Students save for business dream

By Jenny Culshaw
Business reporter, BBC News

Being frugal at university helped Layla save her loans.

While many students are using every penny they can scrape together to pay for tuition fees, accommodation and perhaps the occasional pint in the union bar, Layla Boubker had different ideas.

The 23-year-old, who recently graduated from the University of Hertfordshire, saved part of her student loans, and has used the money to start a business.

Her firm, Artizina, produces handmade, Moroccan inspired clothing - from kaftans and dresses to denim jeans.

And her first collection was part-funded by the money she had borrowed during her student days.

No rules

Those at university and not living at home can apply to the Student Loans Company for a maintenance loan - now worth up to £4,950, or more if they study in London.

The big attraction is that it is probably the cheapest finance they are ever likely to get - with interest rates currently at 1.5%. Meanwhile repayments are not needed until income hits £15,000.

While student loans are a vital ingredient in getting many students through university, there are no rules on what the money is actually used for.

For those in the privileged position of not needing all the funds - perhaps because they already have savings, backing from their families or are just particularly careful spenders - the loan can prove a vital resource for entrepreneurial students to start up their own businesses.

Because she was living with family but not her parents while at university, Ms Boubker qualified for the student loan.

And she knew that with a bit of frugality, she could survive day-to-day without using the full amount she was able to borrow.

Ria has put about £500 from her student loan towards paying a designer.

But she took out her full entitlement anyway - and managed to save £3,500 which she decided to invest in the business, which she runs with her cousin.

"The student loan was very important because without it I may not have been able to start this business right now," says Ms Boubker, who studied marketing, accountancy and French and has already spent £1,250 of her savings.

"I may have had to wait until I had a job in a years time but with the student loan I've been able to start. It's been great."

'Convenient'

Another student at the same university, Maria Alema, is doing something similar.

Her company, Ria Alema, is making lingerie for, as she puts it, "people with big boobs and small backs."

Ms Alema, who is halfway through a four-year law and business degree, works part-time to help pay her way through university.

She too is taking her maximum loan allowance - and is saving what she can to cover bills from her business as they come in, and has extended her overdraft.

Ria used £500 of her student loan towards pay for a designer.

"If I hadn't used that it probably would have been a much slower process," the 21-year-old says.

"So that was quite convenient especially with interest being so low.

"I'll never be able to get a loan later in life with such a low interest rate. I thought I could use this opportunity to start my business."

Means testing

Television programmes such as the BBC's Dragons' Den have inspired young people to go into business says Nigel Culkin, head of Enterprise and Entrepreneurial Development at the University of Hertfordshire - which runs a business ideas challenge called Flare.

"Ten years ago, enterprising students used their loans to make money on the stock market. That option is no longer as appealing and entrepreneurial students are now more likely to invest in themselves, by using their loans to start a business."

The National Union of Students declined to comment on students who take advantage of the loans system to try and make money.

But it stressed that loans are about 80% means tested in Scotland, while in England, Wales and Northern Ireland the total amount available is reduced if you receive the maintenance grant.

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A report on this appeared on Working Lunch on BBC Two on Friday 11 June and can be seen again on the BBC iPlayer.