Fool.co.uk's ultimate guide to student finances

Student living can seem at once exhilarating and daunting. Probably the most difficult challenge you will face will be making sure your money lasts all year long

This guide is intended to see you through from before you start right up until you graduate.

It is divided into sections so you can jump to the most relevant sections to you.

Choosing a city If you're not sure which university to apply for (or to accept as firm choice), then you might benefit from comparing the respective university cities/towns in terms of living expenses.

The cost of living varies between cities; however you won't be given extra loan money unless you live in London.

As a general rule, the North East is cheaper than the South East (so, living in Brighton will be more expensive than Sunderland but you will still receive the same loan).

So if it's a toss up between two universities, it could make sense to go for the cheaper option.

There are several sites on the internet which can help you assess the living costs (especially rental prices) such as www.accomodationforstudents.co.uk/, and www.homesforstudents.co.uk/.

To judge how much a night out in a particular place is going to be try and find out the price of a pint or a glass of wine, you could do this by asking around or searching the internet.

Anything you find online however, you may want to check is up to date.

Living in London will mean you're entitled to up to an extra ?1800, which could help with the extra costs, but, obviously will land you in more debt.

If you really want do the course, then it may be worth it, but if it's just because you can't choose between two courses then maybe it isn't.

It might be more prudent to check for similar courses in cheaper areas of the country.

Student bank accounts One of the major pros of being a student (aside from the drinking and the lie-ins of course) is the perky student bank account.

Banks are dying to get their hands on the high earners of the future, so to entice you whilst you're a poor student they tend to treat you pretty well.

Offering an interest-free overdraft as well as other freebies, there are an array of accounts out there.

Make sure you shop around for the perfect one as the first bank you come across may not have the best deal.

Don't feel you should be loyal to any bank you already hold an account with, and similarly, a good package for one student may be completely wrong for another.

Be wary of the supposed benefits some of the banks give -- some banks offer 10% discount in certain shops, many of which are likely to already be covered by your NUS card.

Others offer such perks as a free mp3 player, but a low overdraft limit or a high interest rate on debt is likely to make you worse off in the long run.

There is no 'one-size fits all' bank account but here are three important things to consider: 1.

Interest-free overdraft size -- do you need a bigger than average sized one? 2.

Added extras (such as freebies) -- can you make use of the freebies and are they at the expense of the overdraft and/or interest rates? 3.

Interest rate -- does the account a good interest rate for when you are in credit? To further compare student (and graduate) accounts, visit The Fool's Current Account Centre and read The Five Top Student Accounts Dos and don'ts of student finance DO: Make a weekly budget.

It may seem square, but sitting down with a pencil and a calculator at the start of the year and figuring out how much you're going to get from loans, part time work and parents and then dividing it weekly will at least give you a rough idea of how much you can afford to spend each week.

DON'T: Lend money to other students, or borrow money from other students.

You may never see your money again, or you might not be able to pay it back causing unbearable tension.

DO: Pay with cash! It's much harder to part with the cash in your hand than a piece of plastic.

DON'T: Try and compete with better off students (or more likely reckless spenders).

DO: Get a summer job! Preferably one that relates to your degree/career interests.

DON'T: Assume your student loan will magically appear, keep checking online and follow up with phone calls if necessary.

DO: Make sure you sign a P38(A) form when you get a summer job.

As long as you earn under ?5,235 you won't have to pay tax.

Claim back any you may have paid erroneously.

You will however still have to pay National Insurance at a rate of 11% of any earnings over ?100 a week.

DON'T: Keep all your money in one, low rate current account; put a good chunk of your money into a high interest savings account.

Not only does it have the potential to make you money, if you can't physically see it in your current account you'll be less likely to spend it.

DON'T: Be afraid to ask shops and businesses if they can offer any student discount.

While You're At University Bursaries and Financial Hardship Funds If you're really struggling to make ends meet, you may benefit from bursaries or financial hardship funds.

Most higher education institutions offer them, and there are a couple of ways to obtain more information.

If you are yet to apply to university, you can visit the UCAS website, which gives details of courses with bursaries, or if you are already at university you can ask them directly.

As a general guide, if your fees are more than a set amount (£2,765 in 2007/08) and you receive the full Maintenance Grant / Special Support Grant then you likely qualify for extra help.

Even if this doesn't apply, you should still check with your University as they may have something to offer you.

Credit Cards Getting a credit card whilst you're a student can seem like a tempting way to get some extra cash, but the reality can be very different.

