Student borrowing: Jargon buster

Going to university or college isn’t just an education in your chosen subject. Depending on how pampered you’ve been at home, you’ll need to learn a host of life skills too, from whipping up a spag bol to navigating your way around a washer-dryer.

And perhaps most importantly of all, you’ll need to learn to take control of your money, making sure bills are paid on time and you have enough to cover your costs until the end of term.

For many students, that may mean relying on an overdraft or credit card at times, which is likely to be another new experience for you.

The language around finance and borrowing can be confusing, so here is a guide to help you know your APR from your RPI.

Student loan

Money you borrow to pay for further, higher and postgraduate education in the UK. There are two types – a Tuition Fee Loan for course costs and a Maintenance Loan to cover living expenses while studying. The amounts available vary depending on your degree and where you live. Unlike personal loans where you repay a fixed amount based on the debt, repayments are based on a percentage of your earnings after you graduate and only start once your income reaches a certain level.

Student Loans Company

The not-for-profit government-owned organisation that administers loans to students and manages the repayments.

Means-tested

If you live in England, a portion of the Maintenance Loan you apply for is means-tested. This is when eligibility is based on how much income your household has. If you are under-25, the Student Loans Company will assess this by asking for details of your parents’ or carers’ annual finances. The system is slightly different in Scotland, Northern Ireland and Wales, and for people not supported by their parents (estranged), single parents and over-25s.

Maintenance grant (Bursary in Scotland)

A financial award from the government to help cover your university costs if you come from a lower income family, with no need to pay it back. Grants were stopped for English students in August 2016 but are still available to eligible students in Wales, Scotland and Northern Ireland.

Overdraft

This is when your current account has a negative balance because you have spent more than you have. As long as you have arranged the overdraft with your bank in advance, this can be a useful way to help manage your budget but beware of interest charged if you exceed your agreed limit or haven’t agreed an overdraft with your bank. Most student accounts offer an interest-free overdraft - for example, TSB’s Student Current Account has an optional arranged overdraft of up to £1,500.

To have a Student Account you must be 17 or over (18+ including overdraft), have been a resident in the UK for at least three years and be studying for a full-time course that lasts for a minimum of two years or be on a one year access course leading onto a full time degree.

Overdrafts are subject to status and repayable on demand.

Current account

A bank account for day to day spending and bills. Student accounts usually have special deals and interest rates for students, so you need to provide proof of your education status to apply.

To have a Student Account you must be 17 or over (18+ including overdraft), have been a resident in the UK for at least three years and be studying for a full-time course that lasts for a minimum of two years or be on a one year access course leading onto a full time degree.

APR

This means Annual Percentage Rate. It includes the interest rate plus any annual or set-up fees associated with the money you've borrowed, giving you the total annual charge you'll have to pay for your credit.

It doesn't include additional charges such as fees for early or late repayment.

APRs vary very widely - from single figures of 2-5% for mortgages, to 25% or more for some credit cards and store cards. Short-term "payday loans" often carry APRs of 300% or more.

RPI

Stands for Retail Price Index and is a measure of inflation, which is how much prices of goods have risen and the fall in the purchasing power of money.

RPI is used to calculate the rate of interest on student loans, which is currently RPI plus 3%, while you are still in education.

For more information visit https://www.gov.uk/repaying-your-student-loan/what-you-pay