ARU Conference - Student Finance Blair Campbell Student Finance Information Team 06 March 2013

Objectives A sound understanding of student finance for 2013 and beyond Good grasp of repayment Discussion common areas of uncertainty and difficult questions.... Have fun?!

A Student Finance Story There are 4 types of student finance. 1 product for fees, 2 for living costs, and 3 for disabled students or those with dependants. There are 2 types of support that come from universities and colleges. About 3 in every 4 students takes out at least 1 loan. Of the 2 loans, 1 depends on income (the maintenance loan) and 1 doesnt, the tuition fee loan. The amount of support a student gets to live on depends on 3 or sometimes 4 things: (1) where they study, (2) what year of study they are in, and (3) how much they or their parents earn. For bursaries and scholarships, it might also depend on (4), what grades they get at A level.

Why is this important?

Top Google Autocompletes When will student loan come through/when do I get paid?When do I apply?What will the interest rate be?Will it affect my mortgage?How do I apply if I am a parent/pregnant?How do I find student finance contact details?How and when is it paid off?

Student Finance in 2013/14

Key Points for 2013/14 Maintenance Grant up by to £3,354 max Tuition fee loan and maintenance loan remain the same Continued transition to Gov.uk First year of part-time online applications

Scholarships & Bursaries STUDENT FINANCE PACKAGE 13/14 Tuition Fee Loan Maintenance (Living Cost) Support Additional Support The Student Finance Package

13/14 TUITION FEES & LOANS

Up to £9,000 per year £6,750 part-time Maximum loan depends on fee charged Optional - take all, part or none of fee loan Average fee in 2012 was £8,657 TUITION FEE LOAN – FULL TIME

13/14 MAINTENANCE SUPPORT

The majority of the maintenance loan will be available to all students. 65% of the total loan is Non Means Tested. (Not based on household income) The amount of maintenance loan available will be linked to where a student lives and studies while in higher education. MAINTENANCE LOAN

Household Income £ Maintenance Grant Maintenance Loan Total £25,000 & under£3,354£3,823£7,177 £30,000£2,416£4,292£6,708 £35,000£1,478£4,761£6,239 £40,000£540£5,230£5,770 £42,611£50£5,475£5,525 £42,875£0£5,500 £50,000£0£4,788 £60,000£0£3,788 £62,125 & over£0£3,575 Student living away from home, outside London 2013/14 COMBINED MAINTENANCE SUPPORT

13/14 ADDITIONAL SUPPORT

13/14 Disabled Students Allowances (DSAs) For students with disability, mental-health condition or specific learning difficulty. Not affected by household income, based on need. Childcare Grant (CCG) Up to 85% of actual registered/approved childcare. Maximum of: £ per week for one child, £255 per week for two or more children. Parents Learning Allowance (PLA) Help with course-related costs for students with dependent children. Amount received will be between £50 and £1,508. Adult Dependants Grant (ADG) For students with a partner or another adult who is financially dependent on them (cannot be an adult child). Maximum grant is £2,642. Additional Support

13/14 STUDENT LOAN REPAYMENT

12_ /14 Nothing to pay until earning at least £21,000 (£1,750 pm) gross. Full time students repay from April after graduating from/leaving their HE course. (After 2016, if earning over £21,000) Part time students begin to repay April 4 years after they started their course. (If earning over £21,000) Repayments are 9% of income over £21,000, deducted automatically by HMRC. STUDENT LOAN REPAYMENTS

12_ /14 If income falls to £21,000 or below repayments will be suspended Remaining loan balance cleared 30 years after entering repayment process No penalties will be placed on early student repayments A student loan is very unlikely to affect your ability to get a mortgage (The Council for Mortgage Lenders) Mortgage lenders are most interested in your spare monthly income (ability to repay) STUDENT LOAN REPAYMENTS

Income each year before tax Income from which 9% will be deducted Approximate Monthly Repayment £21,000£0 £25,000£4,000£30 £30,000£9,000£67 £35,000£14,000£105 £40,000£19,000£142 £45,000£24,000£180 £50,000£29,000£217 £60,000£39,000£292 STUDENT LOAN REPAYMENT – THE FIGURES ! Any outstanding loan balance will be cleared 30 years after entering repayment.

