Student finance

[Mondayagainohno]

I’m probably being a bit dim but can someone explain how and when you apply for student loans and what you can actually get and also what’s the norm to do regarding helping your DC
DC got s place at uni for sept but is on a gap year so asking the sixth form is not really an option
i get mixed responses from friends I ask who have kids at uni - a lot saying the kids take the loan for fees and some then get a maintenance loan which I assume goes towards rent and living expenses, others saying they’re paying for everything except the fees. Can you do a different thing in year 2 if you need to, do you apply each year ?
is this means tested and if so I assume you are expected to top up the shortfall
are halls paid termly in instalments if the parents choose to pay ?
I’ve checked gov website but it’s so complicated to work out what they might be entitled to apply for
any advice welcome !

Try the moneysavingexpert website that has a student section and the WIWIKAU Facebook page/website.

But yes you can decline taking a maintenance loan in year 2. The maintenance loan is means tested and the parents are expected to make up the difference between the minimum and maximum maintenance loan if the household earnings are over a certain level.

There are 2 aspects to student finance:

1. Uni fees - you don't have to take the loan but the uni needs to be paid - so if you don't take the loan then a cash payment needs to be made to the uni. If the loan is taken then the funds go straight to the uni from Student Finance. This is not means tested.

1. Maintenance loan. If parents earn over the threshold then student will only get the basic loan - parent (or student) will be expected to make up any difference needed. If parent earnings are below threshold then the student will get a higher loan. The funds are paid direct to the student by Student Finance and they need to pay their rent and living expenses.

The basic loan is around £4400 - if you get the higher loan it is around £9400.

Where in the UK are you? Eng/Scot/Wales all have different systems. Not sure about NI.

Hi thanks for all your advice so far @sailingsunshine i’ll check those websites
when do you have to apply by - is it through the govt website ?
We’re in England @Seeline
do most students tend to take a maintenance loan - don’t want to saddle Dc with too much debt but equally it would be a stretch to pay rent and maintenance solely for them

do most students tend to take a maintenance loan - don’t want to saddle Dc with too much debt but equally it would be a stretch to pay rent and maintenance solely for them

I can't cite any official statistics, but as a mother of two students and as someone who has read a lot of posts on WIWIKAU, my impression is that the vast majority of students take the maintenance loan. You really shouldn't feel guilty about getting your DC to take the loan. There are lots of parents who provide their DC with minimal financial support (-in some cases because they can't afford to and in other cases because they choose not to prioritise it) which can in some cases leave DC with major financial worries and/or working so many hours on paid work that they have very little free time. It's clear from your post that you are planning to provide your DC with significant support. Another point to be aware of is that often even the maximum loan is not enough to cover realistic accommodation and living costs. Accommodation costs vary hugely between universities.

Money Saving Expert offer a lot of advice and information

UCAS re Student Finance

It’s tricky like most parents you don’t want them to leave with lots of debt but equally we also need to be comfortable with cost of living increases and to have some fun
I’m wondering can you apply for a specific amount of maintenance loan eg - say just for accommodation or is of all of nothing ? We have 2 going off. Out of my friendship group many will pay for their kids entirely I think due to their circumstance. Do you know if they choose to take loans if you can choose at the end to pay some off for them if circumstances allow ? Eg pay off the maintenance loan part ? Sorry for so many questions

Do you know if they choose to take loans if you can choose at the end to pay some off for them if circumstances allow ?

You can pay off any or all of the loan whenever you like. Think of it like a mortgage that allows overpayments.

But, unlike a mortgage it doesn't have to be paid off. So use the calculators available to be sure your DC will earn enough to repay.

Students can apply for any amount of maintenance loan up to the max amount they qualify for, and yes, it can be changed for each year. My DS applied for roughly half in his first year, but he had a job. For his second year, he didn't have a job so took his full amount allowed.

Do you know if they choose to take loans if you can choose at the end to pay some off for them if circumstances allow ?

Yes fully flexible re paying of all or part early. It makes sense if you can afford it and likely to be liable for enough repayments to pay it off in the long term, as paying it off sooner minimises the hefty interest charged.

@Kazzyhoward Thks so much
so for instance if rent was £7k and you budgeted a £100 a week for 39 weeks living expenses meaning approx £11k needed per year you could choose to borrow £5k and top up ?

Your mention of your friendship group suggests you may be a high earning family OP.

If so, your DC will be able to borrow a maximum of £9250 pa for tuition fees (this amount is paid directly to university) and £4,524 pa for living expenses.

There are exceptions for certain courses such as medicine, nursing and certain subjects of PGCE.

