Personal Finance – Student Finance Introduction In this unit you will study the following things about paying for University.
University fees Maintenance costs at University – rent, food etc Grants and bursaries Loans from the student loans company Other loans.
Assessment At the end of this unit are six multiple choice questions. You need to get four out of six correct to pass this unit.
Expensive Going onto full time education after you’re 18 is expensive. The Government through the “Student Loans Company” gives people aged 18+ tuition fees or grants to help them through their education. Maintenance loans are only available for those aged 18-59.
Is it worth it? Graduates earn on average a lot more than non-graduates. Figures suggest you earn £160,000 more in a lifetime if you’ve got a degree (Source = University UK).
Pay back time You have to pay back this money ONLY when you are earning in a job. You start to pay some of it back when you earn £15,000 per year.
What do I have to pay for? There are two basic things you will have to pay for. 1) 2)
Tuition costs Maintenance costs
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Unit 2: Student Finance
Tuition fees These are the costs of your education which are paid to the university. The maximum is just over £3,290 a year in 2010. However, Lord Browne’s review for the Government is likely to lead to an increase in fees.
Maintenance costs This means all your living expenses from rent to food to books to beer.
Where do I get the money from? Grants – Not repayable (you only pay this back IF you leave your course early). Your University will tell you the rules if you are thinking of leaving the course early. Loans – you pay this back later (Student Loans Company).
United Kingdom – all different Wales is the most generous country with student money (if you live and study there). Scotland is pretty generous to students and the worst are England and Northern Ireland. Played
Won
Drawn
Lost
Points
Wales
3
3
0
0
9
Scotland
3
2
0
1
6
Northern Ireland
3
0
1
2
1
England
3
0
1
2
1
Website Google “Student Finance” and use the Directgov site. Then go to the Universities section on finance. There’s a section on finance for each country.
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Unit 2: Student Finance
Activity 1 Which word is missing Cross out the wrong word. (The answer’s on page 6.) Loan
A …………………………. must be repaid. Loan
Grant
A …………………………. does not need to be repaid.
Loan Grant
Low income students All countries in the UK are committed to encouraging students from poorer backgrounds to go to University and will give extra help. This is called the Maintenance Grant.
People on benefits The Special Support Grant is available if you are on benefits. It’s very similar to the Maintenance Grant for low income households. But you cannot get both.
Special circumstances If you have a child / adult dependant or any special needs / disabilities you can get grants to help you with living expenses and/or specialist equipment etc.
How much in grants? This page should give you a reasonable idea of what you can get in grants (don’t pay back). It applies to England. Remember the other countries are more generous.
Grants (you don’t pay this back) Low income earners can get some GRANTS to help with going to Higher Education for their living expenses (maintenance grant). The amount depends on how much your parents earn. The table gives you a rough guide.
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Unit 2: Student Finance
EMA (Educational Maintenance Allowance) Remember students on a full EMA can get a full grant (£2,906) no matter what their parents earn.
Maintenance grant Parents’ income
How much grant
£50,020+
Nil
£25,001 - £50,020
£1 - £2,905
£25,000 or less
£2,906
Average student
£800
Full EMA
£2,906
Loans – pay back later The Student Loans Company will give you a loan (you pay this back later) for the following:
Tuition fees Maintenance costs.
Tuition fees These are approximately £3,290 per year and are sent DIRECTLY to the University. You have to repay them later when you’re earning.
Maintenance costs The maximum loan you can get is about £5,000 per year. It’s higher if you live in London and lower if you live with your parents.
What about my parents’ income? Only grants and the maintenance loan are assessed on your parents’ income.
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Unit 2: Student Finance
Minimum 72% (2010 – 11) You will get a minimum of 72% of the maintenance loan no matter what your parents earn.
Activity 2 When you’ve finished a degree and working, how much do you need to earn a year BEFORE you pay ANY of your student loans back? Select ONE only. (The answer’s on page 6.) £5,000 per year £15,000 per year £30,000 per year £50,000 per year
Bursaries These are grants (free money). They can be from the Government or from the Universities themselves.
