Beware of treating free student loans as a licence to spend

STUDENT loans will be free from September for students taking up places at university, which is good news given they could end up with typical debts of up to £16,000 to fund a four-year course, according to the National Union of Students Scotland.
Interest on student loans is normally charged at either the Retail Prices Index in March, or base rate plus 1 per cent. While RPI turned negative last March, dropping to minus 0.4 per cent, base rate remained at 0.5 per cent, indicating that interestADVERTISEMENT

 should be charged at 1.5 per cent. However, with more students than ever heading off to college, the government decided zero interest would be charged on all student debts from September.

This will not be a licence for students to burn their way through a mountain of cash. Once inflation picks up again interest will rise, perhaps significantly. Students who use zero interest rates as a green light to borrow could come to regret it when repay day arrives. Repayments are deducted from wages once you earn £15,000, at the rate of 9 per cent of gross earnings.

Scottish students studying in Scotland can also celebrate the fact that they can attend university for free, as they do not face the fees charged by universities south of the Border. If you have lived in Scotland for three years, you should not have to pay tuition fees to your college or university, irrespective of how much you or your parents earn.

However, if you want to go to a college elsewhere in the UK you will have to pay fees. These are set by colleges individually, and will typically be around £3,225 for the coming year or £3,000 for Northern Ireland.

Similarly, non-Scottish students who wish to study north of the Border will face annual fees of £1,700, or £2,700 for medical students. Scottish students still have to fund their living costs, and those from families of modest means can apply for a Young Student's Bursary from the Students Awards Agency for Scotland, provided they are under 25, which can be worth £2,640 a year. However, this is means-tested and the full amount is only available to students whose families are on incomes below £19,310. It is clawed back as income rises, until it is phased out completely at £34,195. They can also apply for a small additional top-up loan.

If you don't qualify for a bursary, then you can try for a student loan of up to £4,625 a year for students living away from home. However, this again is means-tested and if a family's income is over approximately £55,550 a year, you will only receive the minimum loan of £915 a year. The Student Loans Company says the typical Scottish student owes it £5,487 when they enter the world of work.


Source

Case studies: Making ends meet is a struggle even with loans

STEVIE WISE, 23, is going into the fourth year of a religious studies degree at Edinburgh University and worries about how she is going to make ends meet this year.
She has struggled to get the level of overdraft she needs to sustain her living costs, and her credit card limit was reduced because she missed a payment by 30p.

Ms Wise depends on her two credit cards and bank overdraft to get by.

Over the sumADVERTISEMENT

mer she struggled to find a full-time job meaning she is now going to have to work part-time, which she had hoped to avoid in her final year.

As a last resort she has been forced to borrow money from friends and family.

"I've already had to drop out once for financial reasons, and it's a real worry for me.

"I broke my foot in October 2007 and I couldn't work, which meant my money troubles were horrendous, even worse than now, so I just had to cut my losses and go home."

And she says she is not alone in her money worries.

She said: "It's unbelievable what Scottish students are given to live off, I don't think people realise. We are just getting in more and more debt. Something really, really needs to be done."

Source