The Government will at last tell students in England about the university ‘parental contribution’ following an MSE campaign
The universities minister for England has agreed to MoneySavingExpert.com founder, Martin Lewis’s, call to be upfront with students that their living loans are reduced – often by £1,000s – due to family income, and parents may need to fill the gap.
Michelle Donelan MP, has agreed to improve official student finance information on maintenance loans for students in England after Martin wrote a formal letter requesting this in June. The letter explained that there is what he calls the implicit "parental contribution" built into the student finance system – and argued it needs to be made explicit.
When students get their loan letter, it just tells them the amount of student finance they’ll get. It doesn’t mention that they could be receiving less than half the maximum loan for living costs due to a means test of household income (which for most under-25s is a proxy for parental income).
The reduction in maintenance loans starts at a family income of just £25,000, affecting millions of students and parents (more on how it works below). And because the reduction isn’t communicated clearly, many parents are unaware that the system implies they should make up the shortfall, which can be £1,000s.
Not being overt about this information leaves many parents unprepared and unable to find the cash to help – which they may need to be saving for years for. There are also cases where parents have the money but refuse to give students any more to live off, in the mistaken belief the loan is an appropriately costed income – not realising it’s been reduced.
Changes have been made to ensure students have clearer guidance
Following Martin's calls, Ms Donelan wrote to Martin Lewis and committed her officials to working with the Student Loans Company (SLC) to ensure that future communications with students explain the difference between an individual’s maintenance loan and the maximum possible award.
The first online changes to the pre-application web information for English prospective students have also now been made. It has been restructured to explain:
- That the maintenance loan students receive may be less than the maximum amount.
- That the calculation is based on a student’s household income.
- And why this means additional funding may be needed.
It also, for the first time, now says: "Students are expected to make up the difference between the Maintenance Loan amount available and their total living costs. Financial support may be provided by the students’ parents or partner."
But as it is too late to make changes to the individual, physical letters and online portal information students receive for the 2021/22 academic year, the minister has committed to asking the SLC to do this in time for the next academic year.
Martin: 'The system does not give families the benefit of foresight when it comes to living loans'
MoneySavingExpert.com founder, Martin Lewis, said: “Politicians argue day and night about tuition fees, but the biggest practical problem faced by students is that many don’t have enough to live off. A huge part of that is because the system does not give families the benefit of foresight when it comes to living loans. Loans are reduced because of household income, therefore parents are expected to plug the gap – it’s as simple as that.
“After years of campaigning and meetings with countless Universities Ministers, I’m delighted to finally have met one who listened and understood that students and their families are missing vital information needed to plan financially for university.
“At my TV roadshows, I’ve met students living off cold baked beans, because parents believe the loan is enough for them to live on and they should be independent – not realising that their incomes meant the amount received was half what’s deemed to be the true living cost.
“There is work to be done on these changes, but we will be pushing for the Student Loans Company to specifically tell parents and students how much their personal shortfall is after family income means testing.”
Ms Donelan said: “Every student deserves clear information about student finance so they can make informed decisions about their future – especially as they embark on this exciting next step in their education.
“We are determined to make the application process simpler and more transparent, and we are working with the Student Loans Company to make these important changes.”
How maintenance loans for students in England work
Support for student living costs comes in the form of a maintenance loan – the maximum amount available depends on whether a student lives at home or goes away to study, plus an uplift for those studying in London.
The amount that a student under 25 (barring the few who are financially independent from their parents) receives is based on a means test of household residual income. For most, in practice, that is mainly an assessment of their parents’ taxed income minus any pension contributions, and a small allowance for other dependent children.
The maintenance loan is reduced when family income hits just £25,000 a year and the reduction continues until family income is just over £60,000 a year, where it can be less than half the full loan available.
As household income is the only factor that reduces the amount a student receives, logic suggests the household (ie, parents) are implicitly expected to make up the shortfall – the "parental contribution". Yet before now this has effectively been hidden, with little mention of this in documents and information issued by official student finance bodies around the UK.
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 ITV's The Martin Lewis Money Show
In Northern Ireland (NI) and Scotland, dependent students get a mix of a loan and grant to live off. Family income dictates the total amount of support received and how much of that support is a maintenance loan versus a non-repayable grant in NI or bursary in Scotland. The bigger the family income, the less the total support, and the bigger the proportion that is a loan.
There is no parental contribution in Wales. Here family income dictates what proportion of the fixed funds received for living costs is a loan and what is a non-repayable grant, but everyone gets the same total amount of support.
As in England, students in NI and Scotland haven’t explicitly been told how and why their loan has been reduced, or how much their parents need to contribute, in official information they receive about their loans - something Martin has also called for - see Martin’s letters to Northern Irish and Scottish ministers.
We're currently in discussion with the ministers in the other UK nations and we hope to report success there soon as well.
See our How student finance works guide and our 'How much should you save for your child to go to university?' calculators for more info.