Health & Social Work Training The Government will give bursaries for these two types of University training courses.
Teacher training programmes You can get some grants from the Government for teacher training (around £1,000 per year) depending on how much time you spend on teaching placements each year. www.tda.org.uk
Sponsorship Some companies or public organisations will pay you to study at university or offer you a job in the holidays. They usually expect you to work for them once you’ve left. Some of them are:
BAE systems Corus group Countryside Properties Ltd National Grid The Armed Forces.
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Unit 2: Student Finance
University bursaries Some Universities will also make grants to or sponsor certain students. http://bursarymap.direct.gov.uk/
Two excellent websites These two websites are excellent for looking at how much you could get. The UCAS website has the number of bursaries that Universities themselves are offering. The information is in the “Entry profile” for each programme. http://www.direct.gov.uk/en/EducationAndLearning/ UniversityAndHigherEducation/StudentFinance/index.htm http://www.ucas.ac.uk/
Activity 3 Maintenance loans are available to all. (The answer’s on page 9.) True False Answer to Activity 1 Correct answer: A loan must be repaid. A grant does not need to be repaid
Answer to Activity 2 Correct answer £15,000 a year You only start to pay back your student loan when you are earning £15,000 per year (£300 per week). It’s on a sliding scale so you don’t pay much at £15,000 but as your wages increase you pay more
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Unit 2: Student Finance
Student Loans Company These loans are a must if you need to borrow money and they are available to you. They are the cheapest loans you will EVER get.
Interest rates For a student loan in 2010 you’ll pay 0% interest. This is linked to inflation. This will go up as the economy improves.
IF YOU CAN TRUST YOURSELF NOT TO SPEND IT!! It is sensible to take out your entire loan even if you do not need it this particular year. It might make you money if you invest it in a high rate savings account and you may need the extra the following year.
What if this isn’t enough The next cheapest place to borrow money is from banks. Banks are very keen to get your custom - you might make them a lot of money one day. They therefore make offers to students to join them. The one you need to look out for is one offering the largest FREE overdraft. You can make use of this and not have to pay any interest.
Warning Do NOT go over your overdraft limit or you will pay a lot for it!
I still need some more money Finally if all else fails take out a proper agreed loan with repayment dates from a carefully researched bank/building society. This will cost you but at least you will know how much you have to pay back.
Interest rates If you are going into debt you need to understand about interest rates. If you borrow £1,250 at 15% APR interest after 1 year you will owe £1437.50, which doesn’t seem too bad.
What happens if I don’t pay it off? In ten years time you will owe over £5,000 due to compound interest. This is THREE TIMES what you borrowed. IT’S IMPORTANT TO CHOOSE LOW INTEREST RATES WHEN BORROWING.
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Unit 2: Student Finance
Quick guide to main loans and grants 2010 -11 (Figures are approximate) Eligible Maintenance Grant
18+
Maintenance loan
18 - 59
Tuition fee loan
Income assessed Yes Earn under £50,020 or full EMA Yes. BUT everyone gets 72% at least Not income
18+
How much?
Pay it back?
From £0 – £2,906
No. Unless you leave the course early. Yes
£4,000 - £7,000 Depends where you live. £3,290
Yes
Quick guide to grants for special circumstances 2010 – 11 (Figures are approximate) Eligible Disabled student allowance Special support grant Child care grant
Disability /Mental Health condition or learning disability. You receive income related benefits Child(ren) under 15 who are in approved child care
Parents’ learning allowance Adults’ dependant grant Travel grant
If you have a child(ren).
Personal Finance
Income assessed No
How much? Varies depending on your needs
Pay it back? No
Yes
£3,000 max
No
Yes
No
Yes
Up to 85% of cost Max is: £150 a week = 1 child. £255 = 2+children. £1,500 max
An adult is financially dependent on you.
