Food, books, accommodation, nights out, and even more food – it all adds up. Once you’ve stepped over that threshold to uni life, you’re officially gifted the badge of financial independence. But even with loans, bursaries and grants, going it alone can all feel a bit daunting. This guide will help you understand how student loans work and how to budget as a student to help you feel more confident.
Financial Literacy For Students
Food, books, accommodation, nights out, and even more food – it all adds up. Once you’ve stepped over that threshold to uni life, you’re officially gifted the badge of financial independence.
But even with loans, bursaries and grants, going it alone can all feel a bit daunting. In fact, 42% of students in the UK claim they don’t understand their student loan agreement, and 67% worry about loan repayments.
Whether you’re an undergrad or postgrad, some quick research into financial literacy for students can help you manage your money. This guide will help you understand how student loans work and how to budget as a student to help you feel more confident.
If you’re a Unite Students resident, you have access to Blackbullion’s free financial wellbeing platform which helps students develop financial skills and empowers better decision making. Blackbullion is an online learning platform that is jam-packed with tools, resources and courses to help you grow your financial skills and your confidence! Get free access here and take control of your finances.
Student Finance: What you need to know
It can be hard to wrap your head around Student Finance. When does it come in? How much money do you get? How will it impact your course?
Don’t worry! We’re here to demystify the student loan system so you can prepare for your time at uni and avoid splashing too much cash at once.
How does Student Finance work?
Student Finance is a package loan funded by the government that covers the costs of going to uni. This includes a tuition loan for your course and a maintenance loan for some of your living expenses.
Here’s what both of these loans cover and the difference between the two:
Tuition fee loans: These cover costs for your course up to £9,250 a year and help to pay towards lectures, seminars and equipment. Tuition loans are given directly to your university, and you won’t need to pay this back until after your course.
Maintenance loans: These help you with the day-to-day living expenses like travel, food, rent and books. Maintenance loans are paid into your bank account once a term and you can use it however you like, so you’ll need to spend wisely! The amount you get will depend on your circumstances, such as household income and where you’re studying.
How do student loan repayments work?
You won’t need to repay your maintenance and tuition fee loans until after you complete your course and start earning over a certain amount. When you earn over the threshold, the repayments will automatically come out of your wages.
You’ll stop repaying your student loan if your earnings fall below the threshold. That means some students won’t pay off the whole of their loan during their lifetime – though many still do.
Keep in mind that any outstanding loan amounts are written off after a certain amount of time. This depends on which repayment plan you’re on. Some loans are cancelled after 25 years, while others are written off after 40 years.
As it’s a loan, there’s also interest to consider. As of March 2024, it stands at 7.7%, but the interest rate changes regularly. Repayment terms can change even after you’ve signed the contract, which can affect earning thresholds, interest rates and loan wipeouts.
When does Student Finance come in?
Student Finance is paid in three instalments during the academic year. For tuition fees, they are paid directly to your uni:
At the start of term one – 25% of the tuition fee
At the start of term two – 25% of the tuition fee
At the start of term three – 50% of the tuition fee
Your maintenance loan doesn’t arrive in your account on the same date every year, but you can expect a payment once a term. The loan is split into equal instalments, and you’ll usually receive a text message or email a few days beforehand.
The months you can expect to your maintenance loan are:
First instalment – September
Second instalment – January
Final instalment – April
Remember, this varies from uni to uni. In Scotland, students receive their maintenance loan on a monthly basis, usually the 7th of each month. You can track the exact dates and the amount of money you’ll get each instalment by logging into your Student Finance account.
Still stuck on all the head-scratching terms? Check out our guide to understanding Student Finance jargon.
How to budget student loans
There’s no better feeling than seeing a large sum of money hit your account at the start of term. But with multiple expenses each month, maintenance loans can only cover so much. Plus, it needs to last!
Some 64% of UK students believe their maintenance loan isn’t enough to live on. With students spending an average of £1,078 every month, the gap between their loan and living costs has widened to £582 per month.
Nowadays, students need extra cash to cover the cost of living. That’s where part-time work, grants and bursaries, or relying on the Bank of Mum and Dad comes in. Here are a few ways you can make your money stretch while at uni.
Stick to a realistic budget
Financial literacy for uni students starts and ends with budgeting. Once you figure out your monthly budget, you can manage your money a little better with the following hacks.
Keep your student loan, savings and job salary in a separate account from your main account used for daily expenses.
Plan your meals ahead and build your shopping list around what you need for an easier food shop.
Track your spending with your bank’s mobile app and set up alerts for weekly balance updates.
Prioritise your essentials and arrange for payments to go out at the start of the term/month to avoid accidentally spending that money.
Give yourself a buffer for unexpected expenses and consider an interest-free overdraft for emergencies.
Easier said than done, but it’s a start! Get the full rundown on budgeting as a student with our handy beginner’s guide.
Find a part-time job
Part-time work is another great way to stash some cash and gain valuable work experience. There are plenty of part time jobs that you can do while you study, such as:
Bar staff
Waiter/waitress
Receptionist
Retail assistant
Library assistant
Student ambassador
This shouldn’t get in the way of your uni work, though. It’s important to balance your work, study and social life, so you can enjoy your uni experience to the fullest.
