The Daily Telegraph - Saturday - Money
Families face £7,000 university funding gap
That’s the annual difference between the amount some students can borrow and their living costs, writes James Connington
Many parents earn too much for their child to qualify for the maximum loan
Tuition fees dominate the headlines when it comes to the cost of a university education, but it is day-to- day living expenses that have the more immediate impact on a family’s finances. Many students will find that they are not able to borrow enough under the maintenance loan system to meet their basic living costs. These loans are means-tested, so many parents will earn too much for their child to qualify for the maximum loan but too little to comfortably absorb the cost of subsidising them.
These parents could be left scrabbling to find thousands of pounds a year to meet the gap between their children’s cost of living at university and the amount that the children are allowed to borrow.
So how much are you likely to be on the hook for when your offspring head off to university? Telegraph Money has calculated the likely shortfalls that families can expect to face at a range of universities across Britain.
How maintenance loans work
The amount a student can borrow for living costs depends on their household income, whether they study in London and whether they live at home.
Those with household incomes of less than £25,000 who are living away from home are eligible for the maximum loan amounts: £8,430 in England, rising to £11,002 in London.
There is then a sliding scale, with families expected to pick up more of the cost as their household income rises.
Outside London, students with a household income of more than £62,187 qualify only for the minimum loan of £3,928. In London, those with a household income greater than £70,000 receive the minimum amount of £5,479.
There are also potential allowances for people with disabilities, medical students and those in other special circumstances.
Our assumptions
To calculate how much middleincome parents should expect to pay for each university, we considered the estimated cost of living, the student’s income from a part-time job and the maintenance loan at the minimum rate. (Our analysis applies to English students only, as Wales, Scotland and Northern Ireland have different loan systems.)
The annual cost of living figures used are those estimated by the universities themselves and are in most cases based on an academic year of 39 weeks or nine months. Where a range was given, we took the average figure.
Universities’ estimates varied significantly, according to their expectations of students’ expenditure on socialising and food, among other costs.
We then assumed that a student could work 16 hours a week at a rate of £7 an hour for 30 weeks of the year. This allowed for taking breaks from work during exam season and spending time at home.
The table on Page 2 shows the approximate living expenses for various universities across the country and the shortfalls that would result if the student received the minimum loan.
It is worth remembering that in a student’s second and third years they are likely to rent private accommodation on a 12-month contract.
If they stay in the property and work for the additional months outside the academic calendar, this may not be a problem. However, if they choose to go home, having to continue to pay rent in the university town could cause a further financial burden.
The £6,800-a-year gap
Unsurprisingly, it is University College London in the centre of the capital where students who receive the minimum maintenance loan face the biggest funding gap: £6,800 a year. Even if the student worked all 39 weeks of the academic year and earned
the “London living wage” of £9.75 (which is not a legal requirement), the shortfall would still be £4,000 annually.
If we then assume a lower household income of £50,000 – say from two parents who each earn less than the national average – the student would qualify for a £7,924 loan. If we keep the 39-week, £9.75-an-hour part-time work scenario, the funding gap is £1,600 a year. Even someone who receives the maximum £11,002 loan and works 30 weeks part-time at £7 an hour would face a £1,200 shortfall.
The University of Birmingham bases its estimates on a 42-week academic year. While living costs are lower than in London, the smaller loans available to those who study outside the capital mean that students who receive the minimum and work part-time could face a shortfall of £5,000 a year or more.
Someone who qualifies for the maximum loan and works parttime would still face a gap of nearly £1,000 a year.
In Newcastle, Sheffield, Essex and Manchester, the shortfall for a student who receives the minimum loan and works 30 weeks part-time ranges from £1,600 to £2,000 a year.
Working the full academic year with no breaks could take care of £1,000 of that gap. Additionally, a student from a household whose income is £50,000 would qualify for an extra £1,476 from the maintenance loan, closing the gap.
Further down the table, there are options that would allow
families not to step in at all. In Worcester and Sunderland, a student who receives the minimum loan and works part-time would be able to cover their living costs entirely. Add a few more working weeks, or longer shifts, and the same could be said for Swansea and Loughborough.
The problem with using household income
Coupled with part-time work by the student, the maximum loan amounts are enough to cover the cost of living in most locations.
However, as non-repayable grants have been scrapped, students from poorer backgrounds now graduate
with the largest debts.
Higher up the income scale, as shown above, those who qualify for smaller loans can be left with thousands of pounds a year to make up even if they work part-time.
Their parents or guardians are assumed to have large enough incomes to cover the shortfall. But households with the same income will differ in their ability to support children at university.
For instance, a couple with one child who live in a cheap area and earn £60,000 a year are in a very different situation financially from a couple with three children who live in an expensive city and earn the same amount.