Student tax rules
I am working over my summer break at a local hotel bar and am paying national insurance contributions on my (non-taxable) earnings. I have been told that this payment is triggered by weekly earnings. Is this correct or should the trigger be a cumulative amount of earnings over a whole year? As I am only working for a total of eight hours a weeks, my total earnings obviously remain low. Can I claim back my national insurance contributions? Olivia Given, Romsey, Hants
Catherine Davies: We frequently get asked this by students who complete temporary work on a flexible basis through FreshMinds. Unfortunately, there is no way of claiming back your national insurance. It is triggered by your weekly earnings, so even if you are only working for a short period of time you still have to pay your NI contributions. The only way you would not pay National Insurance is if you are earning less than £97 per week, which is the weekly limit.
The good news is that if you earn less than £5,035 in a year, you are entitled to claim back the amount paid in tax – so keep an eye on your earnings.
Postgraduate funding
I am going to study an MA course at the University of Sheffield. Unfortunately, the government does not offer a student loan, and advise to take out a Career Development Loan. However, after the 13 months interest free loan that CDL offers, the interest rates can be staggering. Do you have any other suggestions of how postgraduates should finance their year, with fees at £6,000 and living costs £7,000 it can be an expensive year. Andrew Wilson
Chris Tapp: Postgraduate study is an expensive step, and the options for funding are quite limited but there are steps you can take to minimise debt. Many students take a year out before their postgraduate degree in order to save some money. Others take on part-time jobs to help pay their way through college.
But there are also a number of avenues for funding that should be investigated. Often the university you are studying at will have some type of scholarship award scheme you can apply for and this is always worth pursuing.
There are also numerous research councils and other grant making bodies who fund postgraduate study. The eight research councils that make up Research Council UK are the main funders but you should investigate further in your particular area of study. For example, the Wellcome Trust funds medical postgraduate study. The Times Higher Education Supplement has a database of funding opportunities. www.thes.co.uk
Applying for grants and scholarships is an uncertain way of achieving funding as there are not awards for every applicant. This is why taking out a loan is often the only option. Career Development Loans are aimed at this market although they are not cheap, with typical rates of around 12-13 per cent but with the big benefit of deferred payment. At those rates you are likely to get a cheaper loan by just taking out a personal loan with a bank, although obviously this would not afford you the 13 month interest free period and so can prove tricky.
What is certain is that getting through postgraduate study requires good money management and careful budgeting. For help on this, including budgeting calculators, see the money advice website www.moneybasics.co.uk
The tax rules on gifts to students
I am the parent of a new undergraduate. Earlier this year I was given several thousand pounds as a gift from my parents towards my child’s education to be used over the 3 years. What are the IHT rules surrounding financial gifts? My parents are in their mid seventies and they have donated more than my child can (reasonably) spend in one year. Anon
Mike Warburton: There is no special exemption for grandparents but there are several exemptions from IHT that can apply here.
Firstly you or each of your parents can give up to £ 3,000 each year free of IHT and this can be £ 6,000 if there were no gifts in ten previous tax year .
Secondly you or they can give free of IHT any amounts which are regular ( such as to pay fro university ) out of income rather than capital and do not reduce their standard of living
Finally , you can make payments free of IHT for the maintenance of you children up to the time they are 18 or later when they cease full time education .
Apart from this any gifts to an individual will escape IHT if the gift is made by someone who lived fro 7 years after the gift is made With these exemptions I doubt that you will need to consider giving the money back to your parents . They can give direct if they wish , but that is something for the future rather than past gifts
Budget planning
Can you provide a breakdown of the total likely costs for a student each year (Birmingham or London are two likely choices) and also show how much can be taken out as student loans. so we can budget to assist our offspring. Christopher Sullivan
Chris Tapp: The National Union of Students estimates that the average costs for a student for the academic year 05-06 were as follows. In London the course costs – including tuition fees, books, transport to and from uni – are £2,155. The living costs in London work out at £8,338. So a total cost for the year is £10,493.
Outside of London the course costs are slightly less with course costs of £1,777, living costs of £7,033 making the total average cost for the year £8,810.
Obviously these figures are based on an average and whilst it is certainly possible to spend more than this amount it is also, with careful money management and sensible spending, possible to reduce living costs wherever you are. Credit Action produces a ‘Student Moneymanual’ as a guide to help students think about all aspects of managing their money at university, including understanding the funding process.
These figures are also likely to be slightly different in lots of cases this year as the introduction of top-up fees will increase the course costs for lots of people. However, this also affects the student loans and how much will be offered. People will be able to take out the full amount of student loan needed to cover their fees from September, so this is up to £3000.
