How Much Should Parents Give Children Towards their Student Loan?

Student loan news seems to be around every few weeks lately. With students just returning to university there is a constant reminder for parents that they may have to think about financing their children while they are studying. It can be hard for parents, as these days students have to borrow money to pay for their course and their living expenses whereas most parents would have had a grant to cover their fees and possibly one towards living expenses as well.

What many parents do not realise is that student loans are means tested. Although all students will be able to borrow enough to cover their course fees, they will get different amounts towards rent and living expenses depending on their household income. It is therefore expected that better off parents give their children money towards this. Knowing how much to give can be difficult and it will obviously depend on how much spare money there is available to give them as well.

One way of looking at it is to look at how much a student on a low income gets (including any grants they may be able to get) and give that much money. Then they would have the same amount of money as everyone else. However, this may not be enough or it may be too much and they may waste it. It could depend on what part of the country they are living in, what sort of accommodation they are in, how much transport costs from their accommodation to the university as well as from where they are to home. They may have a part-time job which could help towards the fees or be able to get a bursary or other help.

Some parents choose to have a different approach. They choose to pay for the accommodation and then let their child use their loan to pay for fees and then cover food and other expenses. They then know that they have a decent place to stay and they should have enough money left to cover the rest of their expenses.

Some parents even choose to pay for the course fees as well so that their children can be free of debt. However, this is likely to be an unwise move in a majority of cases. This is because most students do not repay the whole of their loan and so if they borrow money the amount paid will be less than if it is paid outright. If the parent then paid the loan repayments, they would still be paying for the course, but they would be likely to end up paying less in most cases. Only those students who are high earners from the time they graduate and continue to be for the next thirty years will have to pay back the full amount, due to the fact that the repayments are means tested and only have to be repaid by those earning over a certain amount of money.

Parents will always try to do the best for their children but financially this is not always easy. Paying for a university course is not cheap and most parents would not be able to save up for this, particularly those on low incomes with more than one child. The student loan scheme does seem reasonable at the moment though as it seems fair to all students, benefitting those on lower incomes more than those on high incomes. This means that it should allow everyone to study, whatever their background and future earning potential. So parents who are higher earners may need to give their children more money to have the same money as other students, but they could choose to make those children get a part-time job to pay towards it instead. The easiest way for parents to help is to let children live at home with them while they are studying at a local university and not charge them rent and everyone will save money that way. Some people feel this will not give them the ‘full experience’ and although they will not experience living away from home, there will be plenty of time for them to do that when they are older and they will not have to experience having hardly any money to live off for three years.

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