Student Finance

August 2021
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Students in England received their exam results in mid-August and will finally know where they are likely to spend the next phase of their education. For many leaving home for the first time is both exciting and daunting. Parents too, are likely to have mixed feelings as their young adults take this next step. 

Tuition fees of up £9,250 per year make up a large part of the cost of going to university. All students can get help with this in the form of a Tuition Fee Loan which is paid directly to the university or college and is paid back by the student. 

Maintenance Loans
These are designed to help students with living and studying costs such as rent, bills and equipment. The amount of maintenance loan they qualify for will depend on household income. Household income is gross income before tax of the student and their parents. A deduction of £1,130 is made for other dependent children in the household and pension contributions are also deductible. There is a sliding scale of loan available which reduces, once household income exceeds £25,000. The amount of loan also depends on whether the student will live at home while studying or away with extra for those studying in London (see table). Where parents are divorced or separated the income of the parent with whom the student usually lives is designated the household income.

Maximum Maintenance Loans for 2021/22

Location

Household income up to £25,000
maximum loan per year of study

Upper household income threshold

Minimum loan per year of study

Living at home £7,987 £58,215 £3,516
Living away from home (outside London) £9,488 £62,212 £4,422
Living away from home in London £12,382 £69,888 £6,166

Source:  https://www.gov.uk/student-finance/new-fulltime-studentshttps://www.savethestudent.org/student-finance/maintenance-loans.html
 

The rules applicable to students from Scotland, Wales and Northern Ireland vary slightly and the amounts differ if you are studying abroad.
 
Maintenance loans are paid in three instalments at the beginning of each term. Interest accrues from the date it is paid and increases with your income to a maximum of RPI inflation plus 3%.

Unlike other types of loan, the outstanding balance is only paid back once the graduate earns more than £27,295, with deductions being 9% deduction of the earnings above the threshold. Even though the student may have borrowed the maximum they do not pay more than the 9% levy. This, combined with the fact that any outstanding balance is written off after 30 years, means that only 25% of current full-time undergraduate students are expected to repay their loans in full (1). Parents should bear this in mind when considering how best to help their children financially through their university years. 

Budgeting
For many, going to university will be the first time they have had to manage their own finances. Basic budgeting skills are vital. Most universities and their associated Student Unions will have helpful information and tools available and the following websites could be worth a visit:
https://www.moneyhelper.org.uk/en/family-and-care/student-and-graduate-money
https://www.citizensadvice.org.uk/debt-and-money/budgeting/

(1) March Briefing for UK Parliament, Paul Bolton, 23 June 2021 https://commonslibrary.parliament.uk/research-briefings/sn01079/

LEBC Group

The information contained in this article is based on the opinion of LEBC Group Ltd and does not constitute financial advice or a recommendation to any investment or retirement strategy, you should seek independent financial advice before embarking on any course of action.

A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.

When investing your capital is at risk.

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