Student Finance: Planning for university fees

Are university fees looming in your household? Maybe your teenager is already collecting their belongings together ready to start their next chapter in life as a student. Even if your ‘mini-me’ has only just chosen their GCSE subjects, no doubt university fees will be something you ponder with some fear and trepidation.

How to plan for student fees

With maximum tuition fees at £9,250 per year, that’s without even starting to think about the cost of homing, feeding and supporting your little darling, university fees can seem an out of reach expense even for the most hard-working and reasonably well off.

If your child decides to follow in your ‘medical footsteps’ and become a doctor or dentist then you are looking at around 5 years plus of fees. Worse still, if they want to train to be an architect, you could be looking at about 7 years of tuition fees and living expenses – that’s a lot of fees!

How do I plan for student fees?

Forget spreadsheets estimating the total cost of university, it will only reduce you to tears! Just concentrate on the loans and assistance available to you. This will help you to understand the process of university funding more thoroughly.

There are always headlines about the spiralling cost of student debt but best not to dwell on those, or get confused with the total loan and the repayment. What matters in practical terms is how much you have to repay  – and that can be a completely separate number from the total amount of tuition fees, maintenance loan and interest.

Let’s look at the basics

The university funding ‘package’ is made up of two parts:

1. Tuition fee loans

2. Maintenance support

Broadly speaking your child should be eligible for both as long as they are studying an approved course at a registered university and haven’t previously started a degree or similar course.  Maintenance support is means tested, so may vary.

They’ll also need to be a UK citizen (or have ‘settled’ status) and have been living in the UK for at least 3 years before the course start date.

EU students can apply for the tuition fee loan but won’t usually qualify for any assistance towards living costs. Rules and amounts also vary; if you’re a part-time student, over 60, or claiming special circumstances such as refugee status.

Tuition fee loans

Those of you lucky enough to live in Scotland or Northern Ireland may not have to pay a tuition fee if your child studies in your home country. With such great universities in both, it does beg the question of why go somewhere else? The rest of us need to cough up £9,250 pa normally. Take a look at the chart below to see if you are in the minority with lower tuition fees.

Tuition fees by region for courses starting in 2021

Student's home region Studying in England Studying in Scotland Studying in Wales Studying in Northern Ireland
England Up to £9,250 Up to £9,250 Up to £9,000 Up to £9,250
Scotland Up to £9,250 No fee Up to £9,000 Up to £9,250
Wales Up to £9,250 Up to £9,250 Up to £9,000 Up to £9,250
N.Ireland Up to £9,250 Up to £9,250 Up to £9,000 Up to £4,395
EU and other International Variable Variable Variable Variable

* This will not apply to Irish nationals living in the UK and Ireland whose right to study and to access benefits and services will be preserved on a reciprocal basis for UK and Irish nationals under the Common Travel Area arrangement.

Source: UCAS: undergraduate tuition fees and students loans

Note:
Tuition fee loans cover the full cost of the course and are paid directly to the course provider.

Maintenance support

So that’s the tuition covered! However, these students of ours have living costs and this is often where many parents get a bit confused and misunderstood.

The average student spends £795/month on accommodation, food, transport, textbooks, and anything else you deem essential. Bear in mind, local variations in cost occur but let’s just use this as a working figure.

What is a maintenance loan?

Your child can apply for a maintenance loan that is payable to them and thus they need to budget carefully. When it’s gone, it’s gone! It’s paid termly in England and monthly in Scotland.

The level of a maintenance loan available to your child is decided by your household income. As you can see from the table below once this exceeds £75,000 the maximum loan is £4,422 pa and would be added to the tuition loan and repaid in the same manner as noted above.

The table shows the maximum figure you could apply for. However, you aren’t guaranteed to get this! Apply early so you can make a ‘plan b’ if unsuccessful.

