Student Guide: Managing your Loans and Finances

Managing your Student Finances

Going to university (or college) can be a liberating experience. No parents to tell you when to get up in the morning, or teachers to give you detention when you don’t get your work in on time. However, it’s easy to fall into this hedonistic lifestyle of partying all night and sleeping all day and spending all your money in the process.

You wouldn’t believe how many institutions will be falling over backwards to loan you as much money as your beer belly desires. The banks will throw overdrafts at you and there are more loans and grants than you can shake a stick at.

Be warned however, although it seems so at the time, this is not free money, and you will one day have to pay it all back. So with that in mind, here are a few tips to help you keep those finances in order.

The Banks

When you head to the fresher’s fair, you find every bank under the sun, advertising their ‘new’ amazing student offer; a free toaster, puke bucket and young person’s bus pass for every new account and an overdraft that will pay for your new Nintendo Wii AS WELL AS 204 nights on the lash.

At this stage, the banks may seem all sweetness and honey, but the moment you are no longer enrolled they’ll come after you gnashing their teeth like hungry piranhas. Therefore it’s best, if you can possibly manage it, to steer clear of your overdraft. Of course you might use a few pennies in times of starvation, but look at more as a last measure than a luxurious freebie.

Student Loans

The ludicrous bureaucracy that accompanies the process of applying for your student loan is tedious and tear-your-hair-out irritating, but unless your parents bathe in rivers of gold, your loan is likely to be essential. The Student Loans Company website is where the magic happens, and it’s worth taking the time to familiarize yourself with the site before sending off your form as the slightest mistake could mean an extra month of living on leftovers.

The loan is low interest and you don’t have to think about paying it back until you’re earning at least £15,000 per year. Having said that, the monthly repayments are noticeable so it’s worth saving as much as you can. If you do take a student loan, which the vast majority of students will, then you’ll find yourself paying for it later. Loans are means-tested, but you can expect £1,200 three times per year (barely enough to cover the rent).

Student Grants

Brilliant. If you happen to be over 21 our generous government will afford you and extra £2,500 or so each year which you DON’T have to pay back. This grant is essential if you don’t want to spend every waking minute outside of University working in Uncle Joe’s Kebab Parlour, however, although it may sound like a lot of money it really doesn’t go far. It is just about possible to live off your loan and grant, but finding a job is an excellent way of subsidising your partying habit.

Bursaries

Most University’s offer means tested bursaries to help students who come from low income families. They’re quite sneaky about these and you’re unlikely to hear about them until late on in your first year, so as soon as you arrive at Uni, it’s worth popping down to the main office, or the Student’s Union and asking someone the best way to apply for bursaries. Bursaries can mean an extra £1,200 each year.

Most students are likely to spend their University lives without two pennies to rub together, but they’ll have a great time nevertheless. The problem for students, in terms of their finances, is lack of foresight. With just a small amount of planning, perhaps a part time job, and researching the right institutions, students are likely to enter the big bad world in much better financial health.

Student Finances Need Not Be a Minefield

Students are increasingly finding it expensive to get a college or university education with increased tuition fees and living expenses. Thinking about student financing can also be time consuming and requiring extensive research to get the best deal and finance package to suit the student’s needs. For those students who feel they can put off thinking about financing for “later,” they may just find they make decisions which can be costly for them.

Being a student can be a very memorable period of an individual’s life, but it can also be a time when the student is constantly thinking about student financing and mounting student loan debts. A student need not be broke all the time, and carefree student days also need not be relegated to history. Instead, with a bit of financial planning, a student can have a good time without worrying about incurring large student debt.

There are institutions that are ready to help a student look at his/her financial requirements and compile an appropriate finance plan. Students who are fortunate to have financial support from parents could also benefit from obtaining additional information. However, for the majority of students heading off to college and university, the issue of student finance and student loans becomes a looming reality.

