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Thursday, 28 September 2017

Student Loan Leaves Students £221 Short Every Month

Thousands of students will be starting university without enough money to make it through the year, experts warn.
  • The National Student Money Survey reveals two-thirds struggle to get by on the Maintenance Loan on its own
  • Parents expected to plug £221 gap – but government sums still leave students short of cash
  • Call for bigger loans to cover basic living costs
  • Jake Butler from Save the Student: “This shortfall is the most pressing issue with student loans, not the latest increases in fees and interest rate”.
As the UK’s students gear-up to go to university, Save the Student warns many may be walking into serious money problems – and it’s nothing to do with tuition fees surpassing £9,000 or the interest rate jumping to 6.1%.

The National Student Money Survey 2017 reports 84% of students suffered financial hardship last year, with 66% stating that the Maintenance Loan is not enough to live on.

The Student Loan is composed of two parts: a Tuition Loan (up to £9,250 in 2017/18) for course fees, and a Maintenance Loan for living costs.

Save the Student’s research reveals students need an average of £821 to cover monthly spending, with rent alone coming in at £394 nationally. However, the average Maintenance Loan payment (for students with a household income of £35k, studying away from home and outside London) is just £600 per month – that’s £221 too little.

The Maintenance Loan is means-tested and designed to be topped up by parents, with many caught out by calculations which expect them to chip in thousands of pounds

The Parental Contributions Calculator shows parents earning £35,000 are expected to contribute £1,211 each year*. For a household income of £50,000, the contribution rises to £3,027. Almost a third of students say parents don’t give enough financial support.

Emma has just finished her second year. She told Save the Student:
Coming from a less fortunate background, money is a massive worry for me. I don't have the option to ask parents for money, and I'm too proud to ask friends to borrow money either. My maintenance loan doesn't actually cover my rent. How am I supposed to live through university without enough money to cover rent?
Billie, who’s starting university in the North West, adds:
The government allow you the bare minimum to live on and think all parents are able to make up the difference. I think all students should be able to borrow anything up to £10,000 a year for living costs (my accommodation alone is almost £7,000!) as it's us who have to pay it back anyway!
The survey also highlights the dangers of sending students to university unprepared for financial hardship: half of all students report mental health issues due to a lack of cash, with 61% saying they can’t always afford to eat. Unsurprisingly, the majority (57%) feel Student Finance isn’t fair.

Jake Butler, Save the Student’s money expert, comments:
Whilst we’ve campaigned against the growing cost of tuition fees and the unfair way in which student loan interest is calculated, the pitiful size of the maintenance loans and the way in which they’re calculated is the major issue.

It’s quite evident that the student loan is not enough to support the average student and their day-to-day living costs, especially in the wake of grants and other financial support being stripped back. 

Parents are increasingly left to plug the gap, leaving many in a difficult position. Upping the loan available will of course mean students owe even more, but the repayment system is affordable.

Avoid a cash crisis at university: advice from Save the Student

  • Get a realistic idea of all the costs you’ll face over the year: rent, bills, books, food, transport and anything else you can think of.
  • Loans are paid in lump sum installments: it’s very important to budget so it lasts the full term.
  • Save the Student’s Parental Contributions calculator shows how much your folks are expected (by the government) to cough up. Use it to prompt an honest and upfront conversation about how much they can really give you.
  • Check you’ve got all the funding you’re entitled to, including Disabled Students’ Allowance, travel grants, childcare costs or help for care leavers if appropriate. Don’t include non-taxable income in Student Finance applications, as it could leave you with less cash than you’re owed.
  • Investigate extra sources of cash before you need them: a part-time job, council or corporate funds, state benefits or charity cash – try turn2us.org.uk.
  • Save as much as you can, either before university or as you go. If you don’t need the money immediately, ask your parents to pay top-ups into your savings instead of giving cash handouts.
  • Set up an interest-free student overdraft to get the best terms – and cheapest deal – if you have to borrow money. Don’t touch it until you need it!
  • Worried about mounting debt? Get expert, impartial advice before borrowing more to cover living costs. Try StepChange.org or nationaldebtline.org.
  • Find out how to apply for hardship (emergency) funds from your university now. It’s easier to get to grips with before you’re in a pickle.

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