A financial guide for going to college this autumn
With July nearly over, it is only a few short weeks until your son or daughter starts the third level journey to their preferred college and subject.
Navigating this stage of life brings challenges, not least among them budgeting. In the UK, the average student debt is £44,000 (€51,163), while in the USA, it is even greater, where the average student accepts that they will have to repay their student debt for the first 10 years of their working life.
Harvard, for example, costs over $150,000 for the privilege of their parchment. That loan is inbuilt with their mortgage/rent payments.
Here in Ireland, we are a far cry from that, but planning for the financial change of going to university or college is still important.
I worked out that if you invested that €140 Child Benefit each month in a stock market managed fund from the first month your child was born, continued it for 17 years – it finishes at age 18 – fund the 18th year yourself, assumed a growth rate of 5% each year, you would wind up with roughly €42,000, the exact amount required to fund a student’s entire third level education.
That said, 95% of households use the Child Benefit for the precise reason for its introduction, to help families financially with their week-to-week living costs, so you can understand why many families are under great financial strain when their children actually reach third level.
For those with limited income, you can apply for a grant – SUSI (Student Universal Support Ireland) is a complicated grant process and outside most families’ eligibility, especially those in the middle income bracket. Click here to check the specifics and see if you qualify.
When spending money day to day, shop around and also look for value. Your student card can sometimes help you save more than you think.
As far as the financials are concerned, when it comes to student loans, I would always check out your local credit union first – they generally have the best rates and are the most flexible. Of the two pillar banks, AIB offer 8.5% (€3,000 over 1 year will cost €261.22 per month – interest for the year amounts to €134.68 ) while Bank of Ireland offer 9.7% (€262.76 per month and an annual interest of €153.16).
Credit cards are a minefield and best avoided. Most students do not have the income to repay, so knowing the interest rate chargeable is important. KBC Bank have the best deal on a maximum credit limit of €1,500 - on purchases, their interest rate is 18.25% (the lowest!) while on cash withdrawals from ATMs, the rate is 20% (the lowest). Late payments will attract a charge of €7 – so don’t be late!
Should you "max out" your card, you will be required to repay over a 12-month period – so on a limit of €1,500 the monthly repayment, including the €30 government stamp duty will be €127.50 per month – tough when you have to study too! Of course, you could transfer the balance to An Post Money – they have the best deal on the market: 0% interest for 12 months on balance transfers.
When it comes to current accounts, again Permanent TSB would have the edge, though An Post Money are now starting to flex its muscles. For a comparison on all the current accounts on offer with the various banks the Competition and Consumer Protection Commission (CCPC) have an invaluable website that you can check.
I would also certainly suggest a student budget exercise. You should know what your total expenses are in relation to the income/grant coming in before you start your first term. You have two choices if your expenses exceed that income – earn more or cut costs.
Enjoy your studies!
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
For more information, click on John Lowe's profile above or on his website.
