New analysis reveals hidden £17,000+ parental contribution for university

Student finance system expects parents in England to cough up, but never tells them.

New MSE calculator reveals how much parents need to save.

At 18 you’re old enough to vote, marry and join the army. But the UK’s biggest consumer website, MoneySavingExpert.com (MSE), is warning that under the UK’s university finance system those same 18-year-olds aren’t seen as independent adults at all. In fact, according to its latest analysis, some parents are expected to put as much as £17,700 (1) aside to support their living costs while in further education… and they aren’t even told about it.

To help, MSE has launched its unique ‘How much should you save for your child to go to university?’ calculator (www.moneysavingexpert.com/parentalcalc) for English students. The calculator allows people to enter their family income and when their child may go to university (even if it’s a decade away) to give a ballpark figure of the amount they may need to save.

What is ‘parental contribution’?

Despite much political debate, tuition fees aren’t a practical problem for students at university. They’re paid for them, and they only repay them after university if and when they earn enough (so they’re more of a problem for university leavers).

More pressing is the amount of maintenance loan – which is there to help with living costs – they get. Big chunks of maintenance loans are means-tested by household income, which for most 18 to 25-year-olds is a proxy for their parental income. The higher it is, the less the student gets.

Reductions start from a family income of just £25,000 per year, and parents are implicitly expected to fill the gap. While five years ago all students received at least 65% of the maximum, now some get less than half.

For example, the gap between the full loan and what a child starting university in 2020 would get – effectively the parental contribution – living away from home outside London is…

  • Total family income £35,000 - £3,900 contribution over a three year course.
  • Total family income £50,000 - £9,750 contribution over a three year course.
  • Total family income £75,000+ - £14,400 contribution over a three year course.

For a family with a £50,000 income, whose child starts in four academic years’ time (assuming the system remains the same), this would mean putting aside £130+ a month from now to have the full amount by midway through the course.

Martin Lewis, founder of MoneySavingExpert.com and former head of the Independent Taskforce on Student Finance Information, said: “When I’m out filming my TV roadshows, parents often angrily complain to me: ‘It’s a disgrace that the living loan isn’t enough to cover my kid’s rent.’ Many are then gobsmacked when I explain to them that is because their child’s loan is thousands smaller due to their income, and they are expected to plug the gap.

“If the Government wants a means-tested system, at least come clean about it. Their failure to do so causes stress between parents and their children. One – unable to find work outside course hours, desperately struggling on the minimum loan – told me his parents’ view was that now he was at uni he should stand on his own two feet. They may well think that, but the system doesn’t. After I explained how it worked, his surprised parents started to contribute.

“We’ve campaigned for years that the Government needs to make this more transparent. The only official guidance I’ve seen is buried in a Student Finance England guide, which says ‘depending on their income, parents may have to contribute towards your living costs while you’re studying’. Student loan letters don’t mention this, they simply note the amount a student will receive.

“A few years ago, I wrote to the then-Universities Minister Jo Johnson – asking him to ensure loan letters include the amount the full loan had been reduced by due to means-testing, and preferably to spell out the parental contribution. His bizarre response argued that it’s not a parental contribution as students can make up the difference from savings or part-time jobs instead. Yet all students can do that, so why means-test the gap based on parental income?

“I’ve raised the same question with the parade of universities ministers since then, and they’ve nodded, but done nowt. That’s why we decided it was time to build this calculator – if they won’t do it, someone should.

“Of course, there’s no legal obligation on parents to contribute, and student offspring can’t force them. Indeed, these amounts may be unaffordable to some, for example those on good incomes but in a debt management plan. Yet at least by providing prior warning of the scale of contribution expected of them, we hope it will enable people to better plan, and students and their parents to better understand their responsibilities.”

-ends-

Notes to editors

(1)    £17,700 is the amount parents with a household income over £70,000 per year would be expected to contribute over three years, to plug the reduction from the maximum available maintenance loan for a student living away from home, studying in London and starting their course in September 2020.

For full info on how student loans work, please visit MSE’s 20+ Student Loans Mythbusting guide, or watch the Student Loans Decoded video.