When it comes to student loans, the media focus is usually on tuition fees (outside Scotland), but there’s another loan that shouldn’t be overlooked – and that includes Scotland.
In January 2023, the Department for Education (DfE) issued a press release headlined Cost of living boost for students. However, the ‘boost’ was more akin to a damp squib:
- There was a reannouncement of a statement made in February 2022 that tuition fees in England would be frozen at £9,250 for the 2023/24 and 2024/25 academic years. This was a quid pro quo for cutting the earnings threshold at which new students from the 2023/24 academic year onwards must start repaying their loans.
- Maintenance loans will increase by 2.8% for 2023/24, taking the maximum for a student living away from home and studying in London to just over £13,000 (just under £10,000 elsewhere). The Office for Budget Responsibility currently projects Consumer Prices Index inflation in September 2023 at around 7%.
Two days after the DfE press release, the House of Commons Library issued a research note entitled, The value of student maintenance support. The parliamentary researchers observed that once the 2.3% increase to the maintenance loan in 2022/23 was taken into account, “the real cut in the maximum value of support in between 2021/22 and 2023/24 is 11% or around £1,100”.
That is not the end of the bad news on student loans. Part of the maintenance loan is means-tested in England, with only students whose parental household income is no more than £25,000 being eligible for the full loan. Above that income threshold, which has remained frozen since 2008, the loan entitlement is reduced by £1 for around £7.00 of income to a minimum of about 45–50% of the full amount, depending on where the student is living and attending university. The reduction is classed as a ‘parental contribution’, often a contentious point with both parent and student.
Scotland, Northern Ireland and Wales have slightly different systems for student maintenance, but all suffer from low maximum levels and some form of means testing (although in Wales this applies only in the determining mix between loan and grant rather than the total sum).
If you have children (or grandchildren) heading for university, maintenance costs are becoming an increasingly significant element of any funding plans. While there is a government loan to cover the full tuition fees, on the maintenance front, the government loan will all too often be far from adequate.
If you would like to discuss the above in more detail, please speak to one of our experienced advisers here.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in stocks and shares should be regarded as a long term investment and should fit in with your overall attitude to risk and your financial circumstance.
