Student loans

Student loans

1. Introduction

Student loans are offered to students to assist with the payment of costs associated with third-level education. The general topic of loans and credit is dealt with in Dolceta Financial Services.

In some countries governments have established educational loan programmes to provide finance to students, for example in the United Kingdom undergraduate and PGCE students resident in the UK can apply for a student loan through Student Finance England in England, Student Finance Wales in Wales and the Student Awards Agency for Scotland, or Student Finance NI in Northern Ireland. Full details of the UK loans scheme can be found on www.directgov.uk.

In Ireland third level undergraduate education has been free to all students since 1997. There has been some discussion in recent times about re-introducing fees for third level and setting up a student loans scheme. A model along the lines of the Australian system has been suggested. However, no decision has been taken to re-introduce fees and there is currently no student loans scheme operating in Ireland.

The Maintenance Grant is the main source of financial assistance and anyone who is thinking of embarking on further study should investigate whether they are eligible, and, if so, submit an application. The Maintenance Grant section of studentfinance.ie provides a comprehensive source of information on the available schemes. It provides a handy step-by-step guide to eligibility. Students can also approach the main banks for loans to cover living expenses associated with their studies.

This fact sheet outlines the most common types of loans and credit available to students and the dos and don’ts of borrowing for students. The lesson entitled Can I borrow money as a student? in Dolceta Financial Literacy unit provides a useful starting point for discussion of the topic borrowing with students.

The most common types of loans and credit available to students

1. Personal Loans A personal loan allows the borrower to borrow an agreed amount of money over a certain time with a commitment to repaying the loan, with interest. The interest rate may be fixed or variable. Banks and lending institutions usually offer a reduced interest rate to students. If the borrower fails to meet the regular repayment schedule it could affect their credit rating, making it more difficult to borrow money, get a credit card or mortgage in the future.

2. Overdrafts

With an overdraft a person can spend more money that they have in their account. Banks set an agreed limit for an overdraft and may charge interest on the money spent.

3. Credit cards

Credit cards allow users to borrow money now and pay back later. Bills should be paid in the interest-free period, if possible. Students should shop around for the best offers available. Banks are usually very keen to sign up new students at the start of their studies and they often make attractive offers at that time.

Dos and Don’ts of Borrowing

Source: Financial Regulator http://www.itsyourmoney.ie/

Do:

• compare the annual percentage rate (APR) on loans or credit cards to find the best deal

• find out what fees and charges apply to your account and regularly check if other accounts offer better returns or cheaper facilities

• try to pay off credit cards in full each month to avoid paying interest

• get in touch with the lender, if you know you will miss any repayments, and work out a new repayment schedule

• complain if you are not happy with the service you receive.

Don’t:

• be rushed into making a quick decision or sign a document that you have not read. Ask for a clear explanation if you don’t understand anything

• borrow more than you can afford

• use your credit card to withdraw cash from an ATM or bank. There is usually a transaction charge and a high rate of interest

• use credit cards as a source of long-term borrowing

• go over your overdraft limit. The penalties may be costly.

Financing Studies outside Ireland - grants, scholarships and loan programmes

Many Irish students choose to study in third level institutions in the UK. The UK operates a student loan scheme, details of which are available on www.direct.gov.uk.

• The International Education Financial Aid Website, www.IEFA.org , is an Internet resource listing financial aid information for students who wish to study in a foreign country. At this site you will find comprehensive listings of grants, scholarships, loan programmes and other information to assist students in their quest to study abroad.

• EU grants are provided under the following programmes - the Erasmus programme provides students with a mobility grant. This normally covers transport costs only. The Leonardo da Vinci programme offers work placement for students in companies abroad as part of a course of study.

• Irish maintenance grants. In Ireland maintenance grants under the Higher Education Grants Scheme and the Vocational Education Committees Scholarship Scheme are available for undergraduate courses of at least 2 years’ duration in a publicly-funded third-level institution in another EU member state.

• Funding for postgraduate study. There are different sources of funding for postgraduate students. Some courses are advertised in the newspapers and include funding. Sometimes financial support is available from the university that is running the postgraduate course; sometimes you need to apply to an external body.

• Postgraduate research/study scholarships: A number of scholarships for study abroad are awarded annually by foreign governments to Irish students who are engaged in, or have completed a course of third-level education. Details of these scholarships are circulated to universities and other relevant third-level institutions of education and are published on the Department of Education and Science website.

Weblinks

Studentfinance.ie

Maintenance grant scheme for students on third-level courses - Citizens Information

Going to College, the website of Ireland’s Financial Regulator, has a section specially for students. It includes impartial, non-commercial information on making a budget, how to manage bills and some tips to reduce everyday costs. It also features a podcast on the topic of student finances.

Department of Education and Science www.education.ie

Higher Education Authority www.hea.ie

Union of Students in Ireland (USI) www.usi.ie

Financing studies outside Ireland

Citizens Information: Studying outside Ireland

Information on financing studies in the UK by the UK government www.directgov.gov.uk

European Commission Education and Training - Study in Europe http://ec.europa.eu/education/study-in-europe/

International Education Financial Aid website www.iefa.org

Dolceta Links:

Financial Services

Consumer Credit; Financing your projects;Current account

Financial Literacy - lesson plans

Can I borrow money as a student?

Getting a loan from the credit union

Borrowing money to buy my first car!

Funding the future - investments

Financial Literacy - Fact Sheets

On-line Banking ; Paying with a card; Budget and cash flow.

Fact Sheet in Word/PDF:

Student Loans

Dolceta Glossary: Link to Glossary