Martin Lewis explains student loans and how much 'parental contribution' is EXPECTED
Martin pointed out he was focusing on English loans for English students, as the rest of the UK have different systems. Responding to the popular question of how much it costs to go to university, Martin said: “How much is a piece of string? Actually what really counts is less ‘what’s the cost’ but more ‘what do you repay’. “And with student finance these are radically different concepts. Go to uni and first time English undergraduate students are charged up to £9,250 for tuition fees, which is paid directly to the university by the Student Loans Company. Plus there’s a loan to meet living costs. “Here are five key facts on how the loan works currently (it can be changed).
1) You repay both these loans once you've left uni, but only if you earn £21,000 or more. If you earn below this you don’t repay a penny. 2) You then repay 9 per cent of everything above £21k, regardless of how much you borrowed. The more you earn, the more you repay monthly. 3) The loan is wiped after 30 years – whether you’ve paid a penny or not – it’s estimated 77 per cent of people won’t clear it in this time so will be repaying for the full 30 years. 4) It is repaid through the payroll, just like tax, so you can’t “not repay” unless you’re self-employed or live outside the UK. And the loan doesn't go on your credit file. 5) Interest is added to the loan at inflation (RPI) + three per cent while studying, and between inflation and inflation + three per cent afterwards, depending on what you earn. For the new year in September the measure of inflation will rise to 3.1 per cent.
Getty Images/ITV Martin Lewis explained what students need to know about loans
ISA advice from Martin Lewis Thu, February 9, 2017 ISA advice from Money Saving Expert Martin Lewis. Play slideshow Getty Images 1 of 11 ISA advice from Martin Lewis
The big issue for most students is not having enough cash to live on Martin Lewis, Money Saving Expert
The real area of concern for most families sending their children off to university should be living costs. Martin explained: “The big issue for most students is not having enough cash to live on. And this is caused by fundamental issues with the system. “Students are eligible for a loan for living – known as the maintenance loan. Yet for most under 25s, even though they are old enough to vote, get married, join the army and more, the amount of their living loan is dependent on parental household income. From £25,000 family income upwards, the loan is reduced until it’s roughly halved at £60,000. “The fact is the amount students don’t get is the expected ‘parental contribution’ and parents are effectively supposed to make up the difference, but this is unsaid. “So look on your loan letter – which you should have already received and then find out what the full amount should be. “For example, the maximum loan amount for new starters this year living at home is £7,097, £8,430 living away from home and £11,002 for new starters living away from home in London. “Then take your loan amount away from that, and the difference is the ‘expected parental contribution’. It can be thousands and even that may still not be enough. “So bizarrely the biggest problem with student loans is actually the loans aren’t big enough.”
Money Saving Expert Martin Lewis shared a chart explaining exactly what repayments could be