Student finance: what parents need to know
Student finance can be complicated. But your child can get money towards tuition fees – now capped at £9,250 a year for UK and EU students – and for living costs.
Beware of paying your child’s tuition fees upfront instead of using a student loan; it doesn't really make financial sense. Student loans expire after 30 years, and 60% of students will never pay all of this back.
Let’s clear up everything you need to know about your child’s student finance including loans, repayments, scholarships and more…
- WATCH: an introduction to student finance in England
- Should I pay my child's tuition fees upfront?
- What student loans are available?
- Are bursaries and scholarships available?
- When will my child start paying back their loan?
- How much will my child have to repay?
- How do repayments work?
- How long until a student loan is written off?
- Is it worth paying back a student loan sooner rather than later?
- Do student loans count against a mortgage?
- Does it make financial sense for my child to live at home while at uni?
- Am I responsible for my child’s loan?
Can't see your question? See if we've covered it in our recent parents and finance Q&A, or download our free guide to student finance.
Firstly, an introduction to student finance in England
Get started with this quick video from Student Finance England summing up the basics of student finance in England:
Universities and colleges can now charge full-time English students a maximum of £9,250 a year in tuition fees, but only if that institution has been rated gold, silver or bronze according to the Teaching Excellence Framework. Otherwise, the maximum fee they charge is £9,000 a year.
Local colleges will charge less than this.
Not studying in England? Read our guides for student finance in Scotland, Wales and Northern Ireland instead.
Should I pay my child's tuition fees upfront?
This isn’t expected. So you can start breathing normally again!
Your child can apply for a tuition fee loan to take care of this. So they can head off to university, without the worry of paying this back until after they’ve graduated.
It’s not recommended that you take out a personal loan to help your child with their student debt. This is almost always a more expensive option than your son or daughter taking out a student loan. Interest rates on student loans are still very low in comparison to other loans on the market – we go into more detail below.
What student loans are available?
There are two types of student loan available: the tuition fee loan we mentioned above, and a maintenance loan. Both will start to be repaid once your child has graduated and started earning over a certain amount.
68% of students we spoke to told us they took both out*:
As the name suggests, the tuition fee loan is there to cover your child's tuition fees.
The maintenance loan is there to help with living costs, such as accommodation, food, travel, going out etc. These also include course-related costs not covered by their tuition fees. The amount your child is eligible to borrow in maintenance loans depends on several factors, including where they will be studying and your family's household income.
To give you a rough idea, if your child will be living away from home (and outside of London), a maintenance loan of up to £8,700 per year is available for households earning £25,000 per year or less. If you're earning more than this, the amount your child is eligible for will be lower.
Beyond this, it is up to you and your child to make up any financial shortfall to cover their living costs. Forty-six per cent of students we spoke to told us that they relied on their family for extra money to help with living costs*. Forty-one per cent of students told us they worked part-time at university, while there are bursaries and scholarships to help cover these – we go into more detail about these further down.
If your child is going to university in London, the maximum loan amount available is slightly higher (£11,354) to account for the higher cost of living in the capital.
Learn more on what's available in our guide to fees and finance for where you live.
- Which? Money reveals the best and worst student bank accounts - you may be surprised by our findings...
Are bursaries or scholarships available?
Most universities offer various forms of financial support too, particularly (though not exclusively) to students from lower income families. The most common examples are bursaries and scholarships to help with some or all of a student's tuition fees or living costs.
Your child's eligibility for these can also be based on academic ability or if they have a disability. And the best thing about these? Unlike the loans above, these don’t need to be paid back!
Your child should enquire directly to their university of choice to find out what extra support they offer, as it varies from institution to institution. In fact, this could be something to ask at an open day, and might even be a factor when choosing a university.
How much will my child have to repay?
The tuition fee loan and the maintenance loan are added together to give the total amount they will have to repay (plus interest). The variations mean it's difficult to calculate the exact level of debt your child will graduate with.
However, a typical English student on a three-year course outside of London might expect to graduate with around £35,000-£40,000 of student loans.
When will my child start paying back their loan?
Your child only starts paying their loan back if they’re earning above a certain amount.
Loan repayments aren’t based on how much your child borrowed, but rather on how much they earn later.