Student Debt

Going to college or university may well be getting more expensive, but it is also becoming a requisite for many students. Many believe that getting a degree or vocational qualifications will enhance their prospects in a competitive and increasingly global job market. However, this desire to undertake studies comes at a price which increases each academic year.

According to Changeboard, more than 50% of all graduates in the USA will have student loans totaling $20,000 by the time they graduate. This statistic is reaffirmed by The National Centre for Education Statistics, who reports that two thirds of all College students have student loans after graduation with an average of $19,237. Additionally, a quarter of undergraduates borrow more than $25,000 and one tenth borrow more than $35,000

In the UK, the picture is reflective of the changing times in the UK education system. According to university research organisation Push, the average student graduating in July 2017 will find themselves with nearly £22,000 in debt. Many will be paying student loans well into their 30s and in some cases, even into their 40s.

Planning student financing can help to manage student debt better. Many students are now coming out of colleges and universities with increased levels of debt and are starting their working lives saddled with debt they incurred as students.

For many students, working part time and studying full time has become the norm, despite protestations from professors and other teaching staff. Teaching staff believe that holding down working commitments impacts the grades and overall learning experience for students.

Sources for Student Funding

The following highlights potential sources of funding for students

  • Private student loans (account for nearly 25% of all student loans in the USA)
  • Federal Student loans
  • College scholarships
  • Parents and friends
  • Personal savings
  • Working during studies
  • Charities
  • Religious institutions
  • Bursaries
  • Employer sponsorship for vocational and further degree qualifications
  • Global institutions like the Soros Foundation, World Health Organisation, AMIDEAST, and the United Nations

Where scholarships are concerned, the student may find that s/he may need to submit and an essay or other written pieces of work. Each institution awarding a scholarship will have the necessary details and background and qualifying requirements.

The onus falls upon the student to get the best student financing information and deals. Therefore, planning and preparation is imperative, even though the student may be tempted to leave this to the last minute. The downside of leaving financial planning for studies to the last minute will mean decisions will be made in haste and may not serve the student in the long run.

College Loans

Further information for students in the USA and UK can be found below:

  • Student Federal Loans
  • The Student Aid website also contains a checklist for prospective students and their parents
  • Direct Consolidation Loans

Information on student financing in the UK can be found from the following sources:

  • Student Loans Company
  • Direct Gov

There are many financial companies offering cheap student loans, but as a word of caution, students pursuing this option may be best advised to read the small print before signing on the dotted line.

As the student population continues to explode globally, so will the number of financial and non financial, reputable and non reputable companies offering an array of financial services and products to the student market. A student who engages in financial planning, research and preparation will be the one who succeeds in the long run.

Student Finance England Loan Deadlines 2016/17: When Students Should Apply for Non-Means Tested & Income Based Loans

Students planning to start or resume full-time courses at colleges and universities for the 2016/11 academic year may find it useful to apply for Student Finance England loans earlier rather than later. Those that hit government deadlines will stand a far better chance of being paid their loan on time for the start of term. What are the deadlines for student finance this year?

Student Finance England Deadlines for Non-Means Tested Loan Applications

If a student is making an application for finance that doesn’t need to be means tested then they are being asked to apply by the 23rd of April 2016. These applications are based on circumstances where the parental/household income will not need to be checked during the loans process.

Student Loans Applications That Will be Based on Income Assessment

If a student is making an application that will be means tested then their application date is the 21st of May 2016. The finance given here may be based on the income of the household.

What do the Student Finance Application Deadlines Mean?

The recommended deadlines are based on giving a better chance that a loan will be paid in time for the start of the student’s academic year. There may be, as was evidenced in recent years, no guarantee that finance will be processed on time but hitting the deadline may give the best chance of this happening. Applying later may delay the payment process.

Should Student Loan Applications be Made Through Student Finance England, Student Finance Direct or DirectGov?

Online applications are now initially made via the government’s DirectGov website. Students can also download a paper-based application from the site’s student areas if they prefer not to apply via the Internet.

