A recent government report suggested that university dropout rates have increased sharply in recent years, with many citing the pressures of student hardship (lack of money) as a key factor. The report also found that student debt had trebled in the past four years, and it now appears the norm for UK graduates to leave university owing as much as £10,000. Clearly, today’s students need to manage their personal finances or risk getting into deep water.

Phil Davis, head of advice and development at the University of Lincolnshire and Humberside, deals with many students’ financial worries. “Although I have not noticed any direct correlation between debt and dropout rates at this university, I have spoken to students who have had to leave higher education as a result of student debt.”

First-year students will need a bank account from the beginning of their course. Before you rush to open an account, shop around for the best bank to meet your requirements. Most banks offer perks, with Barclays currently offering £40 worth of Waterstones and HMV vouchers, and 15% off purchases at these retailers. The high-street banks all offer interest-free overdraft facilities, with Lloyds TSB offering a limit of £1500 for years 1-3, and £2000 for any subsequent years. Natwest offer a £1000 limit for years 1 and 2, £1500 for years 3 and 4, and £2000 in year 5. HSBC offer similar limits, £750 for year 1, rising to £1500 in year 4. Barclays seems to be the most stringent in terms of overdraft limits, only £200, up to £1250 on request.

At all costs, try to avoid exceeding your overdraft limit, as some banks refuse access to your account, while others charge high rates of interest. If you do get into trouble, or can see problems ahead, talk to the account manager at your bank. They may offer to extend your overdraft limit, or give advice on managing your debts. Whatever you do, don’t avoid your bank manager – they won’t forget about you.

Credit cards are optional in most student account packages, usually offering a £500 limit. They offer flexibility, particularly if travelling overseas, although for shopaholics they offer the chance to spend money you don’t have. So if you have trouble budgeting, avoid them.

Opening more than one student account might seem like a canny solution to spiralling debt, and some students do hold more than account. However, many banks will only open a new account after stamping your UCAS acceptance slip. And as you only receive one of these, joining another bank is difficult. Any new overdrafts you run up will have to be paid off eventually, and we’re not all guaranteed a high salary job in 2-3 years’ time.

Student loans have become a necessity for students following the virtual abolition of grants. Full loans for 2000/1 were set at £4590 (London), £3725 elsewhere, or £2950 for students living at home (proportionally lower for final year students). Loans are paid to students either as a lump sum, or, as many recommend, in three instalments. These make up the bulk of a student’s income, though students are increasingly advised to save before they come to university, particularly if studying in big city institutions. Repayments are relatively straightforward. Graduates become liable to begin repayments the April after graduation, and only when income exceeds £833.33 per month (£192.99 per week, £10000 per annum). Graduates have as long as they need to pay off the loan, and if you can hold out long enough, it ceases to exist once you reach 65!

Students living without grants need to budget their meagre resources. There’s no set way for managing your finances – everyone is different in their needs and their financial resources. Spend an hour with a pen and paper, calculating your expected income and outgoings. Your income will include loans, any grants still available, parental contributions, scholarships and savings. Your outgoings include rent, bills, food and clothes, travel, socialising. Add 10 percent to the total to cover unexpected costs. You will now have an idea whether you can cope, or may need to work to boost your income.

If you have to work, know what your employment rights are. Many students are taxed unnecessarily, because their employers do not provide them with the relevant paperwork. Currently, your personal allowance (the amount you can earn without being taxed) is £4385, rising to £4535 in the tax year 2001/2. You will need to complete a P38 tax exemption form and return it to your employer so that you are not taxed PAYE; you still have to pay national insurance. If you are taxed, you can claim your tax back, although usually only when the job has finished.

Working while you study is a balancing act. Particularly in your final year, don’t jeopardise your degree by pulling too many pints. You’ll have the rest of your life to pay off your student loans.

James Cleary

James Cleary is a final year student, BA Communications and
Journalism, at the University of Lincolnshire and Humberside.

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