How much the Govt expects you to give your children for university

Update January 2020: We now have a new how much should you save for your child to go to University calculator and my updated parental contribution briefing. Please go there as that’s more up to date than this blog.

The new university term will soon start and millions of supposedly independent students will be heading off. In fact, though the system doesn’t say students are independent, the system incorporates an expected ‘parental contribution’ to their finances. Yet this is never made explicit, so I’ve worked out ready reckoners to help parents calculate it.

While almost every student is 18 or over and able to vote, for most going straight from school to uni the amount of loan they get for living (the maintenance loan) is dictated by their parents’ income, not their own.

Many don’t get the full loan. And parents are meant to fill the gap. But nowhere in the main Student Loans Company (SLC) communications (as far as I can see) does it say this.

The only place I can find it is in the SLC’s ‘How you’re assessed guide’, which students are meant to read when they apply for a loan. There it just says “depending on their income, parents may have to contribute towards the living costs of their student children”. Well that’s helpful!

What’s needed is a far more accurate, helpful, loud and large…

“Students – your loan for living is £x,xxx a year, this is less than the full loan and we expect your parents to make up at least the £x,xxx difference.”

This currently goes unsaid, but it needs saying. Many parents I meet – for example at my TV roadshows – either don’t realise they’re supposed to contribute, or see it as a loose amount.

In fact, parents and students often complain to me that “the living loan isn’t enough to cover their rent, never mind living costs – I have to give them extra”. However, when I question them, it’s often parents whose offspring don’t get the full loan saying this – the ‘extra’ is actually the gap.

Of course, even with the full living loan, many will struggle (see my Living loans aren’t large enough blog) – and that too is an important, though separate, debate. It’s also a reason that in my ready reckoners below I call this the ‘minimum’ parental contribution, as more is usefully needed.

For full info on how the student finance system works, see my 20+ student loan mythbusters guide.

There’s no way parents can be forced to contribute

A further problem here is students are assessed on parental income but have no way to force their parents to contribute – which does seem an unfair position to put students in. Either their finances should be separate or they should have some ability to be able to force parents to comply.

In fact, the only option for students whose parents won’t contribute is they can apply for the full loan amount as long as they can prove they’ve been financially independent for the past three years – ie, they had a full-time job and were living off that money.

Parents may be supposed to help with living costs but the loan is the student’s

I wanted to make this point before carrying on and talking the numbers.

Many parents panic about their children being in hideous debt after university, especially if they won’t earn much. If you’re thinking that, then I strongly suggest you read my 20+ student loan mythbusters before carrying on.

Actually, student loan repayments work far more like a tax than a loan (I actually believe it’d do a lot of good if we stop calling student loans a debt!). Here’s why…

– They don’t go on credit files.
– They’re repaid through the PAYE payroll.
– You only repay 9% of everything above £25,725 (increasing to £26,575/year from April 2020), regardless of how much you borrowed, so it’s proportionate to income.
– If your income drops so does the repayment.
– Most will repay for 30 years, then it stops.

In many ways, financially it’s a no win, no fee education.

Funnily enough the real issue is that student loans aren’t big enough – as the living loan, even with the full parental contribution, is a struggle to manage with. So it’s far better to help them with that.

As for repaying the loan, most parents wouldn’t help their child if they earned enough to pay more tax, and that’s really what paying their loan for them means. For more on this, see my beware paying tuition fees upfront guide.

My minimum parental contribution ready reckoners

So I’ve decided to do something about this mismatch of info and expectation. My parental ready reckoners are below, which show the minimum parents should contribute.

All I’ve done is calculate the maximum award from the state and subtract the actual award received. This is done via an assessments of parents’ residual income (explained in full in point 10 of the student loan mythbusters guide).

If parents then give what’s listed, their offspring will be in the same position as someone from a lower income background getting the full loan.

There are three sets of ready reckoners for this 2019/2020 academic year coming…

1. For new and continuing students who started in 2016 or later

2. For continuing students who started in 2016 or later and are in their final year of study

3. For continuing students who started between 2012-2016

The figures are for full-time English non-‘independent’ students. They don’t include any extra funds for students with dependents, disabilities or if you’re studying an NHS degree. And it assumes you have no other dependent siblings that your parents may also be supporting (which means the parental income is counted as being slightly lower in the assessment).

Academic year 2019/20 for NEW students and for continuing students not in their final year

For those who started university in September 2016 or later, the maths is easy. Simply subtract the amount of loan your child gets from the full award amount, to get the expected parental contribution.