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 entire premise of our current student finance system is supposed to be “you don’t need cash to pay upfront to go to university!” Yet these days that’s simply not true. Many parents, especially those with more than one child, will need a war chest of possibly £10,000s.
This isn’t about tuition fees. University fees are automatically paid for you by The Student Loans Company – and you only repay once you leave, and then only provided you earn enough.
In practical terms they works less like a debt, more like a tax, as after graduation most simply repay 9% of everything earned above £21,000 (soon to rise to £25,000) for 30 years. This is supposed to be, financially at least, a no-win-no-fee higher education. For a full explanation see my 20+ Student Loan Mythbusters guide.
So tuition costs aren’t a practical barrier for students, they’re a cost for graduates. The real practical problem is the university costs the State won’t cover – and especially how that impacts parents with more than one child.
To understand the problem with having more than one child at uni, you need to understand the basics first, so let me speedily bash out a step-by-step …
Problem 1: Living loans are now heavily means tested
Student are entitled to a maintenance loan to cover living costs – which is then added together with the tuition fee loan – and all are repaid on the same terms as above.
Yet while every first time UK undergraduate is entitled to the full tuition fee loan, the amount given for maintenance is means tested – and the means tested proportion has increased substantially in recent years from a third to over a half.
Problem 2: The means testing usually depends on parental income
Even though they are adults, old enough to vote, get married or even fight and die for our country, most under 25s are considered ‘dependent’. So means testing is based on household, in other words parental, income.
This means testing start for those with family income of just £25,000 – way less than average income for a family with two working adults. And it maxes out on earnings of roughly £60,000 to £70,000 depending whether the student lives at home or away – at that point the amount of loan given is roughly halved.
Problem 3: The missing amount is the parental contribution – but parents aren’t told
The gap between the full loan and what the student receive is the ‘parental contribution’ (not officially – but as it solely dependent on parental means testing – it’s self-evident). Yet disgracefully this is never spelled out to parents.
I wrote to the University Minister asking it to be transparent and communicate this properly, but he replied and said no. And repeated that again when I publically debated him on it a few days ago. So as the government won’t help, you’ll need to work it out yourself. The maximum annual living loans for this year’s NEW starters are…
– Living at home: £7,097
– Living away from home: £8,430
– Living away from home (London): £11,002.
To work out your parental contribution subtract the loan you get from this. See my full parental contribution guide for full help and numbers on previous years.
Of course knowing the parental contribution doesn’t make it affordable – but at least you’re aware of the gap. And ‘dependent’ students should ensure they at least have the discussion with their parents.
If parents can’t or won’t cough up, their offspring have no way to force their parents to contribute. You can only be assessed independently if you’re over 25 or have financially supported yourself for 3+ years, have no living parents or are caring for a child.
Problem 4: Even the maximum loan isn’t enough
Often parents come up to me on my TV roadshows and say “it’s outrageous my daughter’s halls cost alone is £7,000 and her loan is only £6,000!” The first thing I do is explain the hidden parental contribution system and they’re surprised.
Yet even then, at the level of the full loan, I hear more and more reports that the living allowance simply doesn’t cover basic costs. And that means those on courses with long hours, who can’t work, are in trouble.
So with the cost of living increasing, bizarrely the biggest practical problem with student loans isn’t what you often hear, that they’re too big, it’s that they’re not big enough.
Problem 5 – It’s far worse the more children you have
The means testing of maintenance loans in strict terms depends on what’s called household ‘residual’ income. This is defined as income…
- Before tax
- After any pension contributions
- After allowances for other dependent children
To find the key info of what allowances are made for dependent children, you need to go to page 10 of Student Loan Company’s ‘How you’re assessed and paid guide’ where it says: “We’ll ignore £1,130 for any child other than you who is totally or mainly financially dependent on them [parents].”
In other words if you’ve two or more children at university consecutively, the only concession is that your income for assessment is mildly reduced. Or to put it more plainly…
Even if you need to shell out £5,000 for your other child, the system only counts that you’re paying out £1,130
This isn’t a niche problem. Most parents have children who are relatively close in age, so are likely to be at university at some overlapping point. To test this I did an indicative poll on Twitter.
