With living expenses soaring past €1,000 a month, students must learn quickly how to save money, writes Mark Channing
Students living away from home will have to pay more than €1,000 a month for college this year, according to research by the Irish League of Credit Unions (ILCU).
The cost includes €434 a month for rent and bills and monthly living expenses of €516. After paying the mandatory student contribution charge (SCC) of €2,500 for 2013-14 many students will have to fork out more than €11,000 to reach the end of this academic year.
Unsurprisingly, the majority of students have to find a parttime job with 66% working an average of 18 hours a week. There is also an increasing trend of students taking out loans, according to the ILCU.
“Heading off to college is an exciting time but it can also be very stressful for parents and students alike,” said Mandy Johnston, head of communications at the ILCU. “The cost of third-level education can be a significant burden.”
We outline where students can make savings and the products the banks offer their student customers.
Rent is the biggest outlay for students living away from home. A typical two-bedroom apartment in Dublin costs more than ¤1,000 a month, according to the Private Residential Tenancies Board (PRTB) rent index.
Regional accommodation is less expensive but still places a huge burden on students’ finances. A two-bed apartment close to the Institute of Technology Tralee costs €535 a month while the rent for a similar apartment in Galway city is €791, according to the PRTB.
Digs, where students rent a room during the week in a family home close to the college, can significantly cut costs. The website Getdigs.ie links homeowners with a spare room to rent to students.
“Weekly rent varies depending on the location and whether or not meals are provided,” said Tony Campbell, who runs the site. “Generally speaking, the cost of renting a room in the Dublin area for Monday to Friday without meals is about ¤70.” Campbell said that 60% more students were using Getdigs.ie this year compared to last.
“I suspect this has a lot to do with finance — parents and students don’t have the money and are looking at cheaper alternatives,” he said.
For banks, the college campus is a rich hunting ground, with September being a critical time to recruit new customers.
Bank of Ireland, AIB, PTSB and Ulster Bankhave dedicated student packages giving free
banking and other advantages such as commission-free currency exchange.
Many of the “sweeteners”, however, that new students have become accustomed to receiving for signing up with the banks have disappeared. “A few years ago, students could choose between offers that ranged from free return flights to a host of European destinations to cold hard cash,” said Simon Moynihan of bonkers.ie, a price comparison site. “Now none of the big four banks are offering anything much.”
With less by way of inducements, students will be looking more closely at what banks are offering by way of loans, overdrafts and credit cards.
Ulster Bank, AIB and Bank of Ireland have tailor-made loans for students. With AIB, students can apply for up to €3,000 for each year of their course up to four years. The funds must be used to pay the SCC.
Only interest is payable on the loan for the duration of the course, after which capital and interest repayments kick in. The interest rate charged on the loan is 3% less than the bank’s standard variable rate (SVR) for unsecured lending, currently 11.96% APR.
Bank of Ireland will lend students between €300 and €15,000 for any purpose over one to five years at a discounted rate of 11.4%. Ulster Bank will lend students up to €1,300 a year from year one (¤2,750 if parental guarantee is in place) for any purpose, with a maximum drawdown of €4,000 over the duration of a course at a variable 7% rate.
Bank of Ireland has a student travel loan where students can borrow between €300 and €2,000 interest-free for nine months, after which interest is charged at a discounted 11.9% APR.
AIB and BOI also have specialist faculty loans to students of preferred courses including medicine, dentistry, law and veterinary. With AIB these students can apply for an interestfree loan of up to ¤10,000 for a period of five years after which interest is charged at a 3% discount to the bank’s SVR.
Bank of Ireland specialist faculty students can borrow up to €6,500 interest-free in staged drawdowns for up to three years, after which interest is charged at 9.7% APR.
Depending on the bank and the size of the loan, a parental guarantee may be required for students to draw down loans from the banks. “If a student can demonstrate that they have a repayment capacity then they can borrow standalone but most use parental guarantees,” said Catherine Moroney, head of personal banking at AIB.
For cheaper student loans the credit union may be an option. The ILCU said credit unions have seen a significant rise in the number of loan applications from students.
The average interest rate for a credit union student loan is 6.2% APR with some credit unions charging as little as 4%. The average size of a credit union student loan is €3,000- €3,500 and can be used for any purpose, according to a spokesman for the ILCU.
This is an excerpt from a longer article which appeared in the Sunday Times on 22nd September 2013