A parent’s complete guide to student finance in 2022/23

Article written by Kellands Hale, our preferred independent advice firm.

This article is not intended to be financial advice to any individual. The views expressed are those of the author and Moneyfacts.co.uk does not endorse the content.

Halfway through the recent A-level results day, nearly 426,000 students confirmed their university places, according to Ucas, the university admissions service.

With more than half a million undergraduates expected to head off to university this autumn, managing money is likely to be one of their – and your – key challenges during their studies.

So, here’s everything you need to know about student finance, from how much your child can expect to receive to how and when they repay their loan.

Student loans are generally split into two components:

• Tuition fees to cover the cost of studies
• Maintenance loans to help with accommodation and the cost of living (see below).

Tuition fees are dependent on where your child is studying, and where they reside. In the table below, we have listed the maximum tuition fees for each student.

Tuition fees for EU and international students, meanwhile, will depend on their chosen degree and university. The only exception is for Irish students who will receive the same maximum limit as British students under the Common Travel Area arrangement.

According to our calculations, if your child is from England, and studies a three-year course in England, their tuition fee loan is likely to be £27,750.

It is also important to note that tuition fee loans are generally paid directly to the student’s university or college, so your child won’t generally see the money.

Maintenance loans are separate loans that are paid directly to your child, not the university, normally in three instalments across the academic year.

They are intended to help towards a student’s living costs while they are at university – to pay for things like accommodation, bills, food and nights out.

Unlike tuition fee loans, maintenance loans are means-tested and so, if you are a high earner, your child may not be eligible for the full loan. The amount your child receives is based on their household income, including the earnings of parents and, if appropriate, their partner.

In 2022/23, the Government says that any household with income over £50,778 would receive less than the maximum annual maintenance loan, which is:

• Student living with parents – £8,171
• Student living away from parents outside London – £9,706
• Student living away from parents in London – £12,667.

Note that every child is eligible for a minimum maintenance loan, which is £3,597 in the 2022/23 academic year, according to the Government.

Of course, you may wish to supplement your child’s income on top of the help they receive in the form of a maintenance grant. Your child may also be eligible for bursaries or additional support from the institution or may want to take a part-time job when they start their studies.

Over the period of study, the loans can add up.

As an example, if you’re from Manchester and your daughter attends the University of Warwick on a three-year course, living away from home and receiving the maximum maintenance loan, she could expect her student debt to be in the region of £56,800 when she graduates.

While this may seem like an eye-watering amount, it’s crucial to remember that repaying a student loan is based on an individual’s ability to repay.

The income threshold for repaying a loan for students going to university in 2022/23 is £27,295 per annum. Your child pays 9% of their income above the threshold towards their loan. This means a graduate earning:

• Those earning £24,000 per year will pay nothing towards their loan
• Those earning £28,000 per year will pay £5.29 a month towards their loan (£705 of earnings are above the threshold and 9% of £705 is £63.45 a year, or £5.29 a month)
• Those earning £35,000 per year will pay £57.79 a month towards their loan (£7,705 of earnings are above the threshold and 9% of that is £693.45 a year, or £57.79 a month).

Note that, from September 2023, the income threshold is set to  fall to £25,000. When this takes place it means:

• Those earning £28,000 per year will pay £22.50 a month towards their loan (£3,000 of earning are above the threshold and 9% of £3,000 is £270 a year or £22.50 a month)
• Those earning £35,000 per year will pay £75 a month towards their loan (£10,000 of earnings are above the threshold and 9% of that is £900 a year, or £75 a month).

Remember that a graduate on a low wage will be required to repay little or nothing at all, so you don’t need to worry that they will struggle to keep up repayments. The system is designed so that, in the main, those who gain the most financially out of university contribute the most.

If your child graduates with a loan upwards of £40,000 or £50,000, you may be tempted to consider repaying it so they can begin their career debt-free.

However, there is a powerful reason why repaying student debt may not be the wisest use of your funds: relatively few students will end up repaying their loan in full. This is because your loan is written off 30 years after your first repayment (rising to 40 years in 2023).

The Government itself says that only about 20% of full-time undergraduates starting in 2021/22 would repay their loans in full.

This is because many students won’t exceed the income threshold, while others earning just over the threshold won’t pay anywhere near the total amount back before the debt is written off after 30 or 40 years. Debts are also expunged on death.

It’s important to see student debt differently to commercial debt like a bank loan, credit card or mortgage:

• Student loan repayments are proportionate to income, not a fixed amount
• If your child loses their job or takes time off, they won’t need to repay their student loan
• Your child can’t lose their home or another asset if they don’t pay.

Simply put, if your child never earns above the repayment threshold, they will never have to pay back any of their student loan, and it will be written off in 30 or 40 years.

So, if you have a lump sum, using this to help your child onto the property ladder or to start a business could be a more constructive use of the money rather than clearing loans that may never have to be repaid anyway.

If you’d like to chat about how to support your child through university, or the most effective ways to transfer wealth to a loved one, please get in touch.

Email us at hale@kelland.co.uk, call 0161 929 8838, or click here.

Please note

All contents are based on our understanding of HMRC and current legislation, which is subject to change.

© Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No. 193498