In this blog, associate Carla Ditz looks at student finance options in tertiary education and in particular, how children of separating or separated parents are not always able to secure financial assistance from their parents where resources are thinly spread.
For many young people, graduating from university with student debt is simply part and parcel of university life. It is almost a given. What’s more, for the first few years that follow graduation, your student loan will slowly eat away at your monthly salary with, what can feel like no end in sight! With average university fees just over £9,000 p.a. in England, it is unsurprising that students look to all sources of finance to fund their tertiary education. But university fees are only the beginning. Living costs can also weigh you down depending on where you attend university and for how long.
So what are the possible sources of funding for students looking to enter tertiary education?
The sources of finance
- The bank of mum and dad
It is fairly common for parents to be the number one port of call for students when looking for help to pay for their tertiary education. Where parents can, they may indeed offer a helping hand. Or parents may take the view that the time has come for their now adult child to take on some financial responsibility for themselves. However, for many parents who are separating and looking to reach a financial settlement, helping their children get through university or tertiary education without a mound of debt may not be their top priority. When children are young, the matter of university seems far in the future and it is of course unknown if the children will even attend university. More pressing financial concerns take precedence during financial negotiations on divorce and separation and the matter is pushed to one side.
Maintenance for children of divorced or separated parents after secondary education is the jurisdiction of the court and claims may be brought before a judge for determination. That said, whilst such applications do take place, most children wishing to attend university may simply agree on a contribution or an allowance from their parent/s, with the remaining balance to be fulfilled from other sources such as a part-time job.
- Student loans
One of the most obvious and most popular sources of finance for university students is a student loan from the Student Loans Company. A student loan can be made up of two elements:
A tuition fees loan; and
A maintenance loan
By way of summary:
|Tuition fee loan||Maintenance loan|
|Available for||Everyone – although usually only available for your first higher education qualification||Everyone although details of household income may have to be provided (see below)|
|Amount||(see below)||(see below)|
|Conditions||Only available to meet university tuition fees||Only available to meet living costs|
|Terms||Repaid at the rate of 9% of any income you earn over the current repayment threshold of £21,000 a year, £1,750 a month or £404 a week|
|Interest||Maximum of RPI plus 3% (see below)|
Interest is based on your income not how much you borrowed
Tuition fee loan
The Tuition Fee Loan for the 2017 to 2018 academic year is a maximum of £9,250 for a full time university course and a maximum of £6,165 for a private university/college. The tuition fee loan is paid direct to the university or college.
Repayment – If you’re a full-time student you’ll be due to start repaying your loan the April after you finish or leave your course. If you’re studying part-time, you’ll be due to start repaying the April four years after the start of your course or the April after you finish or leave your course, whichever comes first.
You’ll repay 9% of any income you earn over the current repayment threshold of £21,000 a year, £1,750 a month or £404 a week. So if you earn £25,000 per year, that is £4,000 over the £21,000 threshold. You will therefore pay 9% of £4,000 = £30 per month.
Interest – Interest will accrue from the date the first loan payment is made.
- Whilst you are studying and until April after you finish or leave your course: Interest due is RPI plus 3%
- From April after you finish your course: Interest will be based on your income
- £21,000 or less = RPI
- Between £21,000 and £41,000 = RPI plus up to 3%, depending on your income
- £41,000 and over = RPI plus 3%
If you apply for a maintenance loan, you will need to provide details of your household income. If you are under 25 and are financially dependent on your parents, you will have to provide details of their income. The loan is paid directly to the student.
The amount of the loan depends on where the student is living:
|Full-time student||Loan for the 2017 to 2018 academic year|
|Living at home||Up to £7,097|
|Living away from home, outside London||Up to £8,430|
|Living away from home, in London||Up to £11,002|
|You spend a year of a UK course studying abroad||Up to £9,654|
Interest is calculated as above for a tuition fee loan. The same repayment rules apply.
- Bursaries and scholarships
Both bursaries and scholarships will depend on the particular educational establishment that the student attends. Generally, bursaries are available to low income families and scholarships are awarded to those students showing exceptional aptitude in a particular field. Grants may also be available and should be investigated direct with the educational establishment.
NHS bursaries: For those students studying an NHS course such as medicine, dentistry, healthcare, an NHS bursary is available.
Full time students can apply for:
- a bursary from the NHS (based on household income)
- a £1,000 grant from the NHS
- a reduced Maintenance Loan from Student Finance England
Eligible part-time students can apply for:
- a reduced bursary from the NHS
- a reduced grant from the NHS
The amount you will get depends on the length of the course. Please see NHS Award Estimate Calculator https://apps.nhsbsa.nhs.uk/SGUBursary/
Other student finance options available:
Professional and Career Development Loan
If you are studying a qualifying course, you may be able to apply for a Professional and Career Development Loan. https://www.gov.uk/career-development-loans. These are loans designed to assist with training to further your career such as attending law school. Importantly, the course must be provided by an organisation on the Professional Career and Development Loan Register. You may be able to borrow between £300 and £10,000. Loans are usually offered at a reduced interest rate and the government pays interest while you’re studying. You start repaying the loan (plus interest at a reduced rate) 1 month after leaving your course. These loans cannot be paid to cover first full time degrees.
Advanced Learner loan
A student over 19 may also be entitled to apply for an Advanced Learner loan to help with the cost of a course at a college or training provider in England. Loan eligibility is not dependent on your income.
How much you get depends on:
- the type of course
- your course fees
- the maximum loan available for your course
The minimum loan you can get is £300 and is paid directly to your college or training provider. The course can cover the cost of taking A-levels or a graduate certificate for example providing the student is aged 19 or over and the student is studying at an approved college or training provider.
Annual repayments – 9% of any income you earn over £21,000 plus interest. Repayments start the April following the completion of your course. The interest rates are as above for a student loan ie) a maximum of RPI plus 3%.
Please note, this blog does not cover personal loans, bank overdrafts, credit cards or post-graduate loans (for more information: https://www.thestudentroom.co.uk/content.php?r=22757-Postgraduate-Loan nor more specific loans such as Dance and Drama Awards https://www.gov.uk/dance-drama-awards
Part-time job + a bit of help from mum and dad + student loan + credit cards…
Despite a current cap of £9,250 imposed on universities with respect to tuition fees, there is concern about the cost and affordability of attending university for young people today. This has again become a hot topic as universities press the government to offer grants (having been replaced by loans in 2016) and lower interest rates for those students from low income households. This comes as recent analysis reported in The Independent suggests that tuition fees in England are the highest in the world.
The days of a free university education are long gone. Tuition fees were introduced by the Labour government in 1998 and since then, they have soared. With universities relying heavily on income from tuition fees because of a withdrawal of government funding, it would seem there is no looking back. The ones who suffer are the students of course but most see attending university as a must and ultimately an investment in their future. Even if parents are able to make some contribution to university expenses, it is unlikely that it will come close to the sums needed to cover tuition fees and living costs. Students may therefore take on a range of financing options to get them to where they need to be.
At Family Law in Partnership our specialist family lawyers have a wealth of experience in advising clients on what is fair, what is reasonable and what is realistic, whether they are involved in a negotiated settlement or whether a Judge is to make the final decision. We draw on our years of experience to advise and enable clients to make informed and well considered choices when reaching a financial settlement. Read more on Divorce Finances & Separation Finances here or contact any of our specialist family lawyers: T: 020 7420 5000 or E: email@example.com.