Yes
£2,500 max
No
Study abroad e.g. language students or do clinical training e.g. Medical / dentistry
Yes
Varies
No
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No
Unit 2: Student Finance
It is amazing how quickly your money disappears. Average These are the average amounts that you might have to pay if you were living in a house or flat on your own.
Typical Expenditure per week £ Rent
£85
Gas
£10
Electric
£10
Water
£14
Insurance
£3
Council tax
£15
Phone costs
£7
Savings
£5
Travel costs
£25
Card and debt repayments
£30
Food and household
£50
TV licence (it is illegal not to have one if you have a TV)
£3
Total
£247
Answer to Activity 3 Correct answer. True. Yes they are. However, if your parents earn more than £50,000 you will only get 72% of the maintenance loan.
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Activity 4 You are looking at something and deciding whether to buy it. Select the questions below you would answer Yes to. (The answer’s on page 11.) Yes Do I need it? Will I use it? Is it worth it? Have I checked if it's cheaper elsewhere? Can I afford it?
Students and tax No tax Full time students pay NO tax if they meet THREE conditions. 1. 2. 3.
You do paid work ONLY in the holidays (Christmas, Easter, Summer) You return to full time education after the holiday period Your total income for the year is BELOW the Personal Tax Allowance (2010 - 11 = £6,475 per year and £7,475 in 2011 -12).
Not income Student loans, scholarships and educational grants are NOT classed as income for student tax purposes.
P38(S) This is the form you and your employer must fill in and sign. If you don’t fill it in you will pay tax.
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Unit 2: Student Finance
Term time work If you do paid work in term time you WILL have to pay tax.
Reclaim tax If you earn LESS than the Personal Tax Allowance (20010 - 11 = £6,475 per year and £7,475 in 2011 -12) you can get ALL the tax back that you’ve paid. Get in touch with your local tax office and fill in a P50.
Tax office – how to find it Google 'Tax office locator'.
National Insurance and students You have to pay National Insurance like everyone else. You pay if you earn approximately £110 or more per week (2010 - 11). Answer to Activity 4 Correct answer. All boxes should be ticked. Correct answer. Well done. You are a careful buyer and your money will last longer .
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Unit 2: Student Finance
Unit test Here are six questions about this unit. You need to get four out of six correct to pass.
Question 1) You MAY have to pay back a student maintenance grant if you leave the course True False
Question 2) When looking for a loan to get extra money to pay your way the most important thing to consider is: The percentage % APR Interest rate charged The insurance included The size of the bank The free gifts offered
Question 3) When you’ve finished a degree and working, how much do you need to earn a year BEFORE you pay ANY of your student loans back? £5,000 per year £15,000 per year £30,000 per year £50,000 per year
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Unit 2: Student Finance
Question 4) Select TWO only. Which of the following University degrees MAY attract bursaries from the Government? Nursing Art & Design Sports science Social work
Question 5) Which categories of students can get GRANTS (depending on income) at University from the Government? Foreign students Disabled students Low income students Students who have children
Question 6) The Government is committed to helping students from low income families go to University. How has it done this? By making A Levels easier By having a quota system at Oxford and Cambridge for low income By building City Academies By giving maintenance grants to students from low income
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Unit 2: Student Finance
Unit test 1.
You MAY have to pay back a student maintenance grant if you leave the course early. True False
2.
When looking for a loan to get extra money to pay your way the most important thing to consider is: The percentage % APR Interest rate charged The insurance included The size of the bank The free gifts offered
3.
When you’ve finished a degree and working, how much do you need to earn a year BEFORE you pay ANY of your student loans back? £5,000 per year £15,000 per year £30,000 per year £50,000 per year
4.
Which of the following University degrees MAY attract bursaries? Tick TWO only. Nursing Art & Design Sports science Social work
5.
Which categories of students can get GRANTS (depending on income) at University from the Government? Foreign students Disabled students Low income students Students who have children
6.
The Government is committed to helping students from low income families go to University. How has it done this? By making A Levels easier By having a quota system at Oxford and Cambridge for low income students By building City Academies By giving maintenance grants to students from low income households.
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Unit 2: Student Finance