There will be a variation in the interest rate attached to a students loan during study and when earning following graduation: STUDENT LOAN REPAYMENT – INTEREST RATES During study until entering repayment Interest rate is: Retail Price Index (RPI) +3% Earnings: Below £21,000 Interest rate is: Set at RPI Only Earnings Between: £21,000 - £41,000 RPI plus some amount between 0% and 3% Earnings: Above £41,000 Interest rate is: Retail Price Index (RPI) +3%

INTEREST RATES

INTEREST RATES

Gross Income Old System Monthly Repayment New System Monthly Repayment £16,000 £1 £0 £18,000 £16 £0 £21,000 £39 £0 £24,000 £61 £23 £27,000 £84 £45 £30,000 £106 £68 £33,000 £129 £90 £36,000 £151 £113 STUDENT LOAN REPAYMENT – COMPARISON ! Repayment for thresholds for existing students up from £15,000 to £15,795, and will rise again to £16,365 this April

Example 1 Old System Student 3 year course, £3,000 a year fees £4,000 a year maintenance loan 25 year write off period Owes £23,000 at end of studies, including interest Starting Salary of £24,000 Total Repayments = £35,500 Repay full balance in 24.5 years STUDENT LOAN REPAYMENT – COMPARISON ! Assumptions: 2% salary growth, 3% average inflation. Based on a report by HEPI on the Government White Paper, available here.here Example 2 New System Student 3 year course, £9,000 a year fees £4,300 a year maintenance loan 30 year write off period Owes £45,000 at end of studies, including interest Starting Salary of £24,000 Total Repayments = £22,000 Balance written off after 30 years

Gross Income Old System Monthly Repayment New System Monthly Repayment £16,000 £1 £0 £18,000 £16 £0 £21,000 £39 £0 £24,000 £61 £23 £27,000 £84 £45 £30,000 £106 £68 £33,000 £129 £90 £36,000 £151 £113 STUDENT LOAN REPAYMENT – COMPARISON ! This year will see the first earnings linked rise in repayment thresholds for existing students. Up from £15,000 to £15,795.

STUDENT LOAN REPAYMENT – DEDICATED WEBSITE

True or False? True – loan is written off if you become permanently unfit to work through illness or injury False – but you stop making repayments at any time you earn under the threshold False – you are still eligible to make repayments if working abroad and earning above the threshold False – there was a pilot project (RTL) relating to this between 2002 – It is discontinued True – or when aged 65 if taken out before 1st September 2006 True – the debt dies with you, and no one inherits it False – becoming bankrupt does not write off your student loan False – but payments will stop being collected, if unemploye d/claiming jobseekers allowance False – but repayments will stop if earnings dip below the threshold if, say, working part-time STUDENT LOAN WRITTEN OFF …

Websites and Further Info

Key Messages for Students Do not be put off by perceived increase in cost Research student finance, along with other UCAS/Uni information – identify challenges Apply online, on time. Deadline 31 May

The future Fees may go up (but so what?) Maintenance support may go up Could the government change the policy for current borrowers? Could new governments change the system altogether?

Another Student Finance Story Over 3 in every 4 students takes out at a tuition fee loan. Less than 3 in every 4 take out living cost support. For those that do, loans make up less than ½ (or 1 over 2!) of their income. For students who do not take out a loan, there are 3 main reasons: Nearly 2 in every 5 choose not to because of a dislike/concern about debt, and 1 in every 3 because of a concern about repayments. The rest felt they did not need the money. There are 4 groups who are significantly less likely to take the loan: (1) students from professional families, (2) foundation degree students, (3) students living at home, and (4) NHS funded students. 2 groups of students are significantly more likely to take out a loan – those from a routine/manual work family background and those from lone parent familes. Data from Parliament Briefing Paper 29 November 2012

Blair Campbell