STUDENT FINANCE: The best way to beat those breadline blues?

The student loans scheme is hated by most students - unsurprisingly. Ever since it was established in 1990 it has been dogged by problems of maladministration and allegations of corruption.

Even though a student loan will create a burden that is likely to take years to repay it is still better than the alternatives. Part-time work, which may be necessary anyway, can lead to fatigue and lack of time for study, leading to a loss in standards, say academics. Many students, report the National Union of Students, are even being pushed by financial crises to abandon their degree courses.

But borrowing from the still state-owned Students Loans Company has been no easy matter, with application forms delayed and lost by the company. Until now, each year of its operation has seen large numbers of applicants waiting months for their payments to come through. But the company says there are no delays this year, with previous administrative problems all resolved.

The amount available to borrow from the Students Loan Company depends on three factors: does the student live at home, are they studying in London, and is it the final year of study.

The basic loan available each year to a student, if living away from the parental home, is pounds 1,385. But in the final year it is less, just pounds 1,010, because the summer period no longer receives support. If the student is living in London the figure is pounds 1,695, or pounds 1,240 in the last year of a course.

Those students who live at the family home are entitled to borrow pounds 1,065 a year, or pounds 780 in the final year. The loans have been increased by about 20 per cent compared with last year, and, with grants going down by 10 per cent, represent a further shift from grant support to loans. Loans are available to university and other higher education students who are studying for a first degree, a postgraduate certificate of education, a diploma of higher education, a higher national diploma, or some other selected qualifications. You must also have a bank or building society account into which the loan can be paid.

The loans are not means-tested, but a limited rate of interest is payable, equal to the current rate of inflation. This is calculated from the date the student's bank account is credited with the loan. With such a low rate of interest, it is sensible to borrow from the Students Loan Company even if a student does not think they initially need the money. Provided, that is, they can discipline themselves to invest it rather than spend it.

Some 40 per cent of students do not take up their opportunity of borrowing student loans. Their motivation may be that they do not want the albatross of debt hanging round their necks for future years. While this is understandable, this particular debt is less of a worry than some others.

Louise Clark, press officer for the National Union of Students, said: "Most students go for interest free loans from banks. We would advise students not to go to loan sharks or similar. It is very dangerous to borrow on credit cards or store cards, which work out very expensive."

A loan from the Student Loans Company only becomes repayable when the student has entered the workforce and earns 85 per cent of the national average wage - the current threshold is pounds 15,204 per year. The loan must then be paid off in five years, unless monthly earnings drop below pounds 1,268. (Graduates with disabilities do not have their state benefits included in their income for the purposes of deciding when they should begin to repay their loans.)

More than two in three graduate starting salaries are less than this threshold. As a result, few students who have borrowed from the company have actually repaid their loans - though the company says it is unable to report how much has been repaid.

There is a Student Loans Ombudsman for people who wish to complain about the company, but only about one complaint a year has actually been lodged.

The Student Loan Company can be contacted on 0800 405010, with forms available at colleges and universities.

The Student Loans Ombudsman can be contacted on the same number.