Midweek Money: The shock for the new

As students take up their college places, the realities of finance have to be faced up to

Thousands of parents will receive a sharp financial jolt in the coming weeks. As the euphoria of their offspring's achievement of obtaining a university place begins to fade, the reality of funding their child through a degree course will loom on the horizon.

Parents who studied in the Seventies cannot draw on their own experiences, for the way in which higher education is funded has completely altered. Grants are far from generous, and although student loans are available to all, the maximum amount of state funding for this year's freshers falls considerably short of the costs of undertaking a course.

Although there is no magic wand available to make the shortfall vanish, it is possible to relieve some of the financial shocks before the term begins. This can be achieved by drawing up a budget. This should be a family project. Hopefully, there will be a meeting of minds - you will appreciate the financial pressure your son or daughter will experience, whereas he or she will appreciate that financial help from home has its limits.

A student's largest outlay is for accommodation. Because of regional differences in rents, the only way forward is for your son or daughter to telephone the university accommodation officer and find out the typical cost of the various options available locally - living in hall, digs, or sharing a student house. While the type of accommodation is a matter of personal choice, availability is also a determining factor.

Having established the cost of accommodation, the rest is fairly easy to slot into place. Tuition fees, food, local travel costs, laundry, toiletries, entertainment, insurance of possessions, and clothing are all factors to consider. Books, and possibly equipment, will also be needed. Course reading lists will arrive before the start of term. However, it is not necessary to purchase every book listed.

By now, you should know the amount of grant, if any, that will be paid by your Local Education Authority. Every student, regardless of their parents' income, may also take advantage of a student loan. The amount depends on where they are living during the term: London, pounds 3,145; provinces, pounds 2,735; and parental home at any location, pounds 2,325. Inevitably, the two sides of the equation will not balance. Parents are under no legal obligation to fund their offspring, but it is rare, although not unknown, for a contribution not to be forthcoming. The amount you contribute will obviously depend on your circumstances.

Moreover, the timing of the expenditure and your income may not coincide. Inevitably, the beginning of a term is the most expensive. Rent usually has to be paid in advance, books have to be purchased and fares paid. Most parents usually make a monthly contribution to their offspring's expenses to coincide with the receipt of their income. If it is not possible for you to make a larger sum available at the beginning of term, it makes sense for your son or daughter to bridge the gap by taking advantage of the interest-free overdraft facility included in all of the banks' student packages. Do remember that the overdraft has to be arranged before the account is overdrawn.

If, over the academic year, your son or daughter's funding falls seriously short of the estimated expenditure, there are ways of resolving matters. The obvious one is to re-examine the budget to see if economies can be made. Increasingly, students are working during term, as well as in vacations, to supplement their income. Their earnings do not affect the level of their grant, or entitlement to a student loan. Working eight hours or so a week is unlikely to be detrimental to their studies.

You may decide to borrow funds. However, doing this so that your son or daughter does not have to do so, does not make sense, as it is far better for them to take advantage of the cheap credit available to them by way of an overdraft or student loan. You can always assist with repayments later. However, if you do decide to borrow, it is less expensive to have some form of revolving loan facility, secured as a first or second mortgage on your home, than to run an overdraft.

Both parents and students are entering the unknown when the first sixth- former in the family starts a degree course. The last thing that they will want is a lecture on how to budget. However, it is prudent to introduce the subject of money management, not in a dictatorial way, but diplomatically. By working on their budget as a family project, future financial shocks, and the resulting acrimony, can be avoided.

The Department for Education and Employment has published `Financial Support for Students - A Guide to Grants, Loans and Fees in Higher Education in 1998/99'. It includes a section on access funds for students in financial difficulties, and outlines additional financial help which may be available - for example, from local charities. Call 0800 731 9133

The Cost of

Being A Student

The NUS estimates that the average student will be left with a shortfall between income from grants and loans and expenditure of pounds 1,710 (pounds 1,927 in London).

They base this on a first year student starting a three year course this academic year who is on full grant, liable for full tuition fees and studying for 38 weeks a year. Sources for the survey include the NUS accommodation cost survey for 1997/98 and average gas and electricity charges for four people sharing a three-bedroomed house. Entertainments includes newspapers, refreshments and the costs of going out.

London Elsewhere

pounds pounds

Grant 1,225 810

Loan 3,145 2,735

Total 4,370 3,545

Fees 1,000 1,000

Rent 2,340 1,697

Fuel 130 130

Food/

Sundries 1,203 1,011

Laundry 97 97

Insurance 92 55

Clothes 201 174

Travel 70 70

Books/

Equipment 443 443

Leisure 721 578

Total 6,297 5,255

1,927 1,710

INCOME

EXPENDITURE

SHORTFALL