Source:  www.savethestudent.org

Student living away from home, outside London

Household Income Maximum Maintenance Load Amount available to you Difference from maximum
£25,000 £9,488 £9,488 £0
£35,000 £9,488 £8,130 £1,358
£45,000 £9,488 £6,771 £2,717
£55,000 £9,488 £5,412 £4,076
£65,000 £9,488 £4,422** £5,066
£75,000 £9,488 £4,422** £5,066

**only eligible for minimum amount

There are different rates for students living in London and for other circumstances such as other students living in your household, or if you receive benefits.

Things are a little different in Wales and Northern Ireland

All new welsh students will receive their maintenance package as a mixture of grants (which don’t have to be paid back) and loans (which do have to be paid back). The combination is determined by parental household income.

The total sum assumed necessary for a welsh student living away from home but not in London is £10,350 pa. The mix between grant and loan varies. Where the household income is £18,370 pa or less the student would receive £8,100 pa grant, and only need to apply for a £2,250 loan. This changes incrementally until the household income goes above £59,200 pa. Then the two figures reverse with £1,000 grant and £9,350 loan.

The living costs assumed change if you are living at home (£8,790 pa) or go to university in London (£12,930 pa). However, the proportions and income brackets are the same.

Do bursaries still exist?

The short answer is, yes! However, bursaries are such complex areas that I could write a whole other article about them. You may not qualify for any but it’s always worth a look – Student grants and bursaries

What about if you are divorced, are both parents income still taken into account? 

The simple and relieving answer is no. Your child will select the parent they live with most of the time. If it is equal they are allowed to elect one parent, so it would seem logical to choose the parent with the lowest income. Thus making more of the living costs coverable through the maintenance loan rather than parental contribution.

Finally,

How are these loans repaid?

Key points to remember:

  1. The loan won’t have to be paid back until after the course is complete and your child is earning more than £19,895 a year in Northern Ireland and Scotland or £27,295 a year in England and Wales. *** ( 2021/22 tax year)
  2. They will then pay 9% of their earnings over the threshold income as noted above. It’s best to think of it as an additional tax. If you earn £28,000 in a year, what do you repay? The answer is £63.45, as £28,000 is £705 above the threshold and 9% of £705 is £63.45.
  3. As you can see the sum borrowed has no bearing on what your child will repay.
  4. Since 2012 the interest rate has been set at Retail Price Index (RPI) + 3%.  This is rolled up and added to the borrowed sum.
  5. If you’re an employee, your ‘income’ that is used to calculate how much you will repay isn’t the amount that hits your bank each month. They use the full ‘gross’ income, meaning before tax, national insurance, and any pension contributions are taken out.
  6. Don’t forget: If the loan isn’t repaid after 30 years (25 years in Northern Ireland) then it’s wiped out and no more payments are due.

N.B. As a rule, if you took out your student loan before September 2012 then your interest rate is lower. If you aren’t sure which loan type (1 or 2) you have, I suggest you go to this government page to see the definition of each.

If finding the university fees means drawing down from your personal pension, rediverting private school fees or ‘just’ finding the extra from your income, with some careful planning, and prudent advanced saving, university fees can be managed.

There are some excellent blogs out there – The money saving expert has one on the truth about uni loans, fees and grants – definitely, worth a read/watch

I also found an interesting article on ‘9 weird university bursaries grants and scholarships’ on SavetheStudent where students can be eligible for grants if they are a vegetarian through to your surname being “Graham”!

Whichever way you decide to fund your child’s university fees make sure you plan, take advice and look as far into the future as you can! Whatever you do, don’t stick your head in the sand and rely on a political change to solve the problem.

How will you fund your child’s university fees? Let us know by adding a comment below.

Editor’s note: This post was originally published in August 2019 and has been completely revamped and updated for accuracy and comprehensiveness.

*** Student Finance
****The Money Saving Expert

2 thoughts on “Student Finance: Planning for university fees

  1. Nick McDowall

    Thanks Kirsty for the very clear explanation. We’ll be applying for a student loan for our daughter to attend university in the autumn of next year.

    Reply

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