College days are usually enjoyed by young, not-yet-employed people, for the very good reason that once most of us get the taste of a regular income and all the spending that comes with it, the chances of giving it all up to be a penniless student is neither attractive nor practical.
Mr S from Dublin 4, who is 33 and married, but has no children yet, is seriously thinking of bucking the tide by going back to college full time. He'll have to give up his £28,000-a-year job and admits it won't be easy since his mortgage is worth £70,000 and his wife only earns £20,000. He wants to know if there are any grants or tax breaks available to them.
On the tax side, Mr S should certainly consult his accountant: he is more than likely entitled to a tax rebate for the balance of this year if he quits now and his wife will now be the one to claim their married couple's income tax allowances, mortgage interest relief, private health insurance relief, etc. Since she only earns £20,000 and falls into the 24 per cent tax relief category, their combined basic allowances (we worked out that these would amount to at least £9,000£10,000) mean that she would pay tax, PRSI, etc, on about £10,000. There may not be too much tax to pay, but can this couple meet all their outgoings on just one salary? They need to review their expenses very carefully and try to work out ways of cutting costs: if they have two cars, one may have to be sold. They may have to cut back sharply on luxuries, like dining out and holidays and on unnecessary clothing purchases.
There isn't much they can do about their mortgage payment, but if they have a spare bedroom perhaps they could take in a lodger, or even a student for eight months of the year.
If possible, Mr S should try to reduce any outstanding personal debt before he quits his job borrowings such as credit and store cards, hire-purchase contracts and even a car loan. Lenders have become much more flexible about allowing borrowers to make lump sum payments to reduce their debt without added charges. If he has credit cards he should seriously consider cutting them up.
If he has been part of a company pension scheme, those contributions will end when he stops work, as will other benefits such as death-in-service lump-sum payments (a multiple of salary). It is very important that he and his wife should therefore maintain existing life insurance or take some out.
Existing policies should be reviewed, especially if they are expensive, front-loaded, whole-of-life contracts. Because life insurance rates have dropped so sharply in recent months, let alone years, they should check to see if they can buy the same cover for less money. The Equitable Life offers the cheapest life cover on the market, especially for smokers, since they do not differentiate between smokers and non-smokers.
Mr S doesn't say how long his course of studies will take, but they may still need access to credit. If they can afford even a modest amount each month, he and his wife should consider joining a credit union or opening one of the First National Building Society's new Savings and Loan Accounts, highlighted in last week's column. The idea behind both is to save regularly in order to build up sufficient savings that can then be borrowed against and repaid over a reasonable period of time. With the credit union a portion of the repayment is also set aside to purchase shares, so there are always some funds on the credit side of the account. The interest rate on small amounts of savings is generous in both cases; the interest repayment rate is reasonable and is calculated on the diminishing balance of the loan and finally, the loans are insured in the case of death and savings are also subject to automatic life savings insurance (up to certain limits.)
As for student grants, scholarships etc, Mr S should contact the college of his choice: if he is lucky, he may very well be eligible for some kind of financial assistance or scholarship that will meet some of his costs until he graduates.
Depending on the course of studies he is pursuing, Mr S should also speak to his bank manager about a student loan. If he meets the banks' usual criteria he should be as eligible as the next student to borrow funds to help him through the college term and repay the loan by working during holidays or when he graduates and begins a new career.
Suggestions Welcome
Family Money welcomes suggestions on topics of personal finance that readers would like to see highlighted. Please write to Jill Kerby, c/o The Irish Times, 11-15 D'Olier Street, Dublin 2 or by Fax No. 01 6798874 or email: jmkerby@indigo.ie
