live in England or Wales the rules are different. Contact us for advice.

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. Some students in Scotland may also have fixed-term loans taken out between 1998 and 2000. If you took out a loan during this period, or are unsure which type of loan you have, contact us for advice.

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.

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.

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. Contact us for advice about how to complete your budget.

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. 

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

Information: 

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.

Extra advice:

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.

 

 

Tuition fees

If you live and study full time in Scotland the Student Awards Agency for Scotland (SAAS) may pay your tuition fees.

SAAS use a number of factors to decide how much it will pay, including:

  • your age;
  • your family situation, for example if you have any dependent children;
  • where you study;
  • whether you will study full or part-time;
  • if you have taken any previous courses; and
  • what course you will take. 

For more information on the help you can get to pay your tuition fees, or to apply for your tuition fees to be paid, contact SAAS. See Useful contacts at the end of this fact sheet.

Important:

studying elsewhere in the UK

If you are a student from Scotland and study elsewhere in the UK you will have to pay tuition fees up to a set limit. You can take out a student loan to pay this which is not based on household income. You will have to pay this loan back. For more information contact the Student Loans Company (SLC). See Useful contacts at the end of this fact sheet.

Student loans and bursaries

Important:

if you don't finish your course

You will have to pay back a proportion of your bursary if you withdraw from your course during term-time. If you cannot afford to pay this money back, contact us for advice.

If you are a new or existing student you can apply to SAAS for a loan to help with living costs. How much help you get may depend on your household income, the type of course you are studying and whether your course is full or part-time.

You can also apply to SAAS for a bursary to help with living costs. This is in addition to your student loan. The amount you get will depend on your household income. If you get a bursary you do not have to pay this back.

Household income can include income from:

  • your parents and step parents;
  • your partner or spouse; and
  • your unearned income such as pensions.

The amount of loan or bursary you might get depends on your circumstances. Contact SAAS for more information.

Important:

apply as soon as possible 

Don't wait until you have confirmed your place or started your studies before applying. Contact SAAS for more information about when you can apply.

Whatever level of loan or bursary you get, you will need to make an application every year for as long as your course lasts.

For more information on the help you are entitled to or to apply for a bursary or loan, contact SAAS. See Useful contacts at the end of this fact sheet.

Repaying your student loan

Warning:

finishing 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’).

The income threshold is:

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

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

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 your loan to the Student Loans Company directly.

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 the same salary.
 

 

 

 

Information:

interest

Interest on the amount you owe is linked to inflation. The amount of interest you will pay can go up and down and will be applied for as long as the loan lasts. The SLC will have the most up to date information about rates of interest. See Useful contacts at the end of this fact sheet.

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

When will my loan be paid off?

Your repayments are not set over a fixed period. The level of 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 you complete your course;
  • the total amount you borrowed; and
  • the interest rate.

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

Can my loan be written off?

If you took out a student loan for the first time before 1 August 2007 and have kept up with repayments, the Student Loans Company will usually cancel your loan and the interest 35 years after the April that your repayments were first due. Your loan may also be written off if you can prove that you are permanently unfit for work. If you took out your loan before 1 August 2007, the rules are different. Contact us for advice.

Other types of financial help for students

Extra information:

claiming benefits in the summer holiday

Full-time students may be able to claim benefits over the summer period between the years of their course. This only applies in certain circumstances. Contact us for advice.

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. This will make it easier 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 towards the end of this fact sheet.

Disabled Students’ 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.

Discretionary funds – these can help you if you have financial difficulties or your financial situation is preventing you from going on to higher or further education. They are available to full and part-time students. For more information about discretionary funds contact your university or college.

Childcare fund – this is money to help you to pay towards registered or formal childcare costs including child minders and after school clubs. All students who need support are welcome to apply but funds are limited. Even if you are eligible you are not guaranteed any help. For more information about the childcare fund, contact your university or college.

Dependants’ grant – this is extra help for living costs if you are a full-time student and have an adult who depends on you financially. It depends on your family circumstances and income. As long as you complete your course, this grant does not have to be paid back.

Lone parents’ grant – this is extra help for living costs if you are a full-time student and are bringing up children on your own. It depends on your income and does not have to be paid back as long as you complete your course.

Allied health professions

If you are studying an Allied health profession (AHP) course such as occupational therapy, physiotherapy and radiography, this will be funded slightly differently depending on where you study. You should contact SAAS for advice and more information about these types of qualifications. See Useful contacts at the end of this fact sheet.

Nursing and midwifery

The Scottish Government will pay your tuition fees if you study for nursing or midwifery. You will also get a bursary which is not based on your other income. Contact SAAS, for more information about this and other help you can get. 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. Try searching for grants at www.turn2us.org.uk. You can search for scholarships at www.scholarship-search.org.uk.

Welfare benefits

Most students do not qualify for means-tested benefits. 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.

Professional and career development loans

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

For more information phone the National Careers Service on 0800 100 900.

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 and restaurants and many universities will employ people 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 you working.

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 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:

do a budget

Do a budget so you can work out what you can afford to repay to your debts. Use our self-­help pack to complete 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 priorites. 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.

Debts to your university or college

These debts may include accommodation costs, 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 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 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. If you have had rent arrears before, the university or college may be reluctant to provide you with accommodation in future years. This means you should try and come to an agreement to pay back what you owe.

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. 

Utility debts

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.

Treat gas and electricity debts to your current suppliers as priorities, 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.

Remember:

only pay for energy you have used

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

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 sheriff court if you don't come to a repayment arrangement. Contact us for advice.

TV licence

Extra advice:

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, including getting a criminal fine against you. 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 will 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.

Credit debts

Extra advice:

do a personal budget

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

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

Overdrafts

If you have an overdraft, you may also have other debts, such as a credit card with the same bank. If you want to keep your overdraft, for example if it is interest free, you could treat any debts to the same bank as a priority and pay them as normal. This is because if you don’t pay your minimum payments on these debts the bank could take away your overdraft. They could also start charging interest which could increase the amount you owe very quickly. Your bank may also be willing to extend your overdraft, or you could make an arrangement to pay it back once you have graduated. If you cannot pay debts with your current bank as normal, for example because you cannot afford the minimum repayments, you may need to open a new bank account. Contact us for advice.

Information:  

your credit rating

If you are behind with certain types of debts, this information will be recorded on your credit file. Your credit file is used by lenders 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.

Useful contacts

Student loans, grants and bursaries     

Student Awards Agency For Scotland (SAAS)
For loan and bursary information and applications.
Phone: 0300 555 0505
www.saas.gov.uk

Student Loans Company
For loan repayments.
Phone: 0300 100 0607
www.slc.co.uk

Other sources of help     

National Association of Student Money Advisers (NASMA)
For information, advice and signposting on student money matters.
www.nasma.org.uk

National Union of Students (NUS)
Information and advice on all aspects of being a student.
Phone: 0131 556 6598
www.nus.org.uk

Scholarship search
www.scholarship-search.org.uk

Turn2us
For benefit entitlement checks and charitable grants information.
www.turn2us.org.uk

TV Licensing
Phone: 0300 790 6130
www.tvlicensing.co.uk

UK Council for International Student Affairs
Information, advice and signposting for international students studying in the UK.
Phone: 020 7788 92144
www.ukcisa.org.uk