Student loans for maintenance (living costs) are more complicated. The maximum offered for 06-07 is £6,170 for those in London and £4,405 for those elsewhere. Three quarters of this amount is available to everybody and the remaining 25 per cent is income assessed. (For more detailed info on this see the Student Loan Factsheet at www.direct.gov.uk )
The parental contribution required is assessed by the local authority as part of the loan application and without this, your student son or daughter may well find life difficult financially. Most students clearly welcome parental assistance over and above this but it is a matter for people to decide as a family, often after careful bargaining!
Catherine Davies: As a student, your child’s living costs will depend on a number of different factors, including where they are studying, what kind of accommodation they opt for and how well they can stick to a budget!
In terms of basic costs, over a year the total amount will probably be between £7,000-10,000. Accommodation is likely to be around £3,000 for the year (with an extra £350 for bills if it’s a private house rather than halls of residence). A student would expect to spend around £1,500 on toiletries and food and £350 on course costs. With travel and leisure costs thrown in, it works out at about £180 per week.
Although it is assumed that London is the most expensive place (living costs can be 25 per cent higher than elsewhere) it’s worth bearing mind that there is more part-time work available and it will probably be better paid. Also, students that stay in London after graduating will more than likely get a better graduate starting salary than in other parts of the country.
Studying abroad
I have not been able to secure a place in UK and therefore will be going to Hungary to study Dentistry. To date, I have not been able to find what loan or grant I am eligible for. Are you able to throw any light on the situation? Jay Thaker, Kenton
Hardwin Jones: Studying overseas, you won't be eligible for a Local Education Authority Grant, or a government Student Loan. However, you may be eligible for a special Healthcare Student Loan from a bank. Some banks provide these for British students of Medicine or Dentistry, and they are available for undergraduates studying abroad. The Royal Bank of Scotland, for example, provides these loans.
Postgraduate funding 2
I have an existing student loan of approximately £12,000 and I am about to begin a Masters course. I will need to take out a further loan to finance this, what is my best option? Hamish Leese, Bushey
Nick White: The very first thing to consider is whether you really need to be borrowing more money in the first. There are many sources of funding for post-graduate courses, although these may only be open to students in certain subjects, from certain institutions; and possibly only if you commit to staying for a full PhD as opposed to leaving after a year.
Alternatively, can you work before and during the course to fund yourself, parents or relations might be willing to help out or could you chose to attend the course part time in conjunction with a job to gain cash and experience. With £12,000 of debt already on your shoulders and around £6,000 required for living costs next year, you're looking at a debt of £18k plus course fees when you finally leave university.
It's also worth looking for specific graduate loans which are available from most of the big banks. It is important to shop around as they all offer very different terms, rates and some are available for specific students such as law or medical.
If you don't qualify for any of these packages, you could consider a "normal" personal loan. There could be a number of problems with this though. Firstly, with no (or little) regular income, and a limited (and perhaps chequered) credit history, you are unlikely to get the best loan rates yourself. Even uncompetitive providers will want to see a wage and employment history.
If your parents are happy, it may be best that they take out the loan for you. Providers such as Moneyback Bank (5.6 per cent APR) and Northern Rock (5.9 per cent APR) are offering the best deals.
Studying abroad 2
I want to go to America to train to be a pilot (it’s quicker and cheaper than in the UK). However, I don't know how to go about finding the finance (£30,000 to £40,000). I have contacted the training colleges but need to be US resident to get a loan there. Is there anyway I could borrow the money in he UK bearing in mind my starting salary will be more than £40,000 on qualifying. Noel Mahoney
Hardwin Jones: Because you are studying outside the UK, you will not be eligible for a UK Grant or Student Loan. You may, however, be able to get a standard bank loan from a High Street bank, although you would not qualify for a Career Development Loan. It's best to speak to your bank manager and see what they can arrange for you - as you point out, you will be able to back up your application with the high salary you'll be able to command upon graduation. From their point of view, you'll be a worthwhile customer to have in their debt.
Studying and benefits
I am a 49-year-old single parent and wish to retrain as a teacher. I have been accepted for a place at university but I am concerned about my finances. I have been offered a grant, which I will need to cover my additional costs but I am concerned that my income support payments will be reduced/stopped. What are the rules? Anon
Hardwin Jones: The Jobcentre website says you may be able to claim Income Support while studying, if you are a lone parent - so it sounds as if you would not lose your benefit.
Other financial assistance you may be able to claim, as well as the grant you already have, includes a Career Development Loan, a low-interest loan up to £8,000 through Royal Bank of Scotland, Barclays or the Cooperative Bank; or any hardship funds or bursaries that the course provider might make available.
All advice offered here is of a general nature and is intended for guidance only. It is offered without any legal responsibility. You should always consult your own professional advisers on your specific requirements.
