How can this be right? It isn’t . Martin Lewis on uni costs.

[Dowser]

Watched Martin Lewis tonight as grandson is off to uni in two years.

So...it’s £9000 a year tuition
Then the highest living allowance is presently £8700 per annum

So...if your parents earn over £25k , your maintenance loan is reduced.
Some parents didn’t realise that they were expected to top up to the full amount
One poor lad was attempting to live on £4K . His parents hadn’t realised they were meant to top up

Then there was a young girl who had to leave uni because her mum got a new partner. The students loan went down from full to low and this guy who wasn’t her father, had only been with the mum was expected to pay for someone else’s child. I think there was a shortfall of £5k

Martin Lewis rang up the student loan company and was told it was correct.

He’s looking into it.
I was shocked at that.

I went to uni almost 30 years ago and parents were expected to top up maintenance grants according to household income. It’s not new.

I had the minimum grant in the late 1970s. Think it was about £60 a term. My parents were expected to provide the rest. Not new.

What truly is scandalous are Oxbridge colleges with endowments of £500 million a year+, charging £150 a week for a room that they have owned for 500 years. Yes it takes upkeep but surely they should pay the cost of the upkeep not make a 'profit" on rent charges.

Yes, I had minimum grant in the 1980s. £410 for the year in my first year, £205 in the second year, if I remember correctly. OK no tuition fees, but I couldn't have gone if my parents hadn't helped out. DH had a full grant, which seemed like riches beyond compare!

I had the minimum grant in the late 1970s. Think it was about £60 a term.

The minimum grant was abolished in steps: in 1983-4 was £410 per year, in 1984-5 £205 and in 1985-6 £0. £180 per year in the late 1970s sounds about right. However what has to be remembered is that up until the late 1980s (?) (a) students could claim housing and supplementary benefit in the summer, independent of their parents’ income, as the grant/parental contribution was notionally only October to June, and (b) parents could use a covenant to pay their contribution from their gross income, which with basic rate tax at 33% was a substantial saving. So the parental contribution was probably lower (I estimate at most the equivalent of about £4000/year today) but the structure of incomes today is so wildly different that the comparisons are hard to make.

th endowments of £500 million a year+,

What are you talking about? An endowment is capital, not “a year”. That’s like saying that if you own a house worth £200k you have £200k per year. The income from that endowment is a fraction of that amount.

And which colleges have endowments that large anyway? The richest colleges at Oxford are St Johns and Christ Church and they don’t have that much. The average endowment is about £100m. Maybe Cambridge is hugely richer, but I’d be surprised.

My two are both at Uni in London. Ex and I pay half their accommodation costs each and they have a loan for fees and maintenance. This costs me £700per month and even then they struggle to manage. DH and I are teachers but earn over the max amount so DS and DS get minimum maintenance loan.

£410 for the year in my first year, £205 in the second year, if I remember correctly. Yep, those are correct for 1983 onwards (it was zero for your final year).

Yes I do understand how endowments work, just got a little carried away ;)

I'm fairly sure SJC and ChCh have over £500m and earn 6%ish interest. There are a couple of Cambridge colleges far richer

(a) students could claim housing and supplementary benefit in the summer, independent of their parents’ income, as the grant/parental contribution was notionally only October to June, and (b) parents could use a covenant to pay their contribution from their gross income, which with basic rate tax at 33% was a substantial saving.

That’s interesting Reflectent. I used to sign on through the summer months but didn’t get any housing element. Not sure the covenant thing was widely known about, my parents certainly weren’t aware of it. Possibly if they had been self employed and used an accountant they might have been.

My dad did a covenant for me I seem to remember.

Not sure the covenant thing was widely known about,

Everyone I knew whose parents were paying it had their parental contribution paid that way, and I was in an enclave of public sector employees; I don’t think anyone I knew well enough to know about their finances had self-employed parents. It was the sort of thing every middle-class Which? reader knew about :-)

The catch with a covenant was that it had to have a minimum duration of seven years, so you had to trust your children to agree to cease to demand their money when they graduated. And you had to actually claim it back from the revenue, it wasn’t in anyone’s tax code.

Sadly
Adropofreality speaks sense .

So many degrees are pointless

@ReflectentMonatomism. I remember my parents finding out about covenants because when my sister had her first child and they did one for her. But this was after I finished university. However I’d had a year out of education so it’s possible they just weren’t in the loop, middle class professionals though they were! !

I remember the covenant tax loophole too - I think it was abolished just before I went to university.

(And no you didn’t have to be self-employed or have an accountant, it was manageable by any middle class PAYE employee).

I went to uni in the early 90s. I got no grant at all but yes the course was free. My parents gave me 1k at the start of each term.