Applications for SC will be starting soon. My dd will be applying for second year and it says towards the spring. SF have a live chat on FB and are pretty good. The website and application procedure are easy enough to negotiate but make sure you follow the steps correctly. Eg both parents and the student need their own SF accounts etc.

Keep in mind that the amount your young person will repay each month, is related to how much they earn and NOT how much they have borrowed.
This is why it probably should have been called a graduate TAX in the first place and not a graduate loan.

So, if they borrow 3 years @ £9250 for the fees (they don't see this, it goes directly to the University) and nothing for the maintenance loan, or all of the minimum maintenance loan, or if it were a student entitled to the full maintenance loan, the amount being taken from their salary once they earn above the threshold, will be the same for all 3 scenarios.

Detail here

However, if your household income is above (from memory *check detail to be sure) I think it is £65K, then your student will only be able to get the minimum loan anyway. You don't "choose" how much you would like - it is dependent on the income of the parent they live with and any partner of that parent regardless of if they are the student's parent. So if one of you earns £30K and the other £40K, then the student can only borrow minimum loan.

@UsingChangeofName

Keep in mind that the amount your young person will repay each month, is related to how much they earn and NOT how much they have borrowed.

Not the amount, no, but the length over which they make repayments WILL depend on how much they borrowed. The less they borrow, the sooner the repayments will stop, once they've repaid the amount borrowed plus the interest added over the years.

Only if they get to that level of repayments though.
I know things have moved to a new scheme (was it for those students starting last year?) but prior to that, most students never repaid the full amount.

If you think the student is likely to end up in a really high paying role, and then never go part time or stop work, then you are in a different place from if they are going to be a paramedic, or an Occupational therapist, or a social worker, or one of the hundreds of graduates who do not get a graduate job at all.

I realise difficult to predict, but there might be some indicators.

@UsingChangeofName really helpful, thanks i don't envisage them being in really highly paid jobs - we do have a joint income of more than £70k so i guess that tells us that DC will only be entitled to minimum maintenance loan - seems sensible he tries to get that and we top up, its highly unlikely they'll start repaying any loans for a good few years as they def won't go straight in to high paid roles
Does the interest accrue each year post graduating making loan value higher and higher until you start repayments ?

My daughter is in her first year at uni and we have had a terrible time trying to get the loan that she was entitled to. They fobbed her off for months. Funnily enough, as soon as our MP got involved, the money was in her account!

I'm guessing the Student finance company has been privatised by the Tories because they are inefficient and useless.

I've only just started looking into this whole SF thing myself.

My understanding (please correct if I'm wrong), you accrue interests the year after you take out the loan, regardless of whether you have started earning or paying it off.

The terms have changes for those starting 2023, they only write it off after 40 years - that's the whole of their working life, compared to previous 30 (?) years. Another change - Interests will be charged at RPI, rather than RPI+3%.

Also worth bearing in mind, the 9% of earnings should be considered as minimum payment for those earning above the threshold of £27950 (?), if you pay more /faster, overall you pay less interests.

It makes it all very difficult to decide what's for the best.

You apply in May before your course begins. Everyone on their first degree resident in England (different arrangements in the other nations) gets the tuition fee loan, that's part one of the application, the second part is for maintenance, they can apply for the basic loan (just over £4K) automatically but if they want to apply for the means tested element they will need to provide details of their residency status eg with you plus your dh or dp if applicable, and your email - you then need to prove your income eg p60. If your combined income is over a certain amount (check for this year) there's no point applying for the discretionary loan.

@UsingChangeofName

most students never repaid the full amount

That is, of course, based on forecasts, as no one has yet reached the 30 year cut off point for the scheme that's just changed and was only in operation for the last decade or so.

It's also VERY misleading, as it's based on paying off ALL the loan, including the accumulated interest. The interest can easily end up being more than the amount borrowed, so whilst they may not have paid off the their loan, many will have paid more than the amount they borrowed and have been eating away slowly at the interest, rather than the capital, for the latter part of the forecast 30 years.

You don't have to be an ultra high earner to end up paying off huge amounts of interest either. When we did spreadsheets with DS for his tuition fee element of the loan, I seem to remember the earnings level to be as low as £50k or so to pay off the capital, doubled up with interest within the 30 year period. So basically borrowing £27k and paying back just short of £50k over the 30 years! Ouch!

The "forecast" of not paying much back only really applies at levels of average earnings of less as they'll not even pay back the capital, so the loan repayments remain pretty insignificant. Likewise, the ultra high earners pay it off much quicker so don't incur anywhere near as much interest. As always it's the "middle" who are squeezed, i.e. those earning in, say, the £40k-£60k range who DO pay it off more or less, but incur huge interest in the meantime.