Parents of students going to university are facing a large hidden hike in the amount they are expected to contribute to support their child's living costs, with some now asked to pay over £5,300 a year, MoneySavingExpert.com analysis reveals.
Each year a student can apply for a maintenance (living) loan from the Government, which for the vast majority of under-25s is means-tested based on their parents’ income. The reduction in this living loan starts for those from families with incomes of as little as £25,000 a year and it can be halved for those whose parents earn £60,000.
The Government’s calculation effectively assumes parents will make up the difference, through what’s known as the ‘parental contribution’.
For new 2016 starters, an increase in loan size and a large increase in the portion that is means-tested means some parents are expected to find as much as 27% more than parents earning the same were last year. These results came from our analysis of figures obtained from the Student Loans Company (SLC) for England.
Worse still, this amount is never made explicit - it’s just left for it to dawn on parents. Today MoneySavingExpert.com founder Martin Lewis, who's also former head of the Independent Taskforce on Student Finance Information, has written an open letter to Universities Minister Jo Johnson asking for the Government to ‘fess up and put the expected parental contribution, including the amount, in each student’s entitlement letter.
How much has the parental contribution risen?
The table below shows how parents of first-year students are now expected to pay up to 27% more than they were last year.
Changing extent of parental contribution for first year students in England aged under 25
| 2015 | 2016 NB Grants scrapped for new starters |
|||||
|---|---|---|---|---|---|---|
| Family’s residual income | Loan | Grant | Parental Contribution | Loan | Parental Contribution | Increase in Parental Contribution |
| Students living at home | ||||||
| £35,000 | £3,818 | £1,494 | £947 | £5,740 | £1,164 | 23% |
| £50,000 | £3,823 | None | £2,436 | £3,994 | £2,910 | 19% |
| Students living away from home | ||||||
| £35,000 | £4,993 | £1,494 | £947 | £7,023 | £1,177 | 24% |
| £50,000 | £4,998 | None | £2,436 | £5,256 | £2,944 | 21% |
| Students living away from home (London) | ||||||
| £35,000 | £7,262 | £1,494 | £947 | £9,503 | £1,199 | 27% |
| £50,000 | £7,267 | None | £2,436 | £7,705 | £2,997 | 23% |
| How we calculate the parental contribution: For 2016, the max maintenance loan a student can receive minus the actual amount received after means testing. For 2015, the max total award (maintenance loan plus grant) minus the actual amount of loan and grant received after means testing. | ||||||
The amount of maintenance loan received is based on means-testing of the family’s ‘residual’ income. In 2015 only 35% was means-tested - this year it’s risen to between 50% and 56% depending on circumstance.
Here's how much some parents at the higher end of the income spectrum (those earning upwards of £69,803 a year) can expect to fork out to support their children during their studies from this year onwards:
Maximum parental contributions for first year students in England aged under 25
|
Living at Home with Parents | Living away from home | Living away from home (London) |
|---|---|---|---|
| Max Amount of Maintenance Loan | £6,904 | £8,200 | £10,702 |
| Means-tested amount | 56% | 53% | 50% |
| Max expected parental contribution | Up to £3,865 | Up to £4,379 | Up to £5,372 |
For more info on the financial impact of going to uni, check out our Student Loans Mythbusting guide.
Students left in 'dire position'
Martin says: “It’s often said ‘you don’t need to pay upfront to go to university’ and that may be true for tuition fees, but the sharp rise of means-testing for living loans means that the real problem is loans aren’t big enough. For a huge majority of students it simply won’t cover even basic accommodation costs.
“Worse still is the fact that the official calculations show that parents are meant to make up the difference, yet they are never told the amount. This causes conflict between students and their parents. It also leaves some students in a dire position. While parents are supposed to contribute, many can’t or don’t, or they see the amount as loose. This leaves some students risking debt or dropping out of university due to cash flow issues.
“It’s about time we had transparency on this. The student loan offer letter should say something akin to ‘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.’
“That would both aid parents in planning and students in budgeting, and mean the Government can’t get away with tinkering the numbers and increasing the practical costs of going to university without having to be upfront to parents about it.”
Read Martin's full letter to Universities Minister Jo Johnson here.
