How to top up their coffers

The financial packages available to students seem to be forever changing, but there is still a number of useful options that could make all the difference. Gwenda Thomas gives her advice on grants, loans and bursaries

They’ve been tinkering withthe student funding packages again. But the results this time make surprisingly good reading for both parents and students – if you live in England, and your child is starting their university course this autumn. What is even more remarkable, the beneficiaries of the changes include middle class families. The new deal means parents will not be expected to contribute nearly as much towards their offspring’s upkeep – if anything at all. Many more students will be entitled to a maintenance grant, and students from families at the lower end of the income scale will receive larger grants.

But remember, it is just for English students and applies only to this year’s new intake. Existing students in England, who started their course before 1 September 2008, will receive the same package of support as in previous years. Tough, but there it is.

So what is actually happening? The income threshold at which parents of new students have to start chipping in to support their offspring has been raised from £39,780 (the figure for existing students) to £61,061. And parents earning above that income level will find the amount they are assessed to contribute will be less than in the past. As for new students, if the family income is £60,005 or below, you will receive a grant. If that sounds complicated, and it is, you need to understand how the funding system for students works as a whole.

Funding explained

All funding for students is based on four factors: where the family lives, where the student studies, family income and now, in England, when the student started their studies. Ever since devolution, student funding has been regional. There are similarities between all the funding packages, but the differences are significant. This is what a student living in England can expect to receive: Living away from parents’ home and studying in London: £6,475. Living away from parents’ home and studying elsewhere: £4,625. Living at parents’ home and studying: £3,580. The package is made up of grants, student loans, and parental contributions.

Grants

If family income in England is £25,000 or below (£18,360 or less for existing students) a full grant of £2,835 is given. If family income is between £25,001 and £60,005 (£18,361 – £39,305 for existing students) a partial grant will be awarded. This is given on a sliding scale depending on family income. Grants do not have to be paid back. Loans, however, do.

Loans

Most of a student’s maintenance funding will come from a student loan. A student does not have to take all or any of their loan allocation, but most do. Students who receive a grant will find their loan allocation is reduced by the amount of the grant they receive. If family income is £61,061 or above (£39,780 for existing students)no grant will be given, and up to 25 per cent of the loan will be means-tested on family income. Parents are expected to make up the amount of loan a student does not receive, but there is no compulsion on parents to do so. However, statistics show most parents generally contribute more.

Payback on loans is taken from a student’s salary at source in a similar way to tax, starting in the April after they graduate and only once they earn above £15,000. Repayment levels depend on earnings and are worked out at 9 per cent of income above £15,000. So, on a salary of £16,000, monthly repayment would be £7.

The student loan is a cheap way of borrowing. A student only pays interest on their loan at the rate of inflation, so the amount they pay back will have the same value in real terms as the amount they borrowed, which generally is fairly modest. However, this doesn’t sound so good when you discover that this year’s interest rate is 4.8 per cent, double last year’s rate of 2.4 per cent. Even with that inflationary hike, the student loan is still a good deal. There is one more good news story for English students starting their course this autumn. Once they graduate, they will be entitled to take a repayment holiday of up to five years at any time while paying back their loan. Other regions of the UK are considering the idea, so there is still time for them to fall in line.

Bursaries

All students will pay fees and most universities charge the maximum allowed, which this year is £3,145. Students can take out a loan to cover their fees and pay it off gradually along with the student loan once they graduate. But an increasingly important element in student funding are university bursaries. But understanding these is even more daunting. Each university employs its own system of giving, and that giving can be anywhere between £0 and £3,000 – or even more if you are lucky. So you need to do your homework.

Finance-savvy students and parents will have looked into university bursaries before they even started applying, because there are some real bags of gold to be had. This advice, however, is probably a little late for this year’s students. Even so, if you already have a place at university, but have had no information from them about a bursary, there’s no harm in asking. The first tranch of a bursary is generally paid out in the spring term, so there is still time.

All universities in England that charge the maximum tuition fees must give students who receive the full grant a bursary. The statutory figure this year stands at £310. Many universities, however, give more. In fact, the average bursary for a student receiving a full grant is around £1,000. For a Cambridge student it could be as much as £3,150.

So what about the rest of the country?

Scotland

The big plus here is that Scottish-based students studying in Scotland do not pay fees, and students from the rest of the UK who study in Scotland pay fees of just £1,775 a year (£2,825 for medicine). The maximum available grant for Scottish students is £2,095, slightly less than anywhere else.

Students from families with an income below £18,825 receive the full grant (confusingly called a bursary in Scotland), and those from families with an income of up to £33,330 receive a partial grant. Loans of £890 – £4,510 (£5,565 if studying in London) are available depending on family income, and better-off parents in Scotland are expected to contribute much more than in other parts of the country – perhaps as much as £3,620 (£4,675 in London). So, students in Scotland have a lot less accumulated debt, but the deal isn’t quite so good for their parents.

Wales

While Welsh universities charge full fees to all students, Welsh-domiciled students studying in Wales receive a fee grant of £1,890 a year which, in effect, reduces their fees to a more manageable £1,255. They can then take out a loan to cover the balance. The fee grant is not means-tested; it is given to EU students studying in Wales but not to other UK students studying there, or to Welsh-domiciled students who study outside the principality. Otherwise, Wales follows closely the funding package for existing students, so there is no extra help for parents.

Northern Ireland

Student funding also follows very closely the English package for existing students, except that there is a larger basic maintenance grant of £3,335, so students from lower income families can expect more.

Making ends meet

For most students the funding package leaves them with a black hole in their finances. So what do they do?

• Make use of the interest free overdrafts from between £1,000 – £2,750 offered to students by most banks. Rates vary, and it is more debt.
• Work: most universities operate job shops which help students find employment. Average student earnings, according to the NatWest Student Living Index, is £92.89 per week, at an average of 14.3 hours.
• Check out scholarships at their university and school. These are given for a range of reasons, but often for academic ability.
• Apply for sponsorship from major companies.

Gwenda Thomas is author of ‘Students’ Money Matters 08-09’, published by Trotman, £16.99