Student finance - can someone help me get my head around this?

[glittergold]

We saved 20k over the years to help support DC through uni. Obviously, tuition fees and living costs will exceed this.

I think the most sensible plan is for DC to get loans to cover tuition. But when it comes to living costs, 20k won't be enough to cover three years - particularly if they end up at one of the more expensive unis.

Our income threshold means that DC will only be entitled to the minimum loan to help cover costs (just under 5k a year).

My question is, does it make the most sense to take the minimum loan each year, beginning from the first year, and supplement that with money from the 20k? Or to 'use up' the 20k first, thus avoiding interest, and only take loans out when we reach the point that we need to?

My advice would be to keep things simple and divide the £20k by the number of years and then round it down in case of repeat years or course transfers or to help with the transition out of uni.

If it's a 3 year course, your DC (I'm assuming only one child) would need topping up by £6k-ish a year anyway so if you use your funds to pay everything for the 1st year (almost £10k fees and £10k living costs), you'll have nothing left to top her/him up in future years.

Take the minimum loan and use the 20k to top up to maximum loan each year. There will be a some left, this could be used to enrich university - study abroad, placements, supplementary qualifications depending on their subject. If there is any tech they need to get started this could be out of the 20k (e.g. MacBook)

I would also strongly encourage DC to work and if they don’t need as much of the 20k to top up each year, keep hold of it.

The exception to this would be if DC is likely to need postgrad study, in which case try to keep the bulk of the 20k to support that. The financial support for masters is way less generous.

Thank you so much for the advice. Fully anticipate that they will take the standard loans for tuition - it’s more about how best to make the money work for living costs and the maintenance loans that we’d be entitled to…

Take the maintenance loan. On the latest "plan", the interest rate is pegged to inflation, so the amount you pay back is roughly equivalent to what you borrowed (a previous plan added 3% on top, which is very different).

Martin Lewis has done some excellent explainers about student finance and there are some graphics which explore this point. You sound like you have saved the sort of amount he talks about and his articles explain how best to use that. I think you will find that with the loan (which your child would be foolish not to take) you have enough. I took the view that anything my child wanted over those two amounts would have to be earned by them.

Take the Tuition loan and as much Maintenance as possible.
It costs us £10000 per year even with those to support DD at Uni. Her 1st year accommodation (including some meals) is £10500 so even with the full loan she needs another £6000 on top (approx) and then there is travel, other food, books, etc.

We were in a similar position though with slightly more money saved (30k). No idea if we have done the right thing or not but dd took out full loans for tuition and maintaince. The savings haven’t been touched and can be used for a house deposit, so not needing to waste money on rent when she starts work.

But the maintenance loan is based on the parents income, so if your parent is a higher earner you can only get the minimum, whereas if your family has a lower income you can borrow more, up to the full loan. The expectation is that parents top up to the maximum, but your way of doing it penalises the child for having higher earning parents by making them earn the difference, rather than the parents top up. I think parents should top up to the maximum loan amount and then the student can earn any extra they want over that.
Some people choose to pay the accommodation costs and let the students live off the loan amount, particularly if they only qualify for the minimum. If your child is likely to do a sport there are also subs, gym membership etc. which we paid in addition to topping up the living expenses.

@BooberFraggle Presumably, despite having £30K saved, your income is low if your daughter was able to take out the full maintenance loan? The OP has said their income would only allow their child to get the minimum (which is far more common), so would need to be topped up.

If you are trying to limit the amount borrowed/interest on loan etc I think it is worth calling the students loans company to see if you can apply for the loan just for third year and self fund for the first two years, you will be charged interest from the day you take the loan out so it adds up. I would then encourage you DC to work over summer holidays and if possible during term time, tutoring is a good way to earn a bit extra.

No sorry. I meant the full amount (available to her). Which yes, was the minimum. We then topped up. And will do so for her 5 year degree.

Probably worth also noting that the maximum maintenance loan in England is not far off 2k lower than where it would have been had it matched inflation. So dependent on location even topping up to the max loan could still leave a DC with a very tight and possibly challenging budget.

I'd get DC to take mini
Um loan then top up each year to maximise loan then give them another £500 each term if they don't get a part time job whilst at uni. If they do get a PT job then top them up to the maximum loan. During summer holidays insist they get a PT job to save up for the next year. Invest the money you have not spent for them in a bond account or ISA whichever they can get interest.

Take the full loan for the tuition fees that everyone can get and the minimum maintenance loan. Give them 6k each a year top up. If they have to go to a place that's expensive for accommodation give them 8k top up. Consider if they will do a 4 year course (integrated masters). Watch Martin Lewis explainer most up to date one.

I realise not everyone can, but we had been able to save like you and therefore able to top up as the loan system expects parents on higher income to do, and cover the shortfall of expensive town.

Will 8k top up in an expensive place be enough? I am hoping so. Dd has applied for UCL and I think the accommodation is £300 a week! I was thinking I’m going to have to give her way more than 8k! 8k won’t even cover accommodation will it?

Well, she might need to get a job, but it is looking ok. When looking ahead at accommodation costs be aware that second year house contracts might be for 50 weeks which adds a lot compared to first year - and getting a house can be a scramble so it's hard to stick to a budget.

Thanks again everyone. She is trying for Cambridge which would be significantly cheaper than, say, Bristol. Also means she wouldn’t be able to work during term time if at Cambridge - but she’d definitely be expecting to make some income in the summer months!

