Your complete guide to student finance

Halfway through the recent A-level results day, the Guardian reported that a total of 425,830 students had already confirmed their university places.

With more than half a million undergraduates expected to head off to university this autumn, managing money is likely to be one of their – and your – key challenges during their studies.

So, here’s everything you need to know about student finance, from how much your child can expect to receive, to how and when they repay their loan.

Tuition fees are normally up to £9,250 a year

Student loans are generally split into two components:

• Tuition fees to cover the cost of studies
• Maintenance loans to help with accommodation and the cost of living (see below).

Tuition fees are dependent on where your child is studying, and where you come from.

For example, in England, students pay up to £9,250 a year irrespective of where in the UK they study. If you’re from Scotland, it’s free to study there but will cost up to £9,250 in the rest of the UK.

Welsh students pay up to £9,000 in Wales and £9,250 elsewhere, while Northern Irish students pay up to £4,530 there and up to £9,250 in England, Scotland and Wales.

Note that tuition fee loans are generally paid directly to the student’s university or college, so your child won’t generally see the money.

If your child is from England, and studies a three-year course in England, their tuition fee loan is likely to be £27,750.

Maintenance loans are based on household income

Maintenance loans are separate loans that are paid directly to your child, not the university, normally in three instalments across the academic year.

They are intended to help towards a student’s living costs while they are at university – to pay for things like accommodation, bills, food, and nights out.

Unlike tuition fee loans, maintenance loans are means-tested and so, if you are a high earner, your child may not be eligible for the full loan. The amount your child receives is based on their household income, including the earnings of parents and, if appropriate, their partner.

In 2022/23, the government say that any household with income over £50,778 would receive less than the maximum annual maintenance loan, which is:

• Student living with parents – £8,171
• Student living away from parents outside London – £9,706
• Student living away from parents in London – £12,667.

Note that every child is eligible for a minimum maintenance loan which Money Saving Expert report is £3,597 in the 2022/23 academic year.

Of course, you may wish to supplement a child’s income on top of the help they receive in the form of a maintenance grant. Your child may also be eligible for bursaries or additional support from the institution or may want to take a part-time job when they start their studies.

How your child repays their student loan

Over the period of study, the loans can add up.

As an example, if you’re from Manchester and your daughter attends the University of Warwick on a three-year course, living away from home and receiving the maximum maintenance loan, she could expect her student debt to be in the region of £56,800 when she graduates.

While this may seem like an eye-watering amount, it’s crucial to remember that repaying a student loan is based on an individual’s ability to repay.

The income threshold for repaying a loan for students going to university in 2022/23 is £27,295. Your child pays 9% of their income above the threshold towards their loan. This means a graduate earning:

• £24,000 will pay nothing towards their loan
• £28,000 will pay £5.29 a month towards their loan (£705 of earnings are above the threshold and 9% of £705 is £63.45 a year, or £5.29 a month)
• £35,000 will pay £57.79 a month towards their loan (£7,705 of earnings are above the threshold and 9% of that is £693.45 a year, or £57.79 a month).

Note that, from September 2023, the income threshold will fall to £25,000.

Remember that a graduate on a low wage will be required to repay little or nothing at all, so you don’t need to worry that they will struggle to keep up repayments. The system is designed so that, in the main, those who gain the most financially out of university contribute the most.

Why paying the loans back may not be the right thing for your wealth

If your child graduates with a loan upwards of £40,000 or £50,000, you may be tempted to consider repaying it so they can begin their career debt-free.

However, there is a powerful reason why repaying student debt may not be the wisest use of your funds: relatively few students will end up repaying their loan in full before the loan is written off after 30 years (rising to 40 years in 2023).

The government themselves say that only around 20% of full-time undergraduates starting in 2021/22 would repay their loans in full.

This is because many students won’t exceed the income threshold, while others earning just over the threshold won’t pay anywhere near the total amount back before the debt is written off after 30 or 40 years. Debts are also expunged on death.

It’s important to see student debt differently to commercial debt like a bank loan, credit card, or mortgage:

• Student loan repayments are proportionate to income, not a fixed amount
• If your child loses their job or takes time off, they won’t need to repay their student loan
• Your child can’t lose their home or another asset if they don’t pay.

Simply put, if your child never earns above the repayment threshold, they will never have to pay back any of their student loan, and it will be written off in 30 or 40 years.

So, if you have a lump sum, using this to help your child onto the property ladder or to start a business could be a more constructive use of the money rather than clearing loans that may never have to be repaid anyway.

Get in touch

If you’d like to chat about how to support your child through university, or the most effective ways to transfer wealth to a loved one, please get in touch.

Email us at hale@kelland.co.uk or call 0161 929 8838.

Please note

All contents are based on our understanding of HMRC and current legislation, which is subject to change.

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