Martin Lewis: How much the Govt expects parents to give their children while at university 2020/21

Martin Lewis: How much the Govt expects parents to give their children while at university 2020/21

The new university term is starting for many, 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 first briefly bashed out an overview of how it works, then I've worked out ready reckoners to help parents calculate it for all the UK nations. Forgive me that it's not the most polished blog (I've been on many deadlines today). I hope it does the job though.

Before I start, two quick asides...

1. This is only about students at uni in 2020/21. If you've children yet to start university, we have a new How much to save for your child to go to university calculator.

2. We've more on student issues for this year, eg, 'Can I get a tuition refund if my child's classes are online?' See 2020/21 student issues help.

Old enough to vote, but not independent

While almost every university student is 18 or over and old enough to vote, to marry, or to fight for our country's armed forces, they are not counted as independent within the student finance system. For most under-25s, the amount of loan they get for living (the maintenance loan) is dictated by their household's 'residual' income, which for many, is just a proxy for their parents' income, not their own.

It's worth noting the assessment is based on income from over a year ago, so for 2020/21, it is the 2018/19 tax year. If you've had a substantial reduction in income due to Covid-19, you may be able to get that changed to an assessment for the current year.

For students from England this dictates how much loan they get, from Scotland or Northern Ireland it dictates the total received and how much of it is a loan and how much is a grant. Wales is the only part of the UK that gives everyone the same amount, but even there, household income still dictates how much of it is a grant and how much is a loan.

Note: I'm going to continue the rest of this blog explaining the ENGLISH system, though most of the principles explained apply across the UK. Then I break out separate sections for each UK nation at the end.

As a result, 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 that I've seen 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."

Yet all this goes unsaid. People just get a letter saying what they will receive, not what they won't be getting. That's wrong. 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 old 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 often more is needed.

For full info on how the student finance system works, see my 20+ Student Loan Mythbusters guide.

PS: I should note I've lobbied and even formally written to governments asking for this – see letter to minister. This recommendation was taken up by the Augar review, which was done for Theresa May's Government, but she resigned before it was enacted.

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.

Yet that is in theory, in practice many parents can't afford to contribute, especially those struggling with debts. My aim in writing this is to help aid transparency, not to set up a wedge between parents and their offspring. At least by having a conversation about the 'parental gap' it can be understood, and without that understanding it may lead to serious issues.

I once had a student come to me at a TV roadshow in dire straits – his parents had money, but refused to give it him as "you should stand on your own two feet". When I explained that the system didn't expect that, they were shocked, and started to support him.

The only other option for students whose parents won't or can't support them, and who can't support themselves, is to be categorised as independent students. This primarily applies to over-25s, students who are married/in civil partnerships, who are parents themselves or who've lost their parents.

Otherwise, to be counted students will need to prove they have been totally financially independent for the past three years – which isn't easy to do, ie, they had a full-time job and were living off that money and/or are fundamentally estranged from their parents.

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

Before carrying on and talking the numbers, it's worth noting 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, but in brief:

Student loan repayments actually work far more like a tax than a loan (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 £26,575, 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 the higher rate of tax, and that's really what paying their loan for them means. For more on this, see my old Beware paying tuition fees upfront guide.

Minimum parental contribution ready reckoner

So to fix the mismatch of info and expectation, my parental ready reckoners are below, which show the minimum parents should contribute. I will go through it UK nation by UK nation in a variety of categories.

All I've done is calculate the maximum award from the state and subtract the actual award received. This is done via an assessment of parents' residual income (explained in full in point 9 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 state support.

The figures are for full-time English non-'independent' students. They don't include any extra funds for students with dependants, disabilities or those studying for an NHS degree. And it assumes you have no other dependant siblings that your parents may also be supporting (if so, the household residual income is counted as being slightly reduced).

FOR THOSE WHO LIVE IN ENGLAND

Here the maths are easy. Simply subtract the amount of loan your child gets from the full award amount to get the expected parental contribution. If you're in your final year of study, the amounts will be slightly less than in the tables below.

Ready Reckoner 1: For students living at home with parents

The FULL LOAN AWARD is £7,747, so subtract the loan you actually receive from this and then the difference is the parental contribution. Here are examples of how it works at different income levels.
A family with household income of… Will get a student loan of… And therefore the min parental contribution is…

< £25k

£7,747

£0

£30k

£7,095

£652

£35k

£6,442

£1,305

£40k

£5,789

£1,958

£45k

£5,137

£2,610

£50k

£4,484

£3,263

£55k

£3,831

£3,916

£58,222+

£3,410

£4,337

Ready Reckoner 2: For students living away from home studying outside London

The FULL LOAN AWARD is £9,203, so subtract the loan you actually receive from this and then the difference is the parental contribution. Here are examples of how it works at different income levels.
A family with household income of… Will get a student loan of… And therefore the min parental contribution is…

