The ultimate graduate’s survival guide!

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Iona Bain

Thousands have been celebrating the end of a degree course this summer and are looking forward to life after university.

But whether you’ve graduated  yourself or have a child or grandchild who is about to embark on the career ladder, it can be a tough time for families. Entering the real world of work can be an eye-opener!

Despite their bright minds and impressive qualifications, jobs for graduates are sparse.


Rebecca Lake, pictured second left with her dad Andrew, sister Abigail and mum Sally

Rebecca Lake, pictured second left with her dad Andrew, sister Abigail and mum Sally

Rebecca Lake has had no luck finding a job since graduating from the University of Kent — and is eating into her savings.

Despite getting a First in English and American literature, the 21-year-old is going from one unpaid internship to another in her chosen field of PR.

Rebecca (pictured second left with her dad Andrew, sister Abigail and mum Sally), says: ‘I need at least six months’ work experience to even be considered for a job, but that’s a long time not to be earning.’

She has moved back home to Bromley, Kent, and her parents give her a £120 monthly allowance and pay her commuting costs to London.

‘I’m a very proud person,’ she says. ‘I had a job at university and an independent life for three years, so it’s been hard to move back home.’ But she has paid off her overdraft.

Many will be forced to rely on their family’s support. Around one in four of last year’s graduates still had part-time jobs six months after leaving university, while one in ten were unemployed.

That dream of buying a house is probably more than a decade away, while the student loan may well not be paid off until they are in their late 30s.

So, it’s vital graduates get to grips with their finances from the start.


It comes as a shock to most graduates to realise they’ve been charged interest on their student loan for the past few years.

This has already bumped up what they owe. Starting to repay the debt can eat in to their take-home pay.

This year’s graduates, who applied for the maximum maintenance and tuition fee loans in 2009, will owe £25,603. For students in London, the debt hangover is £31,686.

Graduates won’t have to start repaying their loan until next April, and then only if they earn above £15,795 a year. From then, graduates repay 9  per cent of everything they earn above £15,795. On a salary of £21,000, that is  £39 a month — £61 on a £24,000 salary.

The rate of the student loan is 1.5  per cent. It is set every September, and calculated as 1  per cent above the rate of inflation (as measured by the retail prices index) in March or the Bank of England base rate, whichever is lower. Currently, the lower figure is the base rate — 0.5  per cent.


Managing her money: Alana Heaver

Managing her money: Alana Heaver

When Alana Heaver landed her first job this year, she had to learn about money fast.

The 24-year-old, who studied film and media at Sheffield Hallam University, had just two weeks to find a house in London and get her finances together.

The junior researcher, originally from Dorset, says it was a big shock to discover how high her bills were.

‘In my university house we had a pound meter, so I knew exactly what I was paying, but the bills are a lot higher now.

‘When I got my first pay cheque, I forgot how much I’d pay in tax. My bank scared me when they said my overdraft would end soon.’

Alana pays £540 a month in rent and bills, and knows exactly what she pays on top.

‘I put it all into a separate bank account after I get my pay cheque, so I’ve got about £75 a week to play with,’ she says.

‘I’m putting £100 towards my overdraft every month. I feel comfortable and don’t have to ask my parents for help.’

Many graduates, and parents, ponder overpaying student loans to get the debt cleared quicker.

However, at this rate of interest it is not worth it. As rises in the cost of living are higher than the interest, the debt is effectively shrinking each year. Clear other debts first.

For those wanting to overpay, use the Make-A-Payment service offered by the Student Loans Company.


Most students are likely to finish university with around £2,000 to £3,000 in an interest-free overdraft.

But having been very generous when they were a student, most graduates find banks are suddenly anxious to get their money back.

Most offer a similar overdraft in a graduate account, but that will be snipped down and whisked away altogether within three years. For example, Royal Bank of Scotland offers £2,000 in year one, reducing to £1,500 in year two and down to £1,000 in year three. Halifax offers £3,000 in year one.

It’s vital to make plans to repay their overdraft, so they aren’t left trying to find the money in 12 months. Then they will face steep interest charges of 9.9  per cent.

Repaying £500 a year means setting aside £42 a month.


Many will not have paid any tax before and the amount deducted is an eye-opener. For starters there are two types of tax — income tax and National Insurance. Both will be automatically deducted from a pay cheque.

Everyone can earn a certain amount in a tax year (which runs from April 6 to April 5) without being taxed. For 2012-2013, this personal allowance is £8,105. For every £1 earned above this amount, 20p is taken in income tax.

This basic rate applies for the next £34,370 of earnings. The higher 40 per cent rate starts at £42,475.

On top of this, there is also National Insurance to pay. For those in full-time employment, for every £1 earned above £7,592 a year 12p is taken in NI contribution s.

If you earn between £8,105 and £42,475, 32p is taken in income tax and NI for every £1 earned.
It’s vital graduates sort out their tax affairs as soon as they start a new job, to avoid headaches or nasty bills further down the line.

They will fill in a P46 form when they start work — which will give them a new tax code. This is a letter and series of numbers that tells employers how much to deduct in tax. Those who worked part-time at university should have a P45 to give to their new boss.

The only exception is students who worked only in the summer holidays this tax year, who will have completed a P38(S). Those going to a new company will need to tick box B on the P46 and make sure the income they received under the P38 regime is taken into account in the code for the new job. To contact HMRC, call 0845 300 0627.


The lucky few may be asked to join a company pension. Pensions have changed a lot over the generations.

Today’s graduates should benefit from a Government plan making it compulsory for companies to offer their staff a pension from the moment they join (until now, around 75  per cent of firms did not offer pensions).

When this new scheme is fully up and running, employees will pay 4  per cent of their salary into the scheme. Their company will pay 3  per cent, and a further 1  per cent will be added by tax relief — which everyone gets for contributions into a pension.

On a salary of £20,000, a worker would pay £67 a month — £804 a year. Employers would pay £600 and the Government £200. This money will build up to give a pot of cash to fund your retirement.

And though retirement will be more than four decades away for most graduates, now is the time to start saving into a pension.

Anyone who starts saving into the new scheme from age 22 will have a typical pot of £146,800 when they retire, assuming fund growth of 6  per cent. But wait until you are 40 and that will be only £99,200.


On top of all the pay packet deductions, there is also rent and bills. According to HomeLet, the average rent in London — a magnet for new graduates — stands at £1,260 a month, as opposed to the rest of the UK average of £789.

Energy bills can average around £1,000 a year, while a phone, broadband and TV package from Virgin Media is £300.

There is also £145.50 a year for a TV licence, plus a mobile phone contract could cost between £10 and £50 a month. Council tax will vary. A property in Band D will incur £1,444 in council tax.

Add water rates (around £370) and many graduates won’t get much change out of £4,000 for basic bills each year — and this doesn’t include rent, groceries, commuting and going out.

Welcome to reality.

This was originally published in the Daily Mail in August 2012.

This Post Has One Comment

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    Why oh why do graduates pay off their student debt so quickly? It’s the cheapest debt you’ll ever have, so just leave it and take your tine paying it off. When I was at college, my lectures, all in their 50s, were still paying off THEIR debts from when they were at University.

    I am not the slightest bit worried about student debt. Take your time paying it off, otherwise you might end up taking out a commercial loan from a bank which is NOT a cheap debt – just a liability.

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