Chances are, if you’re going to university, you’re planning to study hard in the hope of pursuing your chosen career at the end of it. But the sacrifice many students have to make is paying high tuition fees, as well as rent if they live away from home during their course.
When excited soon to be students submit their applications and weigh different post-graduation paths, their parents face tough decisions, too. Do they: Help pay the tuition, even if it means dipping into retirement savings? Take out a large loan, as a growing number of people do? Encourage their children to take out a student loan in order to attend a dream University, no matter the cost?
New research by MoneySuperMarket, the UK’s leading price comparison site, compares student loans with the cost of living at university and the financial opportunities open to them. Students are often criticised for spending their student loans on alcohol and shopping whilst attending Uni, but in reality is the student loan really enough to cover even the necessities?
The results of the in depth research reveal that the average student loan does in fact not cover the entirety of a student’s costs; while the average student loan is reported to be £2,094 per term, students report that they are spending on average £894.33 each month. Additionally, with academic terms being two and a half months long on average, a student’s total spend comes in at £2,235.83, £141.83 more than the loan offers.
However, students who can manage to cut out the average spend on non-essential purchases like nights out, travelling home, new clothes, the gym, alcohol, eating out, trips, and home entertainment, can actually drop their spend by £550.68. This takes their spending below that of the loan – meaning they’re actually able to save up to £409 per term.
Due to the disparity between student spending and student loans, an incredible 85 per cent of students reported that they had to rely on additional sources of income outside of their loan in order to cover their spending.
46 per cent receive money from their parents or family, and 42 per cent decide to work part-time.
With that being said, overdrafts feature heavily in student spending habits, with 61 per cent using them to pay for their groceries, 48 per cent for their rent, and 28 per cent on bills.
In fact, 30 per cent of students chose their current bank accounts because of the overdraft options available – and 42 per cent regularly dip into their overdrafts to an average total of £548.
Student Spending Tips
Many students worry about their finances every day, and even more are concerned on a weekly basis. Choosing the correct bank can therefore help with these financial difficulties. While they won’t eradicate money concerns, there are different incentives to make managing your student lifestyle a little easier:
Get the largest 0 per cent overdraft – Many student accounts offer a 0 per cent overdraft, but be sure to note that they’re only interest-free for a few years after graduation, so keep an eye on this to avoid unnecessary charges.
Perks – A select few student bank accounts offer free railcards or interest-free credit cards, as well as a number of other incentives when you sign up.
Seek Financial Advice – Of the students who admitted to worrying about their finances every day, only 19 per cent sought any form of financial advice. Most banks offer free support when it comes to choosing accounts or managing overdrafts. For those that don’t, government-backed companies like the Money Advice Service or debt charities can help guide you through difficult times.
Sally Francis-Miles, money spokesperson at MoneySuperMarket, commented:
“It’s not surprising that student loans don’t cover the cost of living for students. The Government takes into account that parents will support their child in addition. Obviously, that’s not always the case so it then falls on the student to get a part-time job or to save before going to make up the shortfall.
“While they can cut back on unnecessary costs – takeaways and cinema trips for example, expecting students not to spend any money on socialising or visiting family and friends is unreasonable.
“We recommend that students always look for ways to save money where they can, but for those who have real financial concerns, there are often financial support offices at universities to help.”
For more information on managing student finances, visit the MoneySuperMarket student spending guide.