For full-time students in England, their repayments will only begin once they have left university and are earning £25,000 or more a year.
If after leaving university, they’re not working at any point, or they're earning less than this, they don’t have to pay anything back until they are again. And if they are earning above this threshold, they’ll only repay an amount based on what they’re earning over this threshold.
Repayments in Wales are the same, but a little different in Scotland and Northern Ireland where the threshold is £18,330.
English and Welsh part-time students may start to repay after the fourth year of study, but only if they are earning more than the repayment threshold.
How do repayments work?
Repayments depend on how much your child is earning, but are calculated at 9% per year of whatever they earn above the threshold in their country.
To keep things simple, this is repaid directly to the Student Loans Company by their employer as part of their monthly salary deductions.
Below is an example for an English student (for whom the salary threshold for repayments is £25,000):
- earning below £25,000? Your child won’t have to pay back anything.
- earning £26,000? Your child will pay back roughly £90 per year.
- earning £30,000? Your child will pay back roughly £450 per year.
These payment rates remain the same regardless of how much was borrowed.
Interest rates are as follows:
- while studying and until the April after your child finishes the course: RPI plus 3% (as of September 2018, this will be 3.3% + 3% to sit in line with inflation).
- from April after leaving the course until loan is repaid: if income is £25,000 or less, interest is set at RPI at that time. This rises on a sliding scale of up to RPI plus 3% where income reaches £41,000 or more.
Make sure your child keeps their student finance agency informed of their current salary after graduating, so they are charged the correct amount of interest at all times.
Learn more about how repayments work in our regional finance guides for Scotland, Wales and Northern Ireland, or check the student loan repayment website.
How long until a student loan is written off?
After 30 years, any outstanding student debt your child still owes is written off.
This is true even if there have been periods in that time where they haven't repaid anything, due to not working or because they were earning below the threshold.
A major review into university funding in 2010 estimated that around 60% of graduates won’t have paid their full loan back after 30 years. So either your son or daughter will be lucky enough to be in the top group of graduate earners, or they will never pay it all back.
Is it worth paying back a student loan sooner rather than later?
Because your son or daughter might not end up paying their total loan back during the 30 years before the debt is wiped out, it may not make financial sense to try and repay their loan as quickly as possible. Furthermore, student loans don't affect credit ratings so don't worry about that.
On the other hand, paying a loan back sooner rather than later could be practical for graduates entering a top–earning profession and if they're particularly keen to rid themselves of any extra debt.
Do student loans count against a mortgage?
The Council of Mortgage Lenders (CML) has said: ‘A student loan is very unlikely to impact materially on an individual's ability to get a mortgage, but the amount of mortgage available may depend on net income (i.e. your “take home” pay after tax and expenses).’
Does it make financial sense for my child to live at home while at uni?
No, this isn’t just an excuse to convince your child to stay at home. It might actually make better financial sense for them to live at home and go to a local university:
- they would take out a smaller maintenance loan than if they lived away from home.
- having them under your own roof should make it more manageable if you wanted to assist them financially.
- does it make sense for them to be paying rent elsewhere if they’re not far from the family home and could commute instead?
Don’t encourage your child to remain at home if the sole reason is to save money, however. While day-to-day living costs will probably be cheaper for them, remember: any student loan they take out will only be repaid based on how much they earn later, not on how much they borrowed.
This means that a graduate who lived away from home, earning the same salary as a student who lived at home, would repay the same amount each month as the student. A stay-at-home graduate might pay their loan back faster, but only if they’re earning enough to pay the whole loan back.
Student banking tips: credit cards, overdrafts and more
Am I responsible for my child’s loan?
Once your child graduates and is earning above £25,000, their loan will be automatically collected through PAYE (a bit like income tax). No cheques and no direct debits needed, meaning it’s therefore virtually impossible for them to fall behind on repayments – one less thing for you to worry about.
So that's what you need to know about your child's student finance. However, we can’t promise that the Bank of Mum and Dad won’t be called upon for some other reason…
* Data source: Which? University Student Survey 2018, conducted on behalf of Which? by Youthsight with 5,000 undergraduate students at UK universities, between March-April 2018.
Download our materials for free to your device - perfect for printing and sharing with students and parents.