Passing the exams is often the easy part — budgeting at university can prove a much bigger challenge.
University students and their parents understand the headline figures well enough — tuition fees of £9,250 for most universities. However, the financial help available to students to meet their living costs is confusing; it depends on how much students’ parents earn, where they are going to study and where they plan to live.
The maximum maintenance loan is £11,672 a year for undergraduates at London universities living away from home. But only under-25s with a gross household income below £25,000 (after pension contributions) can borrow this much.
The more your parents earn, the less your maintenance loan will be. If the household income is greater than £67,000, students will only be able to borrow a maximum of £5,812 to cover their living costs — and a “parental contribution” is expected to make up the difference of nearly £6,000.
The precise amounts will depend on where in the country students are studying, if they are living at home or have a sibling who is also at university. But statistics show fewer than half of students get the full maintenance loan.
A Which? survey found that parents of students were contributing an average of £360 a month. Half of respondents were surprised to be contributing so much, and more than a quarter of those surveyed said they were cutting back on luxury spending such as cars and holidays, and 6 per cent of parents had taken a second job.
Nevertheless, this year’s National Student Money Survey by SavetheStudent.org found that students faced an average monthly shortfall of £267. Two-thirds said they bridged the gap with part-time work, but an increasing number are relying on overdrafts (49 per cent) and credit cards (14 per cent).
Graduates yet to claim loan overpayments worth £28.5m
Unsurprisingly, the soaring cost of student accommodation is blamed for the growing gap. The National Union of Students’ most recent accommodation cost survey found that rents were on average £25 a month more expensive in 2018, and that rental increases had been “considerably in excess of the RPI since 2011-12”. Back then, accommodation costs accounted for 58 per cent of maintenance grants on average, including the parental contribution. Last December, they hit 73 per cent.
The average annual student rent is nearly £9,000 in London, falling to £6,366 outside the capital, with price hikes fuelled by growing numbers of commercial providers of university accommodation. These now account for half of the UK stock, and cost far more than traditional halls of residence.
The most expensive student accommodation was a privately-provided studio flat in Bloomsbury, costing £535 a week for a 51-week let (£27,285). The lowest was a standard room in an institutional cluster flat in Manchester at £65 a week for a 40-week let (£2,600).
Note that the length of student tenancies has also increased. On average, students are expected to sign up for 40 weeks for university halls and 46 weeks for commercial tenancies, but some landlords charge for 51 weeks a year. Be aware that the rent may be due before the maintenance loan arrives.
If your child is in university-managed accommodation, or renting from a large provider such as Unite Group, canny parents may be able to rack up loyalty points by paying on credit card. However, buy-to-let landlords will expect rent to be paid by direct debit.
Demand for large multi-let houses is often so intense that students will be expected to start a tenancy in June for the forthcoming academic year. Deposits — often three months’ rent in advance — may need to be paid before the end of the Easter term. Parents frequently have to front-load these costs, plus act as rental guarantors.
Those who end up in rental arrears on university halls may find they cannot graduate until the debts are cleared. Some 16 per cent of institutions permit students to graduate, but forbid them from attending their awards ceremony, but an additional six per cent do not let them graduate at all according to Citizen’s Advice.
Before term begins, students and parents need to sit down and work out a budget, and discuss ways to manage any shortfall.
Bursaries are usually given to students whose household income is below £25,000 but some universities will consider incomes up to £40,000. They can range from book tokens to annual payments of £1,000 or more. The SavetheStudent.org website is a great source of information about charities, companies, councils and professional bodies that offer grants and financial support — and most of these grants do not need repaying.
Student bank accounts offer interest-free overdrafts of up to £3,000, but be aware of how quickly you will have to pay this down after graduating before interest is applied.
Santander is offering a four-year 16-25 Railcard worth more than £70 as a joining gift, plus an interest-free overdraft of up to £2,000 for up to two years after graduation.
NatWest offers a fee-free overdraft of up to £2,000 plus a National Express coach card or Amazon gift card; Lloyds offers up to £1,500 in years one to three and £2,000 in years four to six; and Barclays up to £3,000. All three banks offer one-year interest-free overdrafts on graduate accounts.
HSBC offers students a £3,000 overdraft over three years, but its graduate account charges 19.9 per cent interest on overdrafts over £1,500.
Nationwide guarantees an overdraft of £1,000 in year one, £2,000 in year two and £3,000 in year three. It charges no interest for the first year after graduation, but gradually reduces the free amount.
As with everything in life, it pays to study the small print.