< £25k

£9,203

£0

£30k

£8,544

£659

£35k

£7,884

£1,319

£40k

£7,225

£1,978

£45k

£6,565

£2,638

£50k

£5,905

£3,298

£55k

£5,246

£3,957

£60k

£4,586

£4,617

£62,249+

£4,289

£4,914

Ready Reckoner 3: For students living away from home studying in London

The FULL LOAN AWARD is £12,010, so subtract the loan you actually receive from this and then the difference is the parental contribution. Here are examples of how it works at different income levels.
A family with household income of… Will get a student loan of… And therefore the min parental contribution is…

< £25k

£12,010

£0

£30k

£11,340

£670

£35k

£10,670

£1,340

£40k

£10,000

£2,010

£45k

£9,330

£2,680

£50k

£8,659

£3,351

£55k

£7,989

£4,021

£60k

£7,319

£4,691

£65k

£6,649

£5,361

£69,977+

£5,981

£6,029

FOR THOSE WHO LIVE IN SCOTLAND

In Scotland, the maximum amount you could receive to live off is £7,750. This is made up of a loan of up to £5,750, regardless of where you study. For students with household income under £34,000, you could get a non-repayable bursary (ie, grant) on top of up to £2,000.

So here I've counted the parental contribution as the gap between the maximum combined loan and grant and the amount received. You could equally chose just to do it off the loan amount – I will leave that debate to you.

Ready Reckoner: For new and continuing Scottish students

The FULL LOAN & GRANT AWARD is £7,750, so add up the loan and any grant received, then subtract that from this. The difference is the parental contribution. Here are examples of how it works at different income levels.

A family with household income of…

Will get a bursary of…

Plus a student loan of…

So the total award is…

And therefore the min parental contribution based on the full award is…

< £21k

£2,000

£5,750

£7,750

£0

£23k

£1,125

£5,750

£6,875

£875

£33k

£500

£5,750

£6,250

£1,500

£34k+

£0

£4,750

£4,750

£3,000

FOR THOSE WHO LIVE IN NORTHERN IRELAND

In Northern Ireland, students are given a combination of a loan and a non-repayable grant. The amount received depends on household income and where you study (eg, at home or away).

So here I've counted the parental contribution as the gap between the maximum combined loan and grant and the amount received. You could equally chose just to do it off the loan amount – I will leave that debate to you.

Ready Reckoner 1: For students living at home with parents

The FULL LOAN & GRANT AWARD is £5,338, so add up the loan and any grant received, then subtract that from this. The difference is the parental contribution. Here are examples of how it works at different income levels.

A family with household income of…

Will get a grant of…

Plus a student loan of…

So the total award is…

And therefore the min parental contribution based on the full award is…

< £19,203

£3,475

£1,863

£5,338

£0

£25k

£2,201

£2,199

£4,400

£938

£30k

£1,215

£2,535

£3,750

£1,588

£35k

£689

£3,061

£3,750

£1,588

£41,540+

£0

£3,750

£3,750

£1,588

Ready Reckoner 2: For students living away from home studying outside London

The FULL LOAN & GRANT AWARD is £6,428, so add up the loan and any grant received, then subtract that from this. The difference is the parental contribution. Here are examples of how it works at different income levels.

A family with household income of…

Will get a grant of…

Plus a student loan of…

So the total award is…

And therefore the min parental contribution based on the full award is…

< £19,203

£3,475

£2,953

£6,428

£0

£25k

£2,201

£3,289

£5,490

£938

£30k

£1,215

£3,625

£4,840

£1,588

£35k

£689

£4,151

£4,840

£1,588

£41,540+

£0

£4,840

£4,840

£1,588

Ready Reckoner 3: For students living away from home studying inside London

The FULL LOAN & GRANT AWARD is £8,368, so add up the loan and any grant received, then subtract that from this. The difference is the parental contribution. Here are examples of how it works at different income levels.

A family with household income of…

Will get a grant of…

Plus a student loan of…

So the total award is…

And therefore the min parental contribution based on the full award is…

< £19,203

£3,475

£4,893

£8,368

£0

£25k

£2,201

£5,229

£7,430

£938

£30k

£1,215

£5,565

£6,780

£1,588

£35k

£689

£6,091

£6,780

£1,588

£41,540+

£0

£6,780

£6,780

£1,588

FOR THOSE WHO LIVE IN WALES

In Wales, there isn't actually an expected parental contribution as all students, regardless of household income, get the same amount depending on where you live – a maximum of £8,335/year if living at home, £9,810/yr living away from home outside London, and £12,260/yr living away from home inside London.

But depending on your household income, some of this maximum amount can be paid as a non-repayable grant instead of a repayable loan. All students get a minimum grant of £1,000.