Google for student deals on Office. You should be able to track on down without needing a .ac.uk email address. I bought the entire suite for my son, 6 years old. All legit and properly licensed - I think Mr Gates believes in getting them young.
As far as the OS goes, watch out for licences being sold on
ebay as a lot of them are OEM versions, branded "Dell" and the like and pretty much unsupported - some don'e even pass MS's authentication. Get a discount on office, take the hit on Win 7. XP's probably a poor investment at the start of a degree course as you'll want something that's going to be supported for at least 3 years.
Having said that, I'd second the earlier post about Linux. Ubuntu is very user friendly, is stable and free. Download it and run it from a USB and see how you get on with it. It comes pre-installed with Open Office which is functionally very similar to MS Office and can open and create MS Word files. Table of contents is supported along with all the usual stuff. Ubuntu also has very low demands on the hardware so is perfect for running on older machines.