Is your child vegetarian? They could get a university grant!
While many A-level students are sweating over revision and exams in the hope of good results taking them off to university in the autumn, their parents should be doing their own urgent homework – on the financial help available to fund their offspring’s degrees.
For the majority of families who cannot afford to fund a course – and living costs – a May 24 deadline is looming to apply for Government-backed student loans.
There are two types to apply for soon if students want to ensure they will be paid out in time for their course starting: one to cover annual tuition fees of up to £9,250, and maintenance loans to cover the cost of day-to-day expenses.
Everyone is entitled to receive the full tuition fee loan and a certain level of maintenance loan. To apply for more than the basic maintenance loan, parents must dig out details of both their child’s and their own income.
A student whose family income is £25,000, for example, can apply for a maximum maintenance loan of £11,672 – if they will be living in London away from the family home. The higher the family’s joint earnings, the less you can borrow. For example, the loan for a household with an income of £60,000 will be £7,103 at most and those with an income of £100,000 can only borrow £5,812. With student rent averaging £5,000 a year, many parents are likely to have to step in with extra cash.
Another source of top-ups are scholarships and bursaries. Many universities offer some kind of cash bonus for academic excellence or for those on low incomes. But there are others ranging from cash for vegetarians (from the Vegetarian Charity) to those with an aptitude for sport.
Among those currently listed on website The Scholarship Hub are bursaries of up to £3,000 offered to students planning a career in television (from the Royal Television Society); two scholarships worth £1,500 open to students from Tunbridge Wells with ‘enquiring minds’ (from Red Brick Research); and for environmentally conscious students cash is on offer from energy supplier GreenMatch.
Students can also enlist the help of family and friends through cashback website Funds4Uni. Those who agree to the arrangement will see a cashback (at no cost to them) go to the student each time they shop at certain retailers online. Karen Kennard, at The Scholarship Hub, says: ‘It’s never going to cover everything but it can provide a nice additional income to help with day- to-day living costs.’
Sarah Coles, personal finance expert at broker Hargreaves Lansdown, reminds parents that those taking out student loans could easily end up with £60,000 of debt by the time they graduate – raising the temptation for parents to pay off some or all of it on their behalf. She says: ‘If they’re going to end up paying off the whole debt and interest (currently charged at 6.3 per cent while they are on their course) it is worth doing it as soon as possible after graduation before interest mounts further.’
If graduates keep the debt, repayments are taken from pay at the rate of 9 per cent over the current earnings threshold of £25,725.
One of the selling points stressed by the Government is that student loans are written off after 30 years. But this disguises the huge levels of interest many graduates will fork out in the meantime – never mind the fact these rules could change. Figures show that only 17 per cent of graduates repay their loans in full.
Coles says: ‘Assuming average pay rises – and no career breaks – a graduate would need a starting salary of £55,000 to pay off all their loan and interest in full. Making the same assumptions, a £29,000 starting salary would be necessary to pay any interest before it is written off.’
No one knows the level of earnings their children will reach, suggesting it may be best left to their offspring to decide a repayment strategy. Coles says: ‘A good idea is to invest in a Junior Isa throughout their childhood to give them a nest egg at 18 which they can either put towards university costs or pay off loans later – or if they prefer use it to help them on the housing ladder.’
Apply for loans online at gov.uk/studentfinance (England), studentfinancewales.co.uk, saas.gov.uk (Scotland) and www.studentfinanceni.co.uk (Northern Ireland). Applications take six to eight weeks to process.