You could end up with ever-increasing high-interest debt, with little or no way to repay it.

Before you sign up for a credit card, have a really good think, do you really need one? Spending on a credit card can make you feel like you're not spending any money because it's all on plastic and doesn't appear on your current account statement.

If you are good with your money (and be realistic with this consideration, you may think you're better than you actually are -- perhaps ask friends, family or even your student union for advice), then you could reap the benefits of credit cards.

You may be able to enjoy the convenience that they offer, or have one as back-up in cases of an emergency.

It goes without saying that you should shop around for the best deal.

If you don't have any debt, consider a cashback credit card where you'll get cash back as you spend.

Or you could go for a 0% on new purchases credit card.

You'll only have to hand over the minimum payment each month and then you won't pay any interest on the resulting debt for up to 12 months.

If you already have some debt, then take a look at 0% balance transfer credit cards where you can transfer your debt to a new card, and then not pay any interest on the debt for a year or more.

That said, bear in mind that as a student you may not be able to obtain these cards as your credit record may be poor or non-existent.

What's more, this kind of 0% surfing is only for the financially savvy.

The temptation to overspend can be very strong.

In the majority of cases, it's probably best to steer clear of credit cards, save up for those extra purchases and learn the art of budgeting! Reassessment This is where your student loan and grant entitlement may be changed.

The most common reason for reassessment is your household income falling (or rising).

If your student loan and grant entitlement is worked out based on the earnings of your parents, their falling income should mean you're entitled to more loan and/or grant.

In such cases, your local authority will be able to advise you of any new rights.

You can apply to be reassessed at any time during the academic year.

For more information about changes in circumstance, visit the Directgov website.

Contents Insurance According to the Home Office, students are one of the groups most likely to become victims of crime, yet many students don't bother to insure their belongings, often because they think it's too expensive.

In reality, student insurance can be pretty cheap, costing as little as ?33 per year, which, when you consider how much stuff you're likely to have knocking around is good value for most people.

It's not hard to see why students become such easy targets for thieves.

They know that they all tend to congregate in one area of a city, are pretty lazy when it comes to locking doors and windows, and have a lot of rich pickings such as individual laptops, televisions and other valuables.

Specialist student insurer Endsleigh is the only insurance company endorsed by the NUS and as such can be seen as the most student-friendly, but other providers such as Saxon Insurance also offer competitive rates.

It's worth noting that laptops tend to be excluded from basic policies, and so an add-on may be required to insure what is probably your most valuable item.

That said, companies such as PC World include theft insurance in their extended warranties, so make sure you're not already covered.

It's also worth checking to see if your parents' insurance policy will cover your belongings while you're a student, but don't get your hopes up, you'll probably need your own policy.

eBay/secondhand shops Unfortunately, books are a necessary (and sometimes very costly) expense.

Some text books can be as much as ?100.

Providing you don't need the just-published-last-month edition, you might be able to bag a bargain on websites such as eBay or www.sellstudentbooks.com/, or a second hand bookshop.

Keep your books in good condition and you'll be able to sell them on to other students and recoup some of the cost of buying the next set.

Don't rush into buying your entire booklist before term begins as you may find some books are used less frequently and taking them out of the library as and when they are needed could be more beneficial.

You probably have a mountain of stuff that you could offload for extra cash too.

It's worth having a look around to see exactly what you're not using and exactly what could be sold.

Rare/designer items obviously sell a lot better, but then again, a lot of small items sold at a low price will also mount up.

Make sure you learn some valuable eBay tricks.

For instance, selling something at ?1 will cost you 30p to list, but selling at 99p will only cost 15p.

OK, so 15p might not seem like much of a saving, but if you really do sell that mountain, every little will help.

Food There are several ways to reduce your spending when it comes to food.

First off, shopping just for yourself can cost just as much as shopping for two, so sharing your shopping with your flat/housemate can save you both money.

Be wary of those tempting BOGOFs and 3 for 2s, if you don't usually buy the product, think twice about buying it just for the offer.

Buying ready meals can seem the easy way out for those not used to cooking for themselves, but it's also an extremely expensive way to eat.

Instead, make your own by cooking too much and freezing the leftovers.

Read 10 Ways To Cut Your Food Bill for some more money-saving food tips.

After you graduate To use a shockingly awful metaphor, if leaving home to go to University is the appetiser in the meal of entering the real world, then consider graduation your starter.

