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Debt Advice Handbook 14th edition

1. Financial support for students

• Advising students

The availability and rates of student loans have steadily increased since their introduction in 1990 to help pay for the living costs of full-time undergraduates and the substantial tuition fees of both full-time and part-time students. Consequently, the vast majority of students now graduate with some level of debt. In England, the average student loan debt is likely to exceed £50,000 by graduation. Many students, especially those from less wealthy backgrounds, also expect to accumulate some commerical debt during study, most commonly bank overdrafts.

The student finance system has become increasingly complex and has changed considerably over the last 30 years. The current arrangements were introduced in 2016 in England and in 2018 in Wales, but students generally continue to study under the rules applicable when they started. While the last students funded under the ’mandatory grants’ system available between 1962 and 1997 graduated in 2008, and those funded under the system of fixed fees available between 1998 and 2005 in 2015, advisers may encounter students funded under the various iterations of the systems introduced since, especially the post-2012 arrangements.

There are different arrangements in England and Wales (and also in Scotland and Northern Ireland). Both English and Welsh universities and colleges can charge new, full-time students up to £9,250 per year in 2020/21 and 2021/22, but there are different rates of student loans and grants in each country. Pre-2018 Welsh-domiciled students can also receive a fee grant.

There are four types of student loans: ‘mortgage-style loans’ available to students receiving a mandatory grant, two income-contingent loan schemes for undergraduates and postgraduate teacher training students, the most recent of which became available to new students in 2012/13, and a further scheme for other postgraduates.

Undergraduate students can generally access a mixture of grants and loans to pay for the cost of tuition and maintenance. Entitlement depends on whether the student is domiciled in England or Wales, whether s/he studies full or part time, and the year of entry.

Welsh-domiciled students on certain healthcare-related courses, such as nursing, midwifery, occupational therapy, and English- and Welsh-domiciled students in the later years of medicine and dentistry courses, are funded by the NHS under a separate scheme. They do not pay tuition fees. English-domiciled students who started non-medicine and dentistry healthcare courses before 2017/18 are also funded under this system, but new students from 2017/18 are funded under the standard undergraduate rules, with the addition of an NHS training grant and some additional elements in certain circumstances.

Postgraduate students on taught master’s courses can get a student loan to help with the cost of their fees and/or maintenance. Separate funding arrangements exist for teacher training students on Postgraduate Certificate of Education courses and social work students on taught master’s programmes. Doctoral degree students can access a student loan to help with the cost of their fees and/or maintenance, or may be able to access funding from research councils via their institution. Students who want to study for a second (or subsequent) undergraduate course will find their access to funding severely restricted, with two main exceptions: full- or part-time nursing, midwifery or other healthcare subjects, and some part-time courses in science, technology, engineering and maths.

Student loans are also available for certain further education courses in England, with the same repayments conditions as in higher education. Other funding for further education courses is limited.

English-domiciled students applying for student financial support must apply to Student Finance England, part of the Student Loans Company. Students in Wales apply to Student Finance Wales. Those funded under the separate healthcare-related system must usually apply for support from the NHS in England or Wales and also to Student Finance England and Student Finance Wales.

See CPAG’s Student Support and Benefits Handbook for more information.

Advising students

When advising students and ex-students about debt, you may need to adopt some different strategies and should be aware that students expect to owe money both before and at the end of their studies. Most creditors (banks and the Student Loans Company) have structured repayment programmes for ’normal’ student debt once the student starts earning. Such indebtedness should not adversely affect the student’s creditworthiness (eg, for obtaining a mortgage), although any repayments made (or due to be made) are listed as outgoings in affordability calculations in future credit applications.

Most of this chapter follows the structure of the rest of this Handbook. Issues are discussed only if the position of the students differs from that of other clients. If an issue is not covered in this section, refer to the main text.

The student finance rules discussed in this chapter are generally those available to new students in England or Wales in 2021/22, except where stated. For detailed information on previous iterations of the rules, see previous editions of this Handbook or see the Student Finance England or Student Finance Wales websites.

Definitions

Home student. This chapter covers only home students in higher education living in England and Wales. A ’home student’ is defined as someone who is settled in the UK within the meaning of the Immigration Act 1971, and is ordinarily resident in England or Wales on the first day of the first academic year of the course, and has been ordinarily resident in the UK, the Channel Islands or the Isle of Man throughout the three-year period preceding the first day of the course. The residence must not have been wholly or mainly for the purpose of receiving full-time education.

’Ordinary residence’ was defined in the case of Shah and Others v Barnet and Others in 1982 as: ’habitual and normal residence in the United Kingdom from choice or settled purpose throughout the prescribed period apart from temporary or occasional absences’.

In addition, a student may be regarded as a home student if s/he (or a certain member of her/his family) meet other criteria, for example s/he:

– has refugee status;

– has been granted humanitarian protection or, in Wales, discretionary leave to remain in the UK;

– is a migrant worker from the European Economic Area (EEA) with settled or pre-settled status;

– is the child of a Turkish migrant worker with settled or pre-settled status;

This is not an exhaustive list of additional categories of student who will qualify; further details can be found on the Student Finance England and Student Finance Wales websites. A student who comes into one of the above categories must still be ordinarily resident in England or Wales to be treated as a home student.

Note: residency rules are complex, and a student may be eligible for home student fee rates but still be ineligible for student support. The financial position of international students is not discussed in this chapter. You should contact UKCISA (see Appendix 1). Changes to the residency rules have been introduced for courses that start in 2021/22 or later, arising from the UK’s departure from the EU, and result in much less support available for EU nationals than under the previous rules. Some exceptions still apply – eg, for Irish nationals. Check the Student Finance England and Student Finance Wales websites for more information.

Full-time student. A student is eligible for support for a full-time course provided the course is ’designated’. It must be a full-time course, a sandwich course or a part-time course for the initial training of teachers, be at least one year in duration and be wholly provided by a publicly funded educational institution.

A ’designated course’ includes:

– a first degree;

– a higher education diploma;

– a Higher National Certificate or Higher National Diploma;

– initial teacher training;

– a course for the further training of teachers or youth and community workers;

– a course to prepare for certain professional examinations of a standard higher than A levels or Scottish Highers, or Higher National Certificate/Higher National Diploma, where a first degree is not required for entry;

– a course not higher than a first degree, but higher than those described in the above bullet point – eg, a foundation degree.

Part-time student. A student is a part-time student if the course has been designated as part time. There is not a more precise definition, and usually a course is deemed part time if it does not meet the criteria to be classed as full time.