Students can struggle to balance finances as there are a number of pitfalls and student debts which can spiral if they are not managed properly.
On the one hand financial institutions are often wary of offering credit products to students due to the fact that they deem students to be a high risk e.g. typically students are young people with little to no credit history, often no work history and limited funds available so certain financial products can be out of the reach of the average student.
On the other hand, there are banks and building societies who recognise that once they have a customer then often the customer will be loyal to their brand over time and students represent a good long term bet as they are more likely to go onto long term employment so there are often good credit deals that are offered specifically to students in order to entice them over to their brand and create loyalty.
There are certain areas that students can struggle with due to their unique status and there is a real possibility that lenders or providers can decline student applications for credit so as a student it makes sense that you ensure you give yourself the best chance of being accepted as possible through following some common sense guidelines.
Areas of finance that are important to students include –
This page will provide a one-stop resource for students that are considering applying for a financial product or have applied for a product and the application has been declined. By arming yourself with the knowledge of what lenders or providers ideally want from their customers you can attempt to make yourself as attractive a proposition to the lender as possible.
If you are heading to university it can be an incredibly expensive time for you. It will likely be the first time you have moved away from home and you have to manage your finances yourself.
You not only have to worry about paying for day to day living, text books, food, etc. but also accommodation costs and the yearly course fees so unless you are a wealthy student or have wealthy parents that are prepared to foot the bill for your studying it is likely that you will need to apply for a student loan.
Student loan eligibility
Many people apply for a student loan and/or grant and will have their application accepted, but there are certain criteria that need to be fulfilled otherwise the application will be denied. In order to make an application for student finance it is important that you qualify under five broad eligibility factors. These are; the university that you will be studying at, the course, whether you have been in higher education before, your age, and your nationality/residency status.
In detail, you should be aware of the following pre-requisites to qualify for student finance –
University – The university, or institution must be a place of learning that provides a qualifying course
Course to be studied – The course to be undertaken must be in the UK and the award must be one of the following:
- a first degree such as a BA, BSc or BEd
- a Foundation Degree
- a Certificate of Higher Education
- a Diploma of Higher Education (DipHE)
- a Higher National Diploma (HND)
- a Higher National Certificate (HNC)
- a Postgraduate Certificate of Education (PGCE)
- Initial Teacher Training
If you aren’t sure about the end qualification for your course you should check with the course leader of academic institution because if the qualification that you will be awarded for successful completion of study is not listed above it is unlikely that your application for a student loan would be granted.
Previous higher education study – It is unlikely that you will receive student finance if you have previously studied before, even if the previous course was self-funded. Exceptions to this where you may be eligible for finance is when you have changed course, have left your course but want to take it up again or if you are adding to an existing qualification such as you have completed an HND and you want to go on to complete a degree course.
You age – For tuition fee loans there is not upper age limit but for maintenance loans you have to be under 60 years of age when you are due to start the course.
Nationality/residency requirements – You are eligible to apply if –
- UK national
- Live in the UK currently
- Have been living in the UK for the last 3 years previous to the start of the course
Student loan amounts
The main forms of student finance in order to help pay for tuition and general living costs throughout studying are a tuition fee loan, maintenance loan for living costs and a maintenance grant for living costs.
Tuition fee loans – These type of loans are paid directly to the university in order to pay tuition fees for the course.
For full-time study – Up to £9,000 loan
For full-time study at a private university – Up to £6,000 loan
For part-time study – Up to £6,750 loan
For part-time study at a private university – Up to £4,500 loan
Maintenance Loan for living costs – You must be a full-time student and under 60 years of age to apply. It may also be necessary to give details of household income to qualify and if accepted the amount will be paid direct into bank account.
Living at home – Up to £4,375
Living away from home (outside London) – Up to £5,500
Living away from home (in London) – Up to £7,675
UK course spent abroad for a year – Up to £6,535
Maintenance Grant for living costs – You must be a full-time student and under 60 years of age to apply. It may also be necessary to give details of household income to qualify and if accepted the amount will be paid direct into bank account.
Households that have an income of £25,000 or less will receive £3,354 for courses starting in September 2013
Households that have an income of £30,000 will receive £2,416 for courses starting in September 2013
Households that have an income of £35,000 will receive £1,478 for courses starting in September 2013
Households that have an income of £40,000 will receive £50 for courses starting in September 2013
Households that have an income over £42,600 will receive no grant
If you have started university or you have been accepted for a place at university you will want to consider the benefits of a student bank account. By all means it is not a pre-requisite to have a student bank account if you are a student – you could opt to have a regular account, but with student accounts there can be attractive perks that make it worthwhile.
What is a student bank account?
All of the major banks and building societies in the UK offer bank accounts that are specifically targeted at students. In their eyes it is worth trying to tempt students to use their banking facilities because statistically students are more likely to be higher earners in the future so banks want the higher earners to bank with them and earn their trust and loyalty.
