A Foolish Guide To Student Finance

We give you the lowdown on how to make the most of your money when you're a student.

Student living can seem at once exhilarating and daunting. Probably the most difficult challenge you will face will be making sure your money lasts all year long and doesn't run out as soon as Fresher's Week is over. This guide is intended to see you through from before you start right up until you graduate. It is divided into sections so you can jump to the most relevant sections to you.

Choosing a city

If you're not sure which university to apply for (or to accept as firm choice), then you might benefit from comparing the respective university cities/towns in terms of living expenses.

The cost of living varies between cities; however you won't be given extra loan money unless you live in London.

As a general rule, the North East is cheaper than the South East (so, living in Brighton will be more expensive than Sunderland but you will still receive the same loan). So if it's a toss up between two universities, it could make sense to go for the cheaper option.

There are several sites on the internet which can help you assess the living costs (especially rental prices) such as www.accomodationforstudents.co.uk, and www.homesforstudents.co.uk. To judge how much a night out in a particular place is going to be try and find out the price of a pint or a glass of wine, you could do this by asking around or searching the internet. Anything you find online however, you may want to check is up to date.

Living in London will mean you're entitled to up to an extra £1800, which could help with the extra costs, but, obviously will land you in more debt. If you really want do the course, then it may be worth it, but if it's just because you can't choose between two courses then maybe it isn't. It might be more prudent to check for similar courses in cheaper areas of the country.

Student bank accounts

One of the major pros of being a student (aside from the drinking and the lie-ins of course) is the perky student bank account. Banks are dying to get their hands on the high earners of the future, so to entice you whilst you're a poor student they tend to treat you pretty well.

Offering an interest-free overdraft as well as other freebies, there are an array of accounts out there. Make sure you shop around for the perfect one as the first bank you come across may not have the best deal. Don't feel you should be loyal to any bank you already hold an account with, and similarly, a good package for one student may be completely wrong for another.

Be wary of the supposed benefits some of the banks give -- some banks offer 10% discount in certain shops, many of which are likely to already be covered by your NUS card. Others offer such perks as a free mp3 player, but a low overdraft limit or a high interest rate on debt is likely to make you worse off in the long run.

There is no 'one-size fits all' bank account but here are three important things to consider:

1. Interest-free overdraft size -- do you need a bigger than average sized one?

2. Added extras (such as freebies) -- can you make use of the freebies and are they at the expense of the overdraft and/or interest rates?

3. Interest rate -- does the account a good interest rate for when you are in credit?

To further compare student (and graduate) accounts, visit The Fool's Current Account Centre and read The Five Top Student Accounts

Dos and don'ts of student finance

DO: Make a weekly budget. It may seem square, but sitting down with a pencil and a calculator at the start of the year and figuring out how much you're going to get from loans, part time work and parents and then dividing it weekly will at least give you a rough idea of how much you can afford to spend each week.

DON'T: Lend money to other students, or borrow money from other students. You may never see your money again, or you might not be able to pay it back causing unbearable tension.

DO: Pay with cash! It's much harder to part with the cash in your hand than a piece of plastic.

DON'T: Try and compete with better off students (or more likely reckless spenders).

DO: Get a summer job! Preferably one that relates to your degree/career interests.

DON'T: Assume your student loan will magically appear, keep checking online and follow up with phone calls if necessary.

DO: Make sure you sign a P38(A) form when you get a summer job. As long as you earn under £5,235 you won't have to pay tax. Claim back any you may have paid erroneously. You will however still have to pay National Insurance at a rate of 11% of any earnings over £100 a week.

DON'T: Keep all your money in one, low rate current account; put a good chunk of your money into a high interest savings account. Not only does it have the potential to make you money, if you can't physically see it in your current account you'll be less likely to spend it.

DON'T: Be afraid to ask shops and businesses if they can offer any student discount.

While You're At University

Bursaries and Financial Hardship Funds

If you're really struggling to make ends meet, you may benefit from bursaries or financial hardship funds. Most higher education institutions offer them, and there are a couple of ways to obtain more information.

If you are yet to apply to university, you can visit the UCAS website, which gives details of courses with bursaries, or if you are already at university you can ask them directly.

As a general guide, if your fees are more than a set amount (£2,765 in 2007/08) and you receive the full Maintenance Grant / Special Support Grant then you likely qualify for extra help. Even if this doesn't apply, you should still check with your University as they may have something to offer you.

Credit Cards

Getting a credit card whilst you're a student can seem like a tempting way to get some extra cash, but the reality can be very different. You could end up with ever-increasing high-interest debt, with little or no way to repay it.

Before you sign up for a credit card, have a really good think, do you really need one? Spending on a credit card can make you feel like you're not spending any money because it's all on plastic and doesn't appear on your current account statement.

