IF YOUR grandparents or parents tell you "not to borrow"-don't listen. This well-meant but outdated logic risks causing damage.

Student finance has changed and if you want to go to university you're going to have to borrow unless you're seriously minted.

This in itself isn't a problem, yet as a nation we should be ASHAMED that we educate students into debt, but never about debt.

Many students heeding misdirected advice, try to avoid loans.

Then after finding they can't live without breaking this taboo, when they borrow they don't differentiate between good and bad lending. Sadly, I've met far too many people who years after university are still nastily in hock because of borrowing the wrong way. Today my crash course will teach students how to borrow the RIGHT way, starting with:

GOOD DEBT: The official Student Loans Company loan, designed to pay both your living costs and any tuition fees, is the cheapest long-term debt you'll ever get.

So much so that once you graduate, it's best not to try to repay it more quickly than you have to-because the interest COST is lower than a top savings account PAYS.

So you're better off saving money in one of those than putting it towards a quick repayment.

Better still, you only pay a student loan back when you're earning over £15,000.

And even then you only have to pay 9 per cent of anything you earn above that.

For example if you earn £20,000, you repay £450 a year.

Also this debt doesn't go on your credit file, and thus has no impact your ability to get a mortgage.

I think of it more like a graduate tax than a type of borrowing. The interest rate, which changes in September, is based on the Retail Price Index rate of inflation the previous March.

Dropped

That's just dropped from 4.8 per cent to 3.8 per cent.

The fact that it's set at inflation-the rate that prices rise-is important because it means there's no real interest cost.

Imagine you borrow £100, and the interest rate you pay is set at a 4 per cent rate of inflation.

That means in a year's time you would owe £104. Yet due to inflation, a basket of shopping costing £100 this year will cost £104 next year.

It's as if you were loaned a "basket of shopping's" worth of money and still owe a "basket of shopping's worth" of money-so your actual spending power hasn't been diminished by the loan.

OK DEBT: Student bank account zero per cent overdrafts. Banks managers salivate at the thought of students. They hope by giving you freebies now, they'll buy your custom for life.

Sadly, they're often right, because most people don't ditch 'em for better accounts later.

The biggest gift they give is a 0 per cent overdraft-so students can go into the red at no cost. As such you should take advantage of this, but only for short-term needs.

Hassle

Once you graduate, it won't be long before the rate rockets to a massive 10-20 per cent. The top 0 per cent overdraft is a whopping £3,000 from Halifax, though you won't always get it immediately.

Alternatively, if you're one of the few unlikely to be too overdrawn, NatWest gives a much lower £1,200 rising to £1,600 but with a cracking freebie, a free five-year 16-25 Railcard (worth £120) slashing a third from many fares.

In Scotland, the best deal is the Royal Bank of Scotland, offering £2,750 at 0 per cent and £100 cash.

But make sure you NEVER exceed your overdraft limit. Because MONSTROUS charges will rack up.

For a full guide to the best student accounts go to moneysavingexpert.com/studentaccounts

BAD, NASTY DEBT: The key to avoiding this is NOT to go near anything charging commercial rates of interest (over 5 per cent).

This means almost all credit cards, store cards and loans.

These will get you in real trouble and cause debt hassles for years. Don't touch them.

But take control of your finances NOW and you should be fine.

GRAB GRANT & SCHOLARSHIPS

PAYING for your university education is not just about loans and running up debts.

Because there is a lot of FREE MONEY out there waiting for you if you know where to look.

STUDENT GRANTS: For young would-be graduates in England whose parents take home roughly less than £60,000 some or all of the student loan, up to nearly £3,000, is replaced by a grant.

The difference between a loan and a grant is simple: You don't need to repay grants.

Full details of how the funding works is at moneysaving expert.com/student loans. Plus if you pay the maximum £3,145 tuition fees and are eligible for the whole maintenance grant, your university must give you a bursary-a monetary award-of £310 that doesn't need be repaid.

HIDDEN SCHOLARSHIPS: There are lots of under-publicised scholarships out there-mostly for academic subjects and sports. But some are way out of left field, even just depending on your parents' jobs. Two websites to check your eligibility are scholarship-search.org.uk and egas-online.org.uk/fwa/index.html

MONEY FROM UNIVERSITIES AND STUDENTS' UNIONS: Universities often have hardship funds for students suffering financially. Just talk to the university's welfare department about it.

All students who are also parents, and those with disabilities or other special circumstances, may qualify for extra cash, as do new teacher training students.

And don't forget the students' unions too-some have their own independent hardship fund.

SEEING SUM SENSE

WORKING people know not to "spend more than you earn" yet students are pushed to budget without anyone saying what you shouldn't "spend more than".

My answer is to add up your student loan plus any cash from parents, grants, and working to give you your income. That's it. Go beyond this and you'll end up in bad debt.

TV money guru Martin Lewis is the creator of the Consumer Revenge website MoneySavingExpert.com , packed with information on how to get more money in your pocket. packed with information on how to get more money in your pocket.

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