This is when it begins to get just that little bit tougher, as fees and interest start to kick in and you come to realise that your money isn't free after all.Luckily however, (generally speaking) the banks don't tend to throw you in at the deep end to start with, your interest free overdraft carries on for a while and you can get preferential loan rates.

But there are several things to think about.

First things first, you shouldn't worry unnecessarily about SLC (Student Loans Company) loan repayments because don't forget, you won't have to start paying the loan back until the April after your graduation (assuming you've hit a ?15,000 earnings threshold.) This gives you a little bit of breathing room to sort yourself out.

It might be a good idea to write down all your likely expenditure, such as rent, travel costs etc.

as well as smaller things such as your daily coffee.

This may seem overly careful, but the little things soon add up.

Writing down your expenditure has two advantages -- firstly it helps you to pinpoint where you could be wasting money or making cutbacks, secondly it helps you to gauge the kind of graduate overdraft and loan you might need.

Later, when you receive job offers (with any luck), having this information already handy will help you decide if the job's right for you.

If you're not sure what your rent and/or travel costs are likely to be, perhaps because you'll be moving to new city after graduation, you can always check on the internet, or ring an estate agents to get a general idea.

You might be shocked to find out that some locations cost more than you might think, so it's always best to be prepared! If you want to stay in your student house, you should probably check that you're allowed to do so, and also bear in mind that you will no longer be exempt from paying council tax.

However, if you continue living with other students, you may be eligible for a discounted rate.

To find out more information about council tax, contact Citizens Advice.

Also, it's worth considering the problems of student/non-student living.

If you're working full-time, but your housemates are still studying, continuing to live together may not be the picnic it once was.

You'll be hacked off by their loud music playing, coming in late (stereotypical I know) whilst they may be less than appreciative of you disturbing them early in the morning.

Graduate Accounts and Loans Recently, HSBC announced its plans to scrap the interest free overdraft for graduates claiming (rather harshly) that it 'gets the message across that there is a cost to borrowing'.

HSBC generously allows you to keep your interest-free overdraft provided you're willing to cough up an extra ?120 fee per year.

Some observers have noted that this may be the beginning of the end of free banking.

But for now, don't forget that your student current account provider doesn't necessarily have to be your graduate account provider.

Many students make the mistake of staying loyal to their bank, when in fact, switching could make them much better off.

When you graduate, it is relatively easy to switch to a better provider; all you need is proof of graduation.

You can also transfer any existing overdraft without hassle.

Bear in mind that your free overdraft limit decreases year by year, and as you might get hit with high overdraft fees, you need to make sure you make provisions for this, even if it is just using a graduate loan to pay it off.

If you have managed to bag a job quickly, some accounts such as the Premier Direct current account from Alliance and Leicester offer a year long interest-free overdraft so long as you earn at least ?500 a month, and a lower rate thereafter.

It also offers 6.50% AER interest on your balance if it is in credit.

On top of that, there's the added incentive of ?40 for an unlimited number of your graduation friends that join based on your recommendation.

As well as your overdraft, you can also get a preferentially rated Graduate Loan if you need it.

These are available at many of the High Street banks.

Typically the interest rate is around 7.5-8.% and you can even opt to defer your first repayment for up to (depending on the bank) as long as 9 months.

Naturally, this deferment will end up costing you more, but it can be handy whilst you hunt around for a well paying job.

You can usually defer the payments for even longer (upto 12 months) if you are going traveling (but you may need evidence of a firm job offer upon your return).

These loans might also be used to get yourself on the property ladder (although specialist graduate mortgages are also available), or to buy yourself a car (useful for getting yourself to your workplace).

There are of course some catches; you may only be offered a graduate loan if you have a current account with the lender.

Graduate Mortgages As it is becoming increasingly difficult to get on the property ladder, many mortgage providers are offering graduate mortgages which come with such features as zero deposit, low set-up fees, flexible fees and up to 100% of the value of the property in loan.

Scottish Widows even offer a 102% loan.

The lender usually requires a guarantor (commonly a parent or guardian) to cover any potential default until the borrower is earning enough.

Some mortgages even include covering the cost of legal fees and stamp duty.

Graduate mortgages are usually available to those who have been employed for over 12 months on a permanent basis.

Lenders may examine your student and credit card debt to ensure you can afford the repayments.

Be sure to avoid mortgages with a higher lending charge (HLC) as these will penalise you for borrowing a high percentage of your house's value.

So that's a brief introduction to graduate finance.

You can find more loads more information about relevant financial products at Fool.co.uk.

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