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Martin Lewis tells ministers it's time to stop hiding the student living loan parental contribution - parents should be told they may be expected to pay £1,000s

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While tuition fees get all the column inches, the biggest practical problem most students face is hidden. The living loan and/ or grant students receive is slashed based on parental income but there's no warning this gap needs filling. Today, MoneySavingExpert founder Martin Lewis has written to ministers to urge them to stop hiding the university parental contributions built into the student finance system.

Action is needed in England, Scotland, and Northern Ireland (the system is different in Wales) before the start of the new academic year in September when hundreds of thousands of new students begin their courses and millions more return – many of whose families will have seen their financial position deteriorate as a result of the pandemic.

The UK government-commissioned Augar report on higher education, published in 2019, supported and included Martin's suggestion that the Student Loans Company begins to make the contribution explicit. It also noted that only 15% of parents give their children the expected amount or more. 

But in its interim conclusion to the review, published in January 2021, the Government did not mention the parental contribution, leading to the worry that unless more pressure is applied, little will happen.

Read Martin's full letters to the ministers in England, Northern Ireland and Scotland.

'The system has an implicit parental contribution'

Martin Lewis, founder of MoneySavingExpert.com said: "Politicians love to argue about tuition fees, conveniently ignoring by far the biggest practical problem most students face – do they have enough money to live off? Many don’t, but a prime cause is hidden.

"The system has an implicit parental contribution – the loan and possible grant they receive depends on their family’s income. The more families earn, the less they get. For those who analyse the system, it's transparent that it works this way. But with the pandemic exacerbating student financial problems, it's about time that transparency was extended to students and their parents.

"To not make this explicit and explain how it works risks immense stress on relationships between parents and their children, leaving them unable to plan financially – often over several years – with many families complaining that ironically, the living loan isn’t enough.

"I've met students living off a pittance, because their parents thought – 'it’s time to stand on your own two feet' – not realising the government expects them to help. Whether or not you agree with how the system works, at the very least, it needs to be honest."

What is the parental contribution?

For current and prospective university students aged under 25, the value of the maintenance loan and/ or grant they get to cover living costs is dictated by their household's income – for most, this is a proxy for parental income. The higher their income is, the less you get as a loan to cover costs. For example, in England, where there are only maintenance loans, this starts to be reduced when total family income is just £25,000 a year, and by the time it's about £60,000 a year it can be halved.

Logic implies that parents are expected to fill the gap – as that's the only factor that impacts the amount received. But to do that can mean extra cash needs to be found of more than £15,000 for some over the three-year length of a standard course.

Here's how the amount parents are expected to pay increases along with their income in England, and how it varies depending on where students live and study:

Image courtesy of The Martin Lewis Money Show Live. Multistory Media.

See our 'How much should you save for your child to go to university?' calculators which cover how it works in England, Scotland, Wales, and Northern Ireland.

How is the parental contribution hidden?

There is little mention of the parental contribution in documents issued by official student finance bodies around the UK. Students just get a letter telling them what their living loan (and/ or grant) is – without indicating that it has been reduced, never mind by how much, due to the household income means test.

This leaves many heading off to university without knowing their loans are a fraction of the full amount. Martin tells of meeting students at his roadshows whose parents won't give them money as "it's about learning independence", without realising their loan's been halved on the expectation their parents would fill the gap.

For years, MoneySavingExpert.com and our founder Martin have campaigned to raise awareness of this hidden parental contribution. Yet despite pounding at the doors of politicians pleading for it to be made explicit, nothing has been done – which is why Martin is calling for action today.

Here's how the current systems are communicated in the UK nations:

  • In England, all the support is via a maintenance loan, and family income dictates the amount. Buried deep in official documentation, there's a line saying parents "may have to contribute" towards their children's living costs while at uni but this isn't likely to be very helpful in practice - and, in any event, this isn't communicated when loans are awarded.

    Students aren't explicitly told how and why their loan has been reduced, or how much their parents need to contribute.

  • In Northern Ireland, family income dictates the total amount of support received and, within that, how much of the support is a loan versus a non-repayable grant.

    The Student Finance Northern Ireland guide "How you are paid 20/21" previously said: "The Student Loans Company (SLC) will send you a letter telling you how much support you can get and the contribution (if any) you and your family are expected to make towards your living costs."

    Yet despite this being exactly the right policy, the SLC confirmed it was never implemented and the guide was later amended to remove the reference to a letter being sent. 

    Again, students aren't explicitly told how and why their loan has been reduced, or how much their parents need to contribute.

  • In Scotland, as in Northern Ireland, family income dictates the total amount of support received and how much of that support is a loan versus a non repayable grant. 

    Its Student Information website is clearer that parents are expected to contribute – but it doesn't give exact figures and, as in England and Northern Ireland, this information is absent from letters students receive about their loans.

  • In Wales there is no parental contribution built into the system as all students get the same amount of support. The only difference family income makes is how much of the support is a loan, and how much is a non-repayable grant.  

'It was a complete shock'

We asked students and parents on social media whether they were aware of the expected parental contribution. Many told us it came as a surprise and some only learned about it after seeing one of Martin's TV programmes or reading about it on MSE. Here's a selection of the comments we've seen:

As a parent of two children who went to uni – no, we didn't realise for the first who then struggled by on his own as he didn't want to have to ask us for help. We were made aware by a sixth form presentation for our second child.

- Marina, via Facebook

We didn't have a clue that maintenance loans were means tested.... I just assumed my son would be able to borrow what he needed. Having to top up a minimum of £6,000 a year is a bit of a shock to be honest!

- Jane, via Facebook

It's time this was made transparent

As Martin has suggested time and time again, more explicit wording should be included in students' loan entitlement letters. This isn't a complicated or difficult change.

For example, in England, the wording could be as follows (a similar type of wording should be included in letters sent to students in Northern Ireland and Scotland too):

"Your loan for living is £x,xxx a year. The full loan for those students from the lowest income households is £x,xxx. Yours has been reduced by £x,xxx after we assessed your family's income.

"As the reduction is based on family income, family should consider contributing to help make up the shortfall."

This is crucial for students to have proper funding and in order to allow preplanning - which may be needed years in advance - and reduce the friction between parents and students.

What do the devolved governments say?

We're hoping for a full response to our letters at a later date, and we've said we're happy to publish these replies on MoneySavingExpert. In the meantime, here's what the UK, Northern Irish and Scottish governments told us when approached for comment:

  • A UK/England Department for Education spokesperson said: "The student finance system is designed to ensure that those with the talent to benefit from a higher education, are able to afford to do so, whilst meeting the skills needs of the country and ensuring value for money for taxpayers. It is only fair that students from the lowest income families have access to proportionally larger living costs support in cash terms.

    "The SLC company works very hard to support students and parents in their applications for student finance and sets out in their guidance that parents may have to contribute to the living costs of their children. The information provided is continually reviewed."

  • A Northern Ireland Department for the Economy spokesperson said: "The letter from Mr Lewis is currently under consideration."

  • Scotland's higher and further education minister, Jamie Hepburn, said: "The Scottish Government, along with Student Awards Agency Scotland (SAAS), offer online budgeting and funding calculators to help parents and carers understand how much they might wish to save for their young people to go to college or university.

    "This also supports students, parents and carers to find out how much funding they will potentially be entitled to. The calculators highlight in red any potential gaps, providing a simple and fairly accurate indicative picture.

    "SAAS have proactively offered to work with MoneySavingExpert this year, to ensure the Scottish funding references are accurate, clear and accessible on its website."

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