Personal Finance: Prudent Students' Reward in the Financial Planning

The Birmingham Post (England), September 20, 2003 | Go to article overview

Personal Finance: Prudent Students' Reward in the Financial Planning


Byline: Peter Axon

Thousands of young people will shortly be embarking on journeys to various points of the country to take up a degree course.

The university years should be among one's happiest besides being the most memorable. They should also transform your job prospects and boost your life-long earning power.

However, the jubilation of success at A-Level will soon have to be tempered by turning towards the practical necessities of becoming a student.

Some of the most crucial decisions for the new undergraduate class of '03 will focus on how to marshal personal finance. Indeed, 'freshers' face an exacting few months getting their finances into order, so they can devote maximum attention to their studies.

Going to university is very expensive and likely to get worse. The proposed increase in tuition fees combined with higher living costs will be responsible for placing a greater burden on overstretched students.

According to the National Union of Students (NUS), three years at university will require a total of pounds 22,570 outside London, including living expenses.

Meanwhile, the NUS estimates last year's graduates owed an average of between pounds 12,000 and pounds 15,000 on completion of their courses.

The prudent student will therefore be rewarded for a degree of financial planning and, hopefully, will avoid having to climb a mountain of debt. But this is much easier said than done.

So how can students contain what is likely to become the perennial struggle of making ends meet?

Student loans remain the cheapest form of borrowing. The Student Loan Company is government-run but strict limits are imposed on how much can be borrowed each year. But, unfortunately, interest rates are set to more than double to 3.1 per cent. The rate is determined each year on the retail price index in March.

Students living outside London can borrow pounds 4,000 and those living at home can apply for pounds 3,165.

Graduates usually begin paying back their loan in the April after they finish university or college. The conditions of repayment involves 60 monthly instalments. Banks are the next port of call. They are waiting in the wings in the hope of scooping up future high-earning customers.

These institutions all want a piece of this potentially lucrative market. Despite increased competition, most people stick with the first bank they choose for much of their life. That's why some banks lure students with a shower of freebies. Knowing they can make their investment back hundreds of times over. …

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