A-Levels are drawing to a close and summer is just around the corner. But while University may seem a long way off right now, thinking about your finances before you fly the nest is a necessity if you want to be prepared.
The vast majority of you will be using student finance to pay for both your tuition fees and your living costs at University – so there’s no need for your parents to be getting on the phone to their bank manager or financial advisor in order to fund your future.
But just what can you expect from your finances in regards to the amounts you’ll be receiving, and how can your parents’ income impact on that?
Your tuition fees are the actual fees that will be paid to your school to allow you access to the course. This money is never seen by yourself and is transferred from the student loan company straight to your college or university.
The current rates are as follows:
- Up to £9,000 for full-time students
- Up to £6,000 for full-time students at a private university or college
- Up to £6,750 for part-time students
- Up to £4,500 for part-time students at a private university or college
Parental income has absolutely no impact on tuition fees, as they are paid in full if you are accepted. Your parents’ income also has no impact on the rate at which you pay back the loan.
What has changed recently are the repayment terms, as the coalition government upped the tuition fee rates 5 years ago.
New students starting this year will not begin repaying their student loans until at least the April following the end of their course (i.e. should your course finish in June 2018, repayments begin in April 2019 at the earliest).
Repayments will also not start until you earn over £21,000 per year. You will then make repayments each month at 9% of your annual earnings. Your loan is also subject to interest at inflation plus 3% – one of the cheapest loans you’re ever likely to receive. This is why it’s often not worth repaying it early.
After 30 years of payments, the remaining outlay – if any – gets wiped.
In order to fund living costs – such as rent, bills, books and food (and booze) – many will also be applying for a maintenance loan to fund this.
At the start of each of your 3 terms, this money will arrive as a lump sum in your bank account – so it’s up to you to budget and not blow the whole thing in Freshers Week before realising that, come Christmas you can’t even afford to eat.
These are the current maintenance loans you can receive as a full-time student:
- Up to £4,565 if living at home
- Up to £5,740 if living away from home, outside of London
- Up to £8,009 if living away from home, in London
- Up to £6,820 if you spend a year of a UK course studying abroad
Unfortunately for some, a maintenance loan will also be affected by your parents’ household income. Whether you believe it is fair or not, parents on a higher income are expected to help subsidise your income while at University.
Parents with an annual household income over £62,000 per year are expected to provide a ‘subsidised contribution’ of £2,009, meaning maintenance loans (outside of London) are capped at £3,731 per year.
It’s not often that you’ll get given free money, but at University there a grants and bursaries available that you don’t have to pay back – ever!
University’s individual bursaries will vary if there are any available at all, but you could be eligible to receive a maintenance grant to top up your maintenance loan for your living costs.
Again, the maintenance grant is based on your parents’ income and you could be entitled to the following depending on your household income:
- £3,387 per year if from a household with an income of £25,000 or less
- £2,441 per year if from a household with an income of £30,000
- £1,494 per year if from a household with an income of £35,000
- £547 per year if from a household with an income of £40,000
- £50 per year if from a household with an income of £42,620
- No grant if from a household with an income of over £42,620
You can use the Government’s official student loan calculator to work out just how much maintenance loan and grant you should receive.
Bear in mind that your yearly rent and bills, as well as money for books, food and the inevitable social events has to come from no more than £5,740 per year.
It’s worth taking a bit of time out this Summer before you leave home to set out a stringent budget. Find out how much your rent and bills are likely to be (student halls will often be all-inclusive and paid up-front each term), and work out how much more of that sub-£500 per month can be budgeted elsewhere.
Ryan Smith is part of the content development team at Local Financial Advice, connecting people with independent financial advisors in their local area to help them achieve their financial goals.