Finance for the pursuit of knowledge

Olivia Meredith and Dylan Bevan
Ages: 22 and 23
Live in: Brighton
Occupations: Postgraduate students
Earn: Part-time incomes only
Mortgage: None
Debts: Student loans/overdrafts of ?10,500 and ?5,000
Investments: Olivia ?2,000
Pensions: None
Aims: To survive the next 12 months financially while undertaking their postgraduate studies

Olivia and Dylan met in America last year. They had both recently graduated and each decided, coincidentally, to take some time off after their studies to travel in America - Olivia with some friends and Dylan on his own.

Afterwards, Dylan was returning to Sussex University to do some genetic research work prior to starting his MSc this month, so Olivia decided to join him.She got a temporary admin job with an internet company in Brighton and has worked there for the past six months. She is now about to return to college to do a journalism course. Her ambition is to become a science journalist, as she studied Zoology. She says: 'I'd like to write for publications such as New Scientist.'

But now Olivia and Dylan are becoming seriously worried about how they are going to make ends meet over the coming year. 'Neither of us has fully paid off the overdrafts we each had on leaving university last year, even though we have both been working full time for the past six months,' Olivia says. 'Now we are really stuck over how we are going to fund ourselves while we continue our studies. We can just about cover the course fees, but our planned budget leaves us astounded at the costs we face just to rent our small one-bedroom flat. The only option that appears available is to take out yet another loan. But we don't think its the best way to start off our careers.'

Dylan has a bursary to cover his postgraduate fees and Olivia will be paying her fees out of the income she has earned this year.

They have both made some headway in reducing their bank overdrafts, which originally stood at a combined total of £1,750. Dylan's is now down to £800, while Olivia is £400 in the red. They have also started to pay off their student loans.

They pay £650 a month in rent for their flat and there are other bills, such as council tax. They both intend to work part-time as much as they can while studying this year, but don't think this will cover all their costs - and they don't want to jeopardise their studies by working too much.

Olivia has been looking into sponsorship, grants and freelance work, but feels she has not got very far with that either. She says: 'There is a hardship fund available at the college but I cannot apply for any help until the term has started.'

Although she has savings of £2,000, this is money she was given for her twenty-first birthday and cannot touch it until she is 25. Dylan has no savings. They would have liked to put money aside while working. 'But all the money we were earning was going towards paying off our debts and keeping our heads above water,' says Olivia.

Although she feels taking out another loan is the only way they will survive financially over the coming year, she is not happy about it. 'Is this our wisest move?' she asks.

Adviser 1: Matthew Young

The first thing to say is: don't worry. With careful management, Olivia and Dylan can keep their debts under control. They need to work out what their income and outgoings are likely to be and try to identify areas where they could save money - for example, could they get a student reduction on their council tax?

As their part-time earnings are likely to be under the repayment threshold of ?10,000 a year, they should be able to defer any further repayments on their student loans until after they complete their studies.

As a full-time student, Dylan should ask his bank to put his account back on to student terms, making him eligible for an interest-free overdraft - typically up to ?1,500 for full-time postgraduate students. Olivia should also be eligible for a graduate bank account, which generally offers interest-free overdrafts for a period after graduation.

Although they are reluctant to take out a further loan, it may be the best option to help them through the next year. HSBC, for example, offers a postgraduate and professional studies loan to pay course fees plus up to ?5,000 towards living expenses. The interest rate is 2 per cent over base rate (currently 6 per cent), and they would not have to start repaying the loan until six months after they finish their courses. The loan can be repaid over seven years.

Matthew Young is a graduate adviser with HSBC.

Adviser 2: Elaine Etheridge

Although Olivia and Dylan have looked into grants or bursaries, an information sheet (No 10) produced by the National Union of Students Welfare Unit may suggest ideas for alternative financial assistance.

They should consider a career development loan - provided by some high street banks in partnership with the Department for Education and Skills. Students can apply for loans of up to ?8,000, provided they are studying for a vocational qualification for less than two years. The loan is repaid once the student is in employment. Interest rates vary, so they should shop around for the best deal. For further information, call 0800 585 505

Olivia and Dylan need to keep a close eye on their finances, ensuring that bills and loan repayments are paid on time. If they have problems, they should contact the relevant company immediately and make arrangements to repay when they can - poor credit at this stage could effect their ability to get loans at competitive rates in the future.

Once they have completed their studies, they will need to re-evaluate their financial position. After a year in employment, they could consider buying a property - schemes for for graduates offer mortgages of up to 102 per cent of the property value to cover costs.

Elaine Etheridge works for Endsleigh Financial Independent Tailoring.

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