Swot up on student finances

Here are some top tips for students looking to get their finances organised before they head to university, and for parents and grandparents who might want to help with higher education costs.

Apply for student loans ASAP
If you haven’t already applied for a student loan and you’ll need to borrow money to cover your expenses, you should complete your loan application as soon as possible.

Chris Larmer, executive director at the Student Loans Council said: “If you haven’t already done so, please apply online now to ensure you have some funding in place as close to term start as possible. If you are applying late, you may get less money than you expect initially. This is because it can take 6-8 weeks to process a student finance application, which means that applications may not be fully processed by term start. We will do our best to ensure that all eligible applicants have some money in place by awarding the minimum maintenance loan amount first, followed by a top-up payment if students are entitled to more funding.”

Students should also start looking into student bank accounts, with many of these offering tempting incentives to sign up.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Student account providers have not held back with tweaking perks this year, which are enticing and could save students some cash.

“Unlike last year, two banks are offering a free cash incentive upon opening, namely HSBC with £80 and NatWest with £50, which was unheard of in 2020 for student accounts. Since the last academic year there is a better variety of perks, so students can debate which type of account will give them the most value based on their spending habits.

“For example, those looking to save some cash on study materials will find Barclays offering an online library with Perlego which would usually cost £96 a year, plus the bank continues to offer an attractive interest-free overdraft of up to £3,000.”

Helping student children or grandchildren
Two-thirds of parents (66%) are planning to help their children with university costs, according to research by the Association of Investment Companies.

If you can afford to help your student children financially, think carefully about how you’ll do this. Rather than handing over a lump sum at the start of the year for them to spend how they want, it may be better to pay for one thing specifically, perhaps their rent or travel costs. That way you’ll have peace of mind that the money you give is helping them reduce the amount the amount they’ll need to borrow.

Grandparents may also want to contribute towards higher education costs, but must be careful not to fall foul of inheritance tax rules.
Jason Hollands, managing director at Bestinvest, the online investment service said “If grandparents wish to help their grandchildren get through the costs of a degree, making financial gifts to them can also help reduce a future inheritance liability. Money provided by parents for the education of their children is usually immediately outside of their estate for inheritance tax.

“Gifts from grandparents will only be potentially exempt if they survive for seven years after making the gift unless they are covered by one of the inheritance tax exemptions. A total of £3,000 can be gifted to any person in a tax year and is immediately exempt. Alternatively, regular gifts from income that they do not use can be made and again are immediately exempt.”