Student finance: Staying solvent with a student loan

The student finance world is now a labyrinth of fees, loans and sponsorships that can seem daunting if your only budgeting experience is saving for that next CD. The major change is that grants - for students' living expenses - are finished. They've now been replaced by loans and hopefully cash from generous parents and older siblings. Even a cursory glance at the cost of campus life indicates the sort of amount you'll have to borrow to keep your head above water.

Most universities and colleges estimate students need pounds 4,000-pounds 5,000 a year for living expenses. They also have to find up to pounds 1,025 a year towards their tuition fees, depending on how much their parents earn.

The National Union of Students recently found students outside London average pounds 1,679 on rent; pounds 1,037 on food, household goods; pounds 454 on books, equipment; pounds 433 on travel; pounds 179 on clothes; pounds 134 on fuel.

Student loans were introduced by the Government to help meet the costs of these expenses. You can borrow large sums from the Student Loans Company, but the size depends on your circumstances.

Student loans have changed this year from a `mortgage'-style loan to a new scheme called student support that is partially means-tested. The maximum amount varies from just over pounds 2,500 a year if you live at home and are in your final year, to nearly pounds 4,500 a year if you are struggling to pay the costs of studying in London.

A spokesman for the Department for Education and Employment said: "Around 75 per cent of the maximum loan will be available to all students under the age of 50 on eligible courses.

"The remaining quarter will be means-tested, so whether you get that part of the loan, and how much of it you get, will depend on your income, and, if it applies, that of your family."

This is the first year where you can apply for a student loan before your course actually starts, and the amount you are able to borrow has also increased.

Contact your local education authority as soon as you have been offered a place at university or college. After assessing your family's income, the LEA will decide the amount of loan you are entitled to, and then ask how much you want to borrow. You tell the Student Loans Company the figure and they pay you in three instalments on the first day of each term.

Hazel Cadenhead, publicity manager of the Student Loans Company, added: "The loans should be carefully budgeted against all your living costs, whether that is accommodation, food or clothing. Students should also make sure they complete and send us their loans request form quickly so we can get them into the system."

You begin to repay your loan via income tax after you leave university or college and start earning pounds 10,000 a year or more.

If, for whatever reason, your income falls below pounds 10,000, you won't have to make repayments. Your repayments will depend on your income, and the interest rate will be linked to inflation so you will repay no more in real terms than you borrowed.

Your loan will be cancelled if you die or if you reach 65 and your income level isn't high enough to pay it off. Liability rests with you alone - no one can be asked repay to your loan.