It was tight but manageable, my room was £25 a week. Bills and food in top of that and obviously socialising and any textbooks.

I got a part time job in year 2 and also worked full time in the summer holidays.

it was manageable by any middle class PAYE employee

I’d have to ask my parents, but I don’t think they had to do anything. They wrote the covenant, which was an agreement to pay, and the recipient (who didn’t have to be a student, although I think they might have had to be a non-tax payer) claimed it from the revenue. I have a suspicion that the rebate was composite rate. Presumably the parents had to have actually paid tax on their original payment, but I don’t know how that was checked.

Covenants still exist in Ireland and at a first impression I suspect they are very similar to how they were in the UK until they were abolished in the late 1980s.

I find the whole system disgraceful
My son is studying medicine in London.
I earn less than £25k he gets full loan, used to be a GRANT. He borrows £9250 tuition fees for 6 years plus £11000 for living costs. His year of intake is the first year who don’t get NHS bursaries for years 5 and 6 study.
He will leave to start his first year of training owing over £120k plus interest from day 1 of over 6%.
He will earn £26k not megabucks.
I am heartbroken for him to start his working life in so much debt.

His year of intake is the first year who don’t get NHS bursaries for years 5 and 6 study.

Yeah removing the NHS bursary is dreadful. On the plus side at £26k he won't be paying much more than a cappuccino towards it.

"Where are there halls at £60 per week?

1999! grin"

Yes. This is about what I paid in 95. Shared a room, but it included the evening meal. Did 4 months in France where the room was really ugly, but the price was 60 a month rather than a week!

awishes If he earns £26000 he will pay precisely £24.75 a year off his loan. That's at the rates from April 2019.
Not a huge burden.

I've posted this before (lots of threads on this subject on Higher Education board) but it's worth repeating.

Repayments are exactly the same regardless of the size of the loan

Example from April 2019
DC1 finishes with a loan of £30000
Earns £25000
Repayments are zero.
Earns £35000
Repayments are 9% of the amount over £25725
Repayments are £965.25 a YEAR.

DC2 finishes with a loan of £50000
Earns £25000
Repayments are zero.
Earns £35000
Repayments are 9% of the amount over £25725
Repayments are £965.25 a YEAR.

DC3 finishes with a loan of £75000
Earns £25000
Repayments are zero.
Earns £35000
Repayments are 9% of the amount over £25725
Repayments are £965.25 a YEAR.

@StartedEarly

This is why I'm not sure those parents who use their savings to pay the actual fee's are making a wise choice. It's not "debt" in the traditional sense. My DS did a 4 year course so "owes" approx 70k. He's working now but under the threshold to start paying anything back. I'm 99.9% certain he will be one of those who never pays back the whole loan. A huge proportion don't. We don't feel bad about that. The system is set up that way.

If parents want to help their DCs financially, the money would be best used as a house deposit, and/or for cost of living while at university. But the student should still take all the loans they are entitled to.

The only people who would benefit from paying their loans off early are those who are 'quite high' earners - no idea how this translates into actual figures but it's something like:

Most (about 80%) won't even pay off all the loan, let alone start paying off any of the added interest, before the loans are written off.

Some (probably far less than 10%) who go on to be very high earners at an early stage in their career, will pay off all their loans fairly quickly, and won't pay much in interest.

The remaining 10-20% will pay off all their loans and quite a lot of interest and it is this minority who would be the ones who would benefit the most from paying off their loans quicker than the minimum requirement, as they would pay less interest. But obviously dependent on their salary through their career and whether or not they take time out to have DC etc.

I'm sure it would be reasonably easy to knock up a spreadsheet to work it all out, or there will be calculators on the internet.

The only people who would benefit from paying their loans off early are those who are 'quite high' earners - no idea how this translates into actual figures but it's something like:

Your analysis is right. Parents who are confident of their 18 year old's long-term future earnings on the basis of the degree course they have been accepted on are off their heads. But this has become one of those entrenched things in which the people who pay up front from their live savings won't be told that "debt" is in this case actually the attractive option: it's become an emotional, rather than analytic, position.

If he earns £26000 he will pay precisely £24.75 a year off his loan. That's at the rates from April 2019.

But what about when his earnings rise as he progresses through his career. The interest alone will be more than £24.75 so his debt will increase. You can't take single years in isolation - you have to look at the full 30 year term. The interest added is at an extortionate rate.

At the end of the day, if you get a decent job and are likely to repay the loan in the 30 year window, you're best to pay it off as soon as you can to stop the interest accumulating.

Only if you never expect to earn much more than the £25k per year will you be unlikely to ever repay even the capital, so then the interest doesn't matter to you.