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A-Z of student finance

Aug 17: Managing money can be difficult for new students. Hilary Osborne shows how to make your cash go that little bit further.

Accommodation will be your biggest expense at university, unless you opt to stay at home. According to Royal Bank of Scotland (RBS), students spend a combined total of 3.9bn a year on rent. When you start your course you are likely to live in a room or flat owned by your university or college. This is a good option - it's easy, should be safe, and you'll be surrounded by lots of people to socialise with. Don't expect it to be cheap though. Research last year showed that in 2006-07 weekly rents for living in halls were 82, up from 63 in 2003-04. In London students paid an average of 100, while at the other end of the scale students in Wales paid an average of 63. Living in a shared house or flat won't necessarily be more expensive during term time. Average private rents for students weigh in at 60 a week, according to research by student homes website Accommodation for Students. However, unlike with halls of residence you will probably have to pay rent during the holidays.

When it comes to choosing a bank account you will be able to take your pick of a range aimed specifically at students. Most of the big banks have student accounts, all offering interest and fee-free overdrafts. Many come with some kind of incentive - Barclays is offering six free cinema tickets, for example, while NatWest is giving away a five-year railcard. While the freebies may be tempting, there are other things you should be paying more attention to, particularly interest rates on extra borrowing.

Hand-in-hand with student bank accounts go student credit cards. These tend to have much lower credit limits than standard cards, reflecting the fact that students don't tend to be a particularly good credit risk. Lloyds TSB, for example, caps spending at just 250. The biggest advertised credit limit is 600 from Barclaycard, but Smile and Halifax operate on a case-by-case basis. Interest rates on student credit cards are not particularly competitive, especially when compared to the 0% introductory deals available elsewhere. Lloyds TSB charges 19.9% on purchases, while RBS and Smile charge 18.9%. Halifax charges 8.9% on purchases if you apply for its student card online, but a heftier 14.9% if you apply in a branch.

Debt is likely to be something you encounter during your course, however carefully plan your finances. But that's not to say you shouldn't think carefully about where your money is going or try to keep your borrowing to a limit. The best way to do this is to draw up a budget, listing all your expected expenditure and setting a limit for each item. Ucas has an online budget planner, which you might find helpful, not least because it will remind you of all the different things your money must buy.

You may not always stick to the amount you've allocated yourself for each item, but at least you will feel you have some control over your spending and the debt isn't spiralling out of control.

After somewhere to live, tuition fees will be the next big expense to cover. Universities and colleges in England and Wales can charge full-time students up to 3,070 for tuition for the new academic year, payable upfront. Next year, fees will rise to 3,145, and for each subsequent year of your course they will rise in line with inflation.

A tuition fee loan is available for the full amount for every student starting a course. You can apply for a loan online or by post.

If your parents have a combined income of less than 38,330 you will be eligible for a maintenance grant from the government. Students whose parents earn less than 17,910 between them will be entitled to receive the full grant, which is worth 2,765 in this academic year. Partial grants are available on a sliding scale to students whose parents earn between 17,911 and 38,330. The grant, which doesn't have to be paid back, is given to you in three instalments at the start of each term. If you are entitled to the full grant your university will also give you 300 to help with living expenses. Next year, the income threshold for the full grant will rise to 25,000. If your parents earn just under 25,000 but more than 17,910 you could be 1,000 better off if you defer starting your course until next year.

Universities also have hardship funds, with some of the money coming from the government. These are last resort funds and you will need to demonstrate that you need the money before being granted a pay out. Before things get that bad, investigate what bursaries and scholarships your university has to offer - you might find you are eligible for a few hundred pounds.

However cash-strapped you are, it's important to think about buying insurance for your possessions. Forking out for the right cover will save you money in the event of a break-in or accident that damages your stuff.

A job, either during term time or the holidays, is a good way to supplement your income, and could also be good for your CV. Some universities restrict the number of hours students can work to make sure they have plenty of time to concentrate on their academic work, and it's important to bear in mind that you will have work to do outside lecture and seminar times.

Late night kebabs, burgers and chips often seem like a good idea at the time, but they can be an expensive habit to get into and probably aren't part of your budget. Resisting the temptation to stop off on the way home from the pub in favour of a couple of slices of toast when you get home can make a real difference to your finances (and you'll feel better for it when you wake up).

Loans are available to help cover your living costs. The maximum maintenance loan in 2007-08 is 3,495 for students living at home. For those living away it is 4,510, or 6,315 if you are in London. Loans are smaller for final year students and those receiving a maintenance grant. The first 75% of the maximum loan is available to all students, regardless of their household income; the remainder is means-tested. Use the government's calculator to get an idea of how much you can borrow.

Your NUS card is a doorway to discounts, particularly if you sign up for the extra card. This costs 10 (the initial democracy card is free), but you can offset the cost with savings on all kinds of purchases.

Interest-free overdrafts are a key feature of student accounts, and the main battle ground for banks trying to win business. They tend to be offered on a sliding scale, so that in each year of study you are allowed to take on a bigger debt. This year's freshers will be able to achieve the biggest interest-free overdraft at Halifax, where the limit for first-year students is 2,750. However, this figure remains unchanged in later years. By the second year of your studies you will be able to borrow more from Clydesdale and Yorkshire banks (3,000). Be warned that if you borrow more than your agreed limit without clearing it with your bank first you could face unauthorised overdraft charges and interest rates of more than 29%.

Parents tend to be the best source of cheap borrowing, with the bank of mum and dad contributing 4,000 a year to their offspring's university education, according to a survey by Unite.

Your qualifications should help you get a higher paid job than you would if you went straight in to work after your A-levels. The latest figures suggest graduates earn around 160,000 more over the course of their working life - more than enough to clear those student debts.

Repayments on your student loans only start when you find a job and are earning more than 15,000. When that happens, the Student Loans Company will ask your employer to start deducting repayments from your gross pay; 9% of all earnings above 15,000. So if, for example you earn 19,000 you will pay back 30 a month. This continues until the loan is paid off. The interest rate on the loan is linked to inflation, which is currently 2.4%. Interest is added to the loan as soon as you get the money.

Students going to university in Scotland will encounter a different fee structure to those studying elsewhere in the UK. Scottish students won't pay any upfront fees, while those from other parts of the UK will pay lower fees than in their home country..

Don't think that because you are a student you can avoid paying tax. Like everyone else, if you earn more than 5,225 this year you will have to hand over some of your cash to the taxman.

If you've been living with your parents, utility bills will probably be a new thing for you. Having your name on the bill for a shared house can be a good thing if you need to provide ID for something, for example to buy a mobile phone. But bear in mind that if your housemates refuse to cough up and you miss a payment, any default will be a black mark against your name.

To get better value for money on things like food, it's often better to buy in bulk. Staples like pasta and rice will last in the cupboard all term and you don't have to buy cash-and-carry sized bags to start saving. At Sainsburys, for example, while 500g of penne costs 37p, 3kg costs 1 - less than half as much. For perishable items, like cheese or milk, you could club together with a friend to make savings.

Your student union welfare officer is a good person to contact if you are having problems with your finances. They should be able to give you details about the university's hardship fund, as well as general advice. They will have eXperience of living on a student income, so will be realistic about where and when you can cut costs.

A young person's railcard is a great investment if you plan to visit friends or family. It costs 20 for a year and will save you a third on rail travel (subject to various terms and conditions).

Zero per cent - that's the rate on the first part of your overdraft, but if you want to borrow more you'll have to pay for it. As long as the overdraft is arranged in advance you won't be hit with penalty fees, but the rate will be higher than on a student loan, so it's wise to apply for that first.

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