Reassuring to hear @lanthanum ’s point that with the new maintenance loans, you end up paying back roughly what you owe anyway rather than being charged excessive interest.

On a separate note, does anyone find the income thresholds a bit questionable? Aware 71k and above is high earning in national terms, but what if you earn 71k and live in London, have a mortgage and 2 or 3 kids? You might not be able to easily supplement dc at university on that income - and the 5k loan isn’t going to be enough to cover your dcs annual living costs. What happens then?

It’s not a concern for us as we managed to save, but I do wonder how that can work for certain families…

On a separate note, does anyone find the income thresholds a bit questionable? Aware 71k and above is high earning in national terms, but what if you earn 71k and live in London, have a mortgage and 2 or 3 kids? You might not be able to easily supplement dc at university on that income - and the 5k loan isn’t going to be enough to cover your dcs annual living costs

They certainly haven't changed for quite a while @glittergold,

This all relates to England. The threshold for the max loan (I know this is not your circumstance) is unchanged since 2008 - so £25k still. The uppper limits - £62k and for those studying away from home in London £71k - I think have seen little change in over a decade - hopefully someone can confirm whether that is correct.

A small benefit might be that the minimum loan for students in London living away from home is currently £6,667, and has that slightly higher income threshold (£71k); as compered with the £4,767 figures for outside London (which also triggers at the £62k household income threshold).

This House of Commons Library Briefing provides a lot of facts and figures https://commonslibrary.parliament.uk/research-briefings/sn00916/

This HEPI report https://www.hepi.ac.uk/2024/12/10/average-student-rents-in-london-overtake-the-maximum-maintenance-loan-the-2024-accommodation-costs-survey/ adds more emphasis to your point about London accommodation costs.

Fingers crossed for Cambridge. 😀

Now of course if you lived in Wales it would be a completely different story in terms of maintenance loans........

@boys3 - thanks! But I think we’re misunderstanding each other - and it’s my fault, I thought the 71k income threshold (as in, if your household income is more than this, you only qualify for minimum loan) applied to everyone. I knew students in London are entitled to bigger loans.

But what I meant was, if the parents live in London and are on a 71k a year income, they won’t necessarily have a huge amount available to top up student DC, not with living costs and mortgages being what they are in the capital. Some families could really struggle with that - and it also seems crazy that a 71k household income qualifies the student for the same loan as if their parents were multi millionaires! (Though probably the kids of millionaires wouldn’t be taking loans at all 🤪)

@glittergold , yes if you follow WIWIKAU on Facebook this situation comes up all the time. Options are Dc can work for a year and save or parents can take a loan / remortgage / or dc can choose a cheaper city to be based in and get a part time job.

The most difficult family situations arise when a parent has a partner move into the home but the partner doesn't financially support the dc, the partners salary means only the minimum loan can be paid to the student and the parent has no means of supplementing this.

@glittergold i think we’re both on the same page on this one. 😁 And taking the example of being just on the upper threshold and so only getting the minimum loan if that household has 2DC at Uni at the same time even more financial pressure for them.

Making forward planning and awareness of the costs and system constraints even more important. For many it does seem to come as a nasty surprise, worsened over the past few years by high inflation, energy prices doubling, quite possibly a mortgage deal coming to an end and several hundred pounds suddenly needed for the monthly mortgage payment.

Families who may genuinely have thought that they could find an extra say £500 /per month to support a DC at Uni may suddenly have found that (and more) swallowed up by bill increases, energy increases and mortgage (or rent) increases.

Then the excellent point that @tennissquare makes around it being household as opposed to parental income based.

Which is why I mentioned Wales. The only household income impact is the split between loan and grant for the maintenance element. With a household income of £71k a DC from England studying in London and living away from home would be entitled to the minimum £6667 maintenance loan. A DC from Cardiff with the same household income living away from home and studying in London would be entitled to £15,170 in maintenance loan (with a very small element of this being a non-repayable grant). That’s a huge difference.

I think its around £60k in The North where we are.
We would struggle to live on that with our outgoings and certainly couldn't top up DD for uni.
It boggles my mind that as an adult the amount DD can borrow depends on what WE earn - what other lender would assess an adults borrowing power on theri parents earnings? Especially as our outgoings aren't taken into consideration.
DD's accommodation alone is over £10k, her maximum loan is around £3.5.
Most of the people she has met at Uni are from pretty wealthy backgrounds

How come her maximum maintenance loan is so low @Hoppinggreen surely even if your household is over the £62k (not studying in London) income threshold she’d still be entitled to the minimum of £4767?

The lender is of course HM Treasury, so it’s in no way a traditional commercial loan. However if anyone thinks a traditional commercial loan is a better deal they are free to take that. No one is compelled to use government provided student finance.

It may be that amount to be honest, I am not sure. She has sorted it out herself.
Obviously its not the same as a Commercial loan, I know that.
I just don't really understand why an adult's borrowing would be based on her parents income, especially with no reference to their outgoings. IF we did decide to take a commercial loan we would have to provide our outgoings and the amount we could borrow would be based on our disposable. When applying for Student Finance no outgoings are considered.
Anyway, fortunately we can support her but if I had been in her position when I was looking at Uni I would have had to self support as my parents could not have afforded it, I probably wouldn't have gone