The two main differences (or perks you could say) between regular bank accounts and student bank accounts are –
Interest free overdrafts – According to the consumer watchdog Which? of 14 different student bank accounts compared there was only one bank that didn’t offer an interest free overdraft of £1,000 or more. Some banks will grant an overdraft of up to £3,000 interest free.
Student bank account freebies – Some of the freebies that banks will offer new student account holders can be worth specifically banking with a particular bank. For instance it is common to receive free gifts, gift cards, money off vouchers and rail cards.
How do I open a student bank account?
It is not difficult to apply for a student bank account and many banks now allow applications to be made online but if you do not have the following evidence to support your student bank account application you should expect to have your application denied.
Supporting information you will need to open a student bank account include:
- One or two forms of photo ID. This can be in the form of a passport of drivers licence.
- Proof of address. This will usually be in the form of a utility bill.
- Student Acceptance letter. You will need to prove to the bank that you are a student so you will need to show your university letter of acceptance or letter from UCAS.
There are specific types of credit cards that are targeted towards students. These student credit cards are designed for people that do not have a regular income (as is the case with standard credit cards) and as such student credit cards tend to be less competitive than standard credit cards.
Managing student finances can be tricky at the best of times so it may not be the most cost efficient mechanism to get credit, but student credit cards offer a quick and easy way to obtain finance.
Advantages in favour of student credit cards
- Student credit cards generally have more lenient application criteria. Banks are aware that students often don’t have a credit history so the requirements to obtain a student credit card are generally easier than a standard credit card
- There are cards with 0% interest rates on purchases for introductory periods
- Some student cards have exclusive freebie offers
- You will receive protection under Section 75 of the Consumer Credit Act which means that if you buy something that costs in excess of £100 using the student credit card and something goes wrong you are entitled to a refund sometimes called a chargeback
- By using a credit card sensibly you are building up a credit history which could be useful in later years should you wish to get a good deal on a credit card, competitive loan or mortgage when you finish studying and enter the world of work
Disadvantages of student credit cards
- Student credit cards are not as competitive as standard credit cards, although they are easier to obtain
- Credit limits can be very low
- Monthly minimum repayments can be higher than on standard credit cards
- Once the introductory interest free period has elapsed you will need to start paying interest payments on the balance of the credit card if it has not been fully paid off
Reasons for having a student credit card application denied
The reasons why you will have an application for a student credit card declined are much the same as with standard credit cards which can be seen in our credit card section but there are some additional reasons why a specific student application could be denied.
Reasons for a failed student card include:
- The applicant is not an actual student so is not eligible
- The applicant was not already banking with the credit card issuer. It is often a pre-requisite that the student must also be a banking customer in order to get a student credit card from the same issuer
- The application was incorrectly filled in or was spurious
- The standard reasons for a credit card application decline such as poor credit history which can be read on the credit card page
An alternative to a student credit card. Pre-paid cards.
If you are a student that wants to have the flexibility of a credit card but standard or student credit cards are unattainable (or you are concerned about managing them) you might want to consider the use of pre-paid cards.
Pre-paid cards work in the same way as normal credit cards in that they can be used to purchase items in shops or online, but the way that they differ is that the money on a pre-paid card is all your own. There is no “credit” on a pre-paid card. To use a pre-paid card you need to load your own money onto the pre-paid card an all purchases are dedicated from the balance that you have added to the card.
By using a pre-paid card you are only spending your own money so you do not need to worry about making repayments, paying interest and spending money you don’t own as can be the case on standard credit cards.
There are some negatives with pre-paid cards in that you have to pay a small admin charge to add funds to the card each time, but the advantages can outweigh the disadvantages for some people.
Getting a mobile phone contract approved can be difficult if you are a student because mobile phone operators will use a credit check as part of the application process and students often have low credit scores (often through no fault of their own).
Having a low credit score doesn’t mean that you have mismanaged your finances in the past it can mean that you have had no finance in the past whatsoever i.e. no credit cards, no loans, etc. Therefore, if you have never had credit before, a lender will then have no past records showing how you have repaid credit in the past so this unknown factor will (seemingly unfairly) tag you as being a high risk for credit.
This is the same view that mobile phone operators will often take. They will be wary of accepting some students for a mobile phone contract that includes a free high end mobile phone such as an iPhone that would cost several hundred pounds outright if they do not know how responsible the student will be with payments.
Having a mobile phone contract refused is not a problem that is solely an issue students – it can be an issue for anyone that has a moderate or poor credit score. See here for steps on how to increase a credit rating
Mobile phone operators regularly fail applicants for mobile phone contracts. Fail rates for high end mobile contracts can be in excess of 50% of applicants being turned down!
If you are concerned that you would fail a mobile phone operator’s credit check or you have already been turned down for a contract, you have two options.
Increase your credit score
Get a FREE credit report which will show you any areas of concern.
Get a guaranteed mobile phone contract
Get a new mobile phone contract with no credit checks required – many 100% guaranteed!