Look at grants and bursaries
Every little helps, as a famous supermarket once said. And the same goes for student finance: there are a variety of bursaries, grants, scholarships for students depending on your circumstances, including:
NHS Bursary
Travel Grant
Dependants’ Grants
Special Support Grant
Initial Teacher Training (ITT)
Maintenance Bursary (Scotland)
Disabled Students’ Allowance (DSA)
Worried you’ll miss out on grants and scholarships? See our National Student Money Week guide for more information on benefits and eligibility.
Your finance questions answered
Now you have a better idea of how Student Finance works, let’s go through the other burning questions around finances and money below.
What is a credit card and how does it work?
A credit card is a type of Visa card that allows you to spend money up to a certain amount, known as a credit limit. When you spend money with a credit card, you borrow from your card provider to make that payment, and then pay it back.
Credit cards can be used in the same way as debit cards, but you’ll need to pay back the minimum amount every month. The total amount you owe is called the balance. If you pay the balance over time, you’ll be charged interest. But if you pay the full balance all in one go, you won’t pay any interest on what you’ve borrowed.
Some credit cards offer an interest-free period on purchases. You may also be entitled to freebies, such as reward points and cashback.
What is an overdraft and how does it work?
An overdraft lets you borrow more money than you have in your current account. For example, if you have £0 in your account and you spend £20, your balance would be -£20. This means you’re now using your overdraft.
You’ll normally agree on an overdraft limit with your bank – known as an arranged overdraft. This is the maximum amount you can borrow, based on your credit score and how much you can afford. You may be charged interest on your outstanding balance.
You can repay your overdraft whenever you like. So, if you put £20 back in your account the next day, your balance becomes £0 and you’re no longer overdrawn. They make a great safety net for emergency purchases. Some student bank accounts offer interest-free overdrafts, with limits between £500 to £3,000.
What is a credit score?
A credit score is a three-digit number that shows how reliable you are at borrowing and repaying money. The score typically runs from 0 to 999 – the higher the number, the better your credit score.
Credit scores use a points system based on your credit report. This shows how you’ve managed any debts, bills and other finances. For example, if you always pay a phone bill on time, this may have a positive impact on your credit score.
A higher credit score means you’re more likely to get approved for credit cards and loans. If you want to take out a mortgage to buy a house in the future, your credit score could affect whether your application is accepted or not. If you’ve never borrowed money before as a uni student, you can still build a credit score. Consider taking out a student credit card, paying your bills on time and joining the electoral roll.
What is an interest rate?
An interest rate is a charge you get for borrowing money, shown as a percentage. When you borrow money for a mortgage, credit card or overdraft, you could pay a percentage of interest. The higher the percentage, the more you have to pay back.
In the same way, when you save money, your bank may reward you with a percentage of interest. This could be paid to you monthly or annually.
The Bank of England (BoE) sets the bank rate (or base rate) in the UK. This can affect interest rates set by banks. If the base rate goes up, lenders may charge more as the cost of borrowing money rises. The same goes for savers. If the base rate rises, the interest you earn for your savings will increase.
What is a payday loan?
A payday loan is a short-term loan for smaller amounts of money. They’re usually used for emergency money and can range from £50 to £1,000. You’ll normally agree an amount to borrow and are given up to a month to pay it back – around payday. The money is then paid directly into your bank account.
Payday loans are easy to get, but interest rates are extremely high. Payments are taken out by direct debit, and missed payments will lead to charges. It’s important to have enough money in your account when it’s time to repay.
Because of their high interest rates, payday loans are seen as risky. They can also damage your credit score. If you’re looking for a loan as a uni student, it’s best to find an alternative, as payday loans could cost you more in the long-term.
What is a tax code?
A tax code is a series of numbers and letters that tells HMRC how much tax is deducted from your salary before you get paid. This is part of the Pay As You Earn (PAYE) system, which is used to collect Income Tax and National Insurance from an employee’s pay.
If you have a job as a student, your tax code can be found on your payslip. Different people have different tax codes depending on their circumstances. You won’t have a tax code if you’re unemployed, self-employed or receive a state pension.
It’s really important to make sure that you’re on the correct tax code. Having the wrong code means you could be paying too much or not enough tax.
What is National Insurance?
National Insurance (NI) is a tax on earnings. You start paying when you turn 16 and earn over a certain amount. In other words, you must have an NI number to work in the UK, and you’ll have the same number throughout your life.
Your National Insurance contributions help to decide if you qualify for state pension, Jobseeker’s Allowance and other benefits. They’re automatically paid from your salary through the PAYE system, along with your Income Tax.
The amount you’ll pay depends on how much you earn. For example, if you earn £1,000 a week, you’ll pay nothing on the first £242, then 10% on the next £725.
Do I need to do a tax return if I have a part time job?
A tax return is a form that you need to submit if you owe tax on your income. Simply put, if you’re self-employed, you need to send a Self-Assessment tax return to HMRC every year. This is to pay Income Tax and National Insurance on the money you’ve earned.
In some cases, you may need to file a tax return even if you work part-time. Delivery drivers, like Deliveroo and Uber Eats riders, need to to file a tax return if they earn over £1,000 a year. This is because they are classed as self-employed.
How much tax you pay depends on the Income Tax band you’re in. The tax year runs from April to the following April, and your tax return will be due the following January. It’s your responsibility to send your tax return by the January deadline.
