Student loan

Monday 5th April 2010

Student Loan

In the last post I promised an article about my meeting with a mortgage adviser, but I thought it would make more sense to explain how a 21 year old graduate in their first year of full time work managed to come up with a deposit large enough to buy a house. It's very simple, basically, I just listened to my dad. And do you know what he told me? Do not spend your student loan. Yeah, yeah, dad of course your going to say that!! But I did listen in the end, and heres how it worked:

There are two parts of the student loan that you can receive - the tuition fees and the maintenance loan. You do not ever receive the tuition fees, they get sent straight to the university. The maintenance loan, however, goes into your bank account each term or half term and is meant for you to spend on rent, food, books and other items that you need for your course. I put this loan into an online savings account and an ISA account, which means it was making money for me just sat in the bank (even if it was just a tiny bit of interest).

Instead of spending my loan money on rent, I went to the university which was in City and stayed at home with my parents. Although they didn't ask me for rent, even if they had done, it still would have been much cheaper than the rent of shared accommodation. I was very lucky in that my parents understood my age and my maturity and just let me get on with my life. I know that its harder with some families and moving out is more suitable for some students, but in this case it worked. I think it could work with most people, if clear and fair boundaries are set before hand between the parents and student. Starboy was allowed to sleep over and I was allowed to get home at any time I wanted. This is a lucky situation, but like I said, its just about boundaries and a trusting relationship between you and your parents.

The next step is to find a job. I got myself a cleaning job, where I cleaned the houses of wealthier and older people for 10 pound per hour. I know its not the most glamorous job, but its very well paid and thats all that mattered at the time. I only had lectures on 2-3 days a week, so I worked until about 2-3pm every other day, meaning during the week I was working full time, whether that be manually working or studying. I earnt enough money for petrol, food, clubbing, clothes, etc. This is how I managed to save my student loan rather than spend it.

The majority of my university friends did not have jobs. The most common situation was that their parents paid for their rent and controlled their loans for them, transferring them money when they needed it. This loan was then spent on clothes, food and going out clubbing. Now, I know that part of university is the experience, but this is so obviously the wrong way to go. My friends are now in as much debt as me, but with nothing to show for it. Well Ok not nothing, they do have their degrees. I have a degree and enough money for a deposit on a house. The point I am trying to make is, I didn't do this under any special circumstances, any one of my friends (and you!!!) could have done this too. Its all about saving and budgeting.

When I left university with this money in my accounts, my dad was looking into buying properties. I gave him the money that I had saved - a five figured number - and he used it for part of the deposit on a house that he had found. This house has just been sold and I have gained 50% of the original value on top of it. This is the reason I had the meeting with the mortgage adviser, to see what I could invest this money into next.

All of this is Ok and makes sense, but I am still in debt with my student loan and will have to pay it back. The reason I am not paying it back with the money I have made is that current student loans have no interest added to them. They are the cheapest kind of loan that you can get. Also, they do not affect your credit rating, as they are automatically taken out of your wages before you get them. It makes more sense to make more money on the money you have, then to loose it for a debt that isn't rising. For more about this try looking at www.moneysavingexpert.com.

I hope this has helped clear up how you could use your student loan to your advantage. Just be smart with your spendings and savings, and work whilst your at uni. Hopefully, this way you will be able to make your money work for you. The next post will definatly be about the meeting with the mortgage adviser, which explained mortgages in a very simple way and helped me to understand how you can buy a property with a low income.

Stargirl