How to survive in the student loans jungle EDUCATION 2001

Right. I'm off to uni, but all I hear is that I'll be in more hock than a Euro wine lake True, average debt when you leave higher education is more than 10 grand. You're quite lucky, though. The new type of student loans which this year's graduates will be the first to repay, should make it less of a hassle.

A debt's a debt isn't it? I'll still be in the red for years!

Sort of, these loans mean the less you earn the less you pay. OK, let's take it a step back. Before you start your higher education course, you must fill out your LEA's (local education authority) HE1 and HE2 forms. These determine how much you'll pay.

Pay for my education? Outrageous

Perhaps, but it's argued that as graduates earn more than non- graduates you should contribute in the form of tuition fees this year it's 1,075, but as this is meanstested not everyone pays. If you're over 25, married for at least a year, or estranged from your parents, it's your income that counts.

But for most students it depends on your parents' residual income and any substantial investment income of your own. With divorced parents the LEA decides which to assess.

Residual income, fine - with what they spend that's virtually nothing

'Fraid not. It roughly means your parents' pre-tax income minus interest and pension payments. If it's under 20,000 you don't pay fees, if it's over 29,785 you pay the full whack, though there are special-circumstance allowances in between, when you part- contribute.

How on earth will I pay it?

Well, if it's your parents who are assessed, they're supposed to contribute, though there's no legal way to force them to.

I suppose you just hope they're rich, then you needn't apply?

That would be a mistake - if you don't apply you won't get an LEA eligibility letter, so some universities will try to make you pay the much higher overseas student fees. Also, your student loan depends on this means-test.

OK, back to the loans. What do I get?

It depends. Loans are paid each term. You pick up the first cheque from your college loan office. Fulltime students living at home with parents get a maximum 3,020 a year. Live independently and it's 4,700 in London and 3,815 outside - less in your final year, as the summer holidays aren't covered. You are automatically entitled to 75 per cent of those maximums, and the rest depends on the means-test. The more your parents' residual income is over 29,785, the more they should contribute.

Before, you were banging on about radical new loans

Glad you remembered. From the April after you leave university you will repay nine per cent of anything you earn above 10,000 a year, straight from your employer's payroll, like income tax, until your loan is paid off. Earn 11,000 and you pay nine per cent of 1,000 or 90 for the year.

What if I need more cash?

Grab a special student bank account. They offer interest-free overdrafts, aiming to gain your custom for life, as you're more likely to get divorced than swap bank accounts. Lloyds TSB gives the most, up to 1,500. Also try applying to your college's welfare department student parents, those with disabilities, or other special circumstances may receive extra cash, and students suffering financial hardship may get access to extra funds - even if you don't think you meet the requirements, you'll never know unless you ask.

Whether you're short of cash or not, there are bags of scholarships available for academia, sports, hobbies or even just for being the child of a banker who retired early.

You're not serious?

I am. Check out www.scholarship-search.org.uk or for a wider range of grant directories in libraries.

If I get enough money, should I forget a loan?

Absolutely not. Student loans are cheap debt, the interest is at the rate of inflation, currently 2.6 per cent, so take it and put it in a safe savings vehicle like a tax-free mini cash ISA. The best payer is internet bank www.smile.co.uk at 5.75 per cent. If you put the maximum London loans in Smile throughout your course, after interest charges, you'd make just over 1,000, so taking the loan, even if you won't spend all of it, is definitely worth it.

That reminds me, do I need to pay tax if I work?

Like anyone else, you can earn 4,535 tax-free this year. If you're not going to earn that much, ask your employer for a P38(S) form to make sure you're paid tax-free.

What happens if I drop out?

You'll still need to pay fees for that year and repay any loans taken. Be positive though - you may build a debt, but there are loads of people who'd pay to be a student all over again.

Useful contacts

Student Loans Company - www.slc.co.uk or 0800 405010. Government funding handbook www.dfee.gov.uk/studentsupport. Consumer credit counselling service - 0800 1381111.

Copyright 2001
Provided by ProQuest Information and Learning Company. All rights Reserved.