#Budget2015 FAQ - We asked Money.co.uk for answersBy Sj.Cliff
The Budget 2015 marked a massive change in the way young people fund their education, amongst a lot of other things.
If you aren’t on the ball with you political knowledge, a lot of this stuff can slip away unnoticed. However, each of the governments decisions regarding the way it spends its money has an impact on everyone in this country.
So Hannah, what is the Budget?
The Budget is where the Chancellor explains to MPs in the House of Commons, and the nation, how the Government plans to earn and spend money over the coming year.
Why does the Budget happen?
Officially the Budget is used to inform government departments how much money they will have to spend during the next year. It also tells HMRC (the tax collectors) how much tax we will be paying to cover the cost of Government spending plans. Now, the Budget is also used to let consumers and businesses know about future changes that will impact their finances.
Technically yesterday’s Budget was what’s known as an ‘Emergency Budget’. Usually there’s just one Budget a year; but this is the second in relatively quick succession because of the change to a Conservative majority.
Why have the government scrapped the maintenance grant?
To save money! For the past 14 years different governments have been spending more money than they earn resulting in a large deficit. The current Government is now attempting to balance the books as a way to protect our economy against future economic shocks - this is why they’re making such drastic cuts.
What effects will the new system have on current students?
None, if you’re already a student, or are starting your studies this September, you don’t need to worry about the changes to the maintenance grant as they only apply to students starting in the 2016/17 academic year.
Are new students going to be better or worse off with this system?
Ditching maintenance grants and turning them into loans is clearly bad news and it means that new students will be lumbered with even bigger debts when they graduate than those that came before them. This shouldn’t be a reason not to go to university though; the additional borrowing won’t become a burden until you are earning a significant amount because of the way student loan repayments are calculated.
Do you believe that there would have been a better way to help the government save money?
Cuts were felt almost across the board, but young people fared particularly badly. I'd like to see greater detail about the obligation on universities to support those from disadvantaged households to make sure that affordability isn't a barrier to higher learning.
Will the changes in the size of the debt affect younger people’s future borrowing?
Possibly; student loans don’t appear on your credit report, but lenders do take them into consideration when you apply for a mortgage because they impact how much spare cash you have to spend on repayments. Since the amount you can borrow when you apply for a mortgage is linked to your income, there is a chance that this change could mean you’re able to borrow slightly less although the change is more likely to mean it takes longer to repay your loan and you pay more interest. The amount you pay off your student loan each month is linked to your earnings rather than your total debt, so it’s unlikely to impact your monthly repayment.
Is there anything else in the budget that students should pay particular attention to?
Yes, the threshold for when you start repaying your student loans will be frozen at £21,000 for 5 years from 2016/17, meaning you’ll have to pay back your loans sooner and quicker than expected.
Also, it’s worth noting that the headline announcement of a new Living Wage only applies to over 25s, so most students won’t benefit from it either.
As the purse strings have grown tighter for students, do you have any advice for keeping spending low when at university?
Writing your own budget is a great way to keep on top of your spending and make sure your student loan lasts the distance. It also makes it easy to see how much spare cash you have left to spend on fun once you’ve paid for essentials like rent, bills, food, books and library fees.
Picking the right bank account can also make a big difference, with banks tripping over themselves to get student customers, many offer interest free overdrafts and other freebies that could save you a bundle.