The official name of the UK’s student loans company has now changed from Student Finance Direct to Student Finance England. The base organisation remains the same and any student that has applied for a loan previously can use the same details for new applications.

What if the Student Hasn’t Been Offered a Place Yet?

The DirectGov website recommends that students try to meet the application deadlines even if they haven’t got a firm offer of a university or college place yet. Students can simply enter their first choice on the form and change it later if necessary.

Using a Student Finance Calculator May be Useful

Those that are unsure how much finance they may be qualified to be given can use the DirectGov student finance calculator. This gives an estimate (but not a guarantee) of options including student loans, grants, scholarships and bursaries. This may be worth doing to help assess income before starting college.

General Money Management Tips for Students

Those about to leave home to study for the first time may need to set up financial accounts and to think about budgeting their money. Choosing the best student bank accounts and other financial products such as credit cards can help with this process. Thinking about how they will manage their money at university may also give them a good start.

Using Student Loans to Finance the High Cost of Student Loans

According to the National Postsecondary Student Aid Study, sixty-six percent of all undergraduate students received some sort of financial aid for the 2013-2014 school year and thirty-eight percent took out an average of $7,100 in student loans. Parents of some of those students borrowed an average of $10,800 in Parent PLUS loans. Borrowing those amounts over a period of four or five years adds up to a heavy debt load for a new graduate. Students should carefully explore all available sources of financial aid and realistically assess their ability to repay any loans.

Federal Student Loans

Federal loans offer the best deal. The government charges lower interest rates than private lenders and most federal loans don’t require a credit check. Federal student loan interest rates are the same fixed rate for all loans made under the same program (e.g., subsidized, PLUS) for a particular disbursement period.

The Department of Education’s Federal Direct Loan Program options include subsidized loans, unsubsidized loans, and PLUS loans. Subsidized loans are made based on financial need and don’t accrue interest while the borrower is in school, during the grace period after graduation or during deferment periods. Unsubsidized loans don’t require a demonstration of financial need, but interest is charged from the time the loan is made. Parents and graduate students can obtain PLUS loans if they meet the program’s credit underwriting criteria. Like unsubsidized loans, PLUS loans do not include any interest free periods.

Prior to 2010, the federal loan program allowed private lenders to originate federally guaranteed student loans. The Student Aid and Fiscal Responsibility Act made the Federal Direct Loan Program (“FDLP”) the sole source of all federal student loans.

Private Student Loans

Because they lack a payment guarantee from the government, private lenders charge higher interest rates than FDLP loans and borrowers must satisfy credit and other underwriting requirements. Private student loan interest rates are determined by adding the prime rate or LIBOR to a risk margin based on the borrower’s credit rating. Students (and their parents) should avoid private student loans unless savings, scholarships, grants and federal loans won’t pay all education costs.

Student Loan Consolidation and Repayment

After graduation, federal loan borrowers have ten years to pay off their loans with either fixed equal monthly payments or graduated monthly payments that increase every two years. Those with more than a minimum total amount of Direct Loan debt  can qualify for a twenty-five year extended repayment term.

FDLP also offers an income contingent repayment plan that calculates payments based on the borrower’s adjusted gross income. Some borrowers can even get a discharge of any remaining debt if the income contingent repayment plan payments are not sufficient to pay off the loan within 25 years.

A federal loan consolidation combines one or more federal loans into a new loan. The monthly consolidation loan payment may be lower than the total of the monthly payments on the loans before consolidation. Unfortunately, the Direct Loan Program will not consolidate federal loans with private loans.

For private loans, repayment terms usually range from ten to twenty-five years. Some lenders allow students to defer all payments of principal and interest until six months after graduation. Other loans collect interest only payments while the borrower is enrolled in school or require immediate principal and interest payments.

Advanced planning, research and budgeting can help students avoid surprises and undue hardship after graduation. The Direct Loan Program and other sources publish resources to help with the process. Many websites also include a student loan repayment calculator that estimates future monthly payments.