Today's twitter poll: How big is the age gap between you and your closest (in age) sibling?
— Martin Lewis (@MartinSLewis) September 13, 2017
It shows well over 50% of parents have children who could overlap. And that can be incredibly expensive – just imagine someone with triplets! To play this out practically here’s an example…. (I’ve ignored loan size changes each year for simplicity)…
The Medium family have two children. Mrs Medium lives in Manchester and earns £37,000/yr and Mr Medium part-time work pays £15,000. Together their family income, after £2,000 of pension contributions is £50,000. Child 1: Their eldest child, Erma Medium goes to Newcastle Uni. Her family income is calculated at £48,900 (slightly reduced as her younger brother’s a dependent child living at home). This means rather than the full £8,430 living loan, means testing reduces it to £5,540, leaving a needed parental contribution of £2,890 a year. Child 2: Erma’s brother Ivor is 20 months younger, and starts at London University the following year. The fact that his sister is dependent means rather than the full £11,000 loan, he gets £8,060, leaving a needed parental contribution of £2,940 a year. So when they have two children at university the total parental contribution is £5,830 a year. Just to stretch the point, compare that to what the parental contribution would be if there’d been only children from separate families (on the same income). Erma family would’ve had a parental contribution of £3,030 and Ivor £3,080. So only an extra £140 needed from two families. |
The parental contribution ready reckoner for those with multiple children at Uni
To help I’ve drawn up this quick table that sets out for you, as the system currently is, how much the parental contribution is likely to be each year.
Annual parental contribution. Student(s) living at home
| Parental Income | 1 child at Uni | 2 at Uni | 3 at Uni |
| £25,000 or less | £0 | £0 | £0 |
| £30,000 | £600 | £920 | £980 |
| £40,000 | £1,800 | £3,320 | £4,570 |
| £50,000 | £2,990 | £5,710 | £8,160 |
| £60,000+ | £3,970 | £7,950 | £11,750 |
Annual parental contribution. Student(s) living away (outside London)
| Parental Income | 1 child at Uni | 2 at Uni | 3 at Uni |
| £25,000 or less | £0 | £0 | £0 |
| £30,000 | £610 | £940 | £990 |
| £40,000 | £1,820 | £3,360 | £4,630 |
| £50,000 | £3,030 | £5,780 | £8,260 |
| £60,000 | £4,240 | £8,200 | £11,890 |
Annual parental contribution. Student(s) living away (in London)
| Parental Income | 1 child at Uni | 2 at Uni | 3 at Uni |
| £25,000 or less | £0 | £0 | £0 |
| £30,000 | £610 | £950 | £1,010 |
| £40,000 | £1,850 | £3,420 | £4,710 |
| £50,000 | £3,080 | £5,880 | £8,400 |
| £60,000 | £4,310 | £8,340 | £12,100 |
PS Obviously I’ve not covered every eventuality here. You may have one child living at home and one away, but hopefully these tables give you a rough indication of how it works.
Will some feel the need to ‘pick’ which child can go to Uni?
As you can see at the extreme level some parents will need to fork out over £12,000 a year. My concern is it means some families will need to ‘pick’ which child goes to university – denying the other. Do let me know if that’s you feel pressured to do that in the discussion below.
For most, prioritising one child would be on academic or career merit. Yet even worse there are still likely some in society who value girl’s education less than a boys, and we could be going back to the dark ages.
What can prospective parents and students do about it?
While many editorials are about the size of student debt – the complaints I hear most from parents and students are all about living costs. Yet many only learn this once they get to university as the debate is so skewed towards “debt”.
Until more understand our misnamed system (I’ve campaigned for it to be renamed a graduate contribution system not a debt) genuine practical problems like this will continue to be missed. From a political perspective talk to your local MP, and other parents so many more are prepared. It’d be nice to think things will change, but I see little appetite for that at the moment.
So in practical terms, while I’ve always argued don’t pay tuition fees upfront, unless things change parents will need to save up to ensure you’ve cash set aside to support your child’s living costs while at uni.
I’d love to hear your views, whether you knew about it, and if you’ve been impacted how you dealt with it…