If you are good with your money (and be realistic with this consideration, you may think you're better than you actually are -- perhaps ask friends, family or even your student union for advice), then you could reap the benefits of credit cards. You may be able to enjoy the convenience that they offer, or have one as back-up in cases of an emergency. It goes without saying that you should shop around for the best deal.

If you don't have any debt, consider a cashback credit card where you'll get cash back as you spend.

Or you could go for a 0% on new purchases credit card. You'll only have to hand over the minimum payment each month and then you won't pay any interest on the resulting debt for up to 12 months. If you already have some debt, then take a look at 0% balance transfer credit cards where you can transfer your debt to a new card, and then not pay any interest on the debt for a year or more.

That said, bear in mind that as a student you may not be able to obtain these cards as your credit record may be poor or non-existent. What's more, this kind of 0% surfing is only for the financially savvy. The temptation to overspend can be very strong. In the majority of cases, it's probably best to steer clear of credit cards, save up for those extra purchases and learn the art of budgeting!

Reassessment

This is where your student loan and grant entitlement may be changed.

The most common reason for reassessment is your household income falling (or rising). If your student loan and grant entitlement is worked out based on the earnings of your parents, their falling income should mean you're entitled to more loan and/or grant.

In such cases, your local authority will be able to advise you of any new rights. You can apply to be reassessed at any time during the academic year. For more information about changes in circumstance, visit the Directgov website.

Contents Insurance

According to the Home Office, students are one of the groups most likely to become victims of crime, yet many students don't bother to insure their belongings, often because they think it's too expensive.

In reality, student insurance can be pretty cheap, costing as little as £33 per year, which, when you consider how much stuff you're likely to have knocking around is good value for most people.

It's not hard to see why students become such easy targets for thieves. They know that they all tend to congregate in one area of a city, are pretty lazy when it comes to locking doors and windows, and have a lot of rich pickings such as individual laptops, televisions and other valuables.

Specialist student insurer Endsleigh is the only insurance company endorsed by the NUS and as such can be seen as the most student-friendly, but other providers such as Saxon Insurance also offer competitive rates.

It's worth noting that laptops tend to be excluded from basic policies, and so an add-on may be required to insure what is probably your most valuable item. That said, companies such as PC World include theft insurance in their extended warranties, so make sure you're not already covered.

It's also worth checking to see if your parents' insurance policy will cover your belongings while you're a student, but don't get your hopes up, you'll probably need your own policy.

eBay/secondhand shops

Unfortunately, books are a necessary (and sometimes very costly) expense. Some text books can be as much as £100. Providing you don't need the just-published-last-month edition, you might be able to bag a bargain on websites such as eBay or www.sellstudentbooks.com, or a second hand bookshop.

Keep your books in good condition and you'll be able to sell them on to other students and recoup some of the cost of buying the next set. Don't rush into buying your entire booklist before term begins as you may find some books are used less frequently and taking them out of the library as and when they are needed could be more beneficial.

You probably have a mountain of stuff that you could offload for extra cash too. It's worth having a look around to see exactly what you're not using and exactly what could be sold. Rare/designer items obviously sell a lot better, but then again, a lot of small items sold at a low price will also mount up.

Make sure you learn some valuable eBay tricks. For instance, selling something at £1 will cost you 30p to list, but selling at 99p will only cost 15p. OK, so 15p might not seem like much of a saving, but if you really do sell that mountain, every little will help.

Food

There are several ways to reduce your spending when it comes to food. First off, shopping just for yourself can cost just as much as shopping for two, so sharing your shopping with your flat/housemate can save you both money.

Be wary of those tempting BOGOFs and 3 for 2s, if you don't usually buy the product, think twice about buying it just for the offer. Buying ready meals can seem the easy way out for those not used to cooking for themselves, but it's also an extremely expensive way to eat. Instead, make your own by cooking too much and freezing the leftovers. Read 10 Ways To Cut Your Food Bill for some more money-saving food tips.

Useful Links

NUS (National Union of Students) -- www.nusonline.co.uk

UCAS (Universities and Colleges Admissions Service) -- www.ucas.ac.uk

Student Support Direct -- www.studentsupportdirect.co.uk

Directgov -- www.direct.gov.uk

Home Office -- www.homeoffice.gov.uk

Endsleigh -- www.endsleigh.co.uk

Saxon Insurance -- www.saxoninsurance.com

eBay -- www.ebay.co.uk

www.sellstudentbooks.com

Inland Revenue -- www.hmrc.gov.uk

CAB (Citizens Advice Bureau) -- www.citizensadvice.org.uk

www.accomodationforstudents.co.uk

www.homesforstudents.co.uk

More: Ten Top Tips For Students | A Monster Guide To Student Finances | The Five Top Student Accounts | A Foolish Guide To Graduate Finance