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Debt Advice Handbook 14th edition

2. Stages of debt advice

• Exploring the debt problem
• List creditors and minimise debts
• List income
• Period to be used
• List expenditure

The stages of debt advice described in Chapter 3 must be applied when working with students, as with anyone else. There are, however, some additional issues to be considered. These are highlighted below.

Exploring the debt problem

Most higher and further education institutions and many students’ unions offer money advice services. The majority of these are experienced in dealing with student debt and have student-specific information resources. Many students may, therefore, prefer to use this service. There can, however, be issues of impartiality, independence, confidentiality and trust arising when advisers work for the educational institution, particularly when the institution is the creditor (see here). It may not always be appropriate or ethical for an adviser employed by the institution to assist a student in this position. Even when an adviser works for the students’ union, the student may need reassurance that the service is confidential and/or impartial.

In order to create a position of trust with a student in need of debt advice, be aware of the different causes of student debt and do not make a judgement about the position in which a client finds her/himself. Very often, clients do not seek help for causes of problems, but their effects.

There are many reasons why a student may be in debt. In addition to those that apply to the general population, these can be as a result of:

•above-average course costs;
•Student Finance England or Student Finance Wales assessments not being a true reflection of parental disposable income;
•errors in student finance assessments that mean support has been ‘overpaid’ and must be repaid, or subsequent payments have been reduced;
•debts incurred before the client became a student;
•aggressive marketing towards the student group;
•tuition fees; or
•coping with an income paid in irregular instalments.

During the coronavirus pandemic, additional factors have been at play: students have been less able to find employment in many of the sectors that would customarily be a significant source of additional income, such as hospitality and non-food retail. Similarly, support from family may also have been affected, and, as a result, there has been increased demand for money advice and hardship funding.

Some students can cope with increased levels of debt, accepting that a certain level of indebtedness is inevitable and part of the student experience. For others, it can have a more negative impact. You could be faced with a student who may be extremely anxious, ashamed, desperate, worried or confused. The stage at which the student presents may also have an effect on her/his emotional state, as many wait until the situation can no longer be dealt with without external assistance before seeking help. The impact can be that the student may be experiencing poor health, mental ill health, relationship difficulties and difficulties with her/his course – eg, low marks, missed deadlines and exam failures. Some students may feel forced to withdraw from their course completely.

List creditors and minimise debts

When noting the status of the debt on the creditor list, it is important to consider the sanctions connected with non-payment in order to determine whether the debt should be recorded as a priority or non-priority. In addition to the criteria referred to in Chapter 8 (if non-payment would give the creditor the right to deprive the client of her/his home, liberty, essential goods and services or place in the community, that debt has priority), you must consider the sanctions available to, and used by, the institution if it is the creditor. Outstanding tuition fees can be listed as a priority debt. For some ex-students, outstanding tuition fees can remain a priority debt as the majority of institutions withhold awards until the debt is cleared. Students entering some professions (eg, teaching) need their degree conferring or their degree certificate before they can take up employment. Prioritisation needs to be discussed with the client.

Be aware of the threats posed to the client by the recovery action, and whether they are appropriate. See here for details of what sanctions should be imposed on the different types of debt s/he may have with the institution. Also, be aware when negotiating with creditors that some types of student debt become repayable in the future, and any offers of repayment must reflect this.

List income

• Period to be used

Student loans for living costs and some elements of grants are taken into account as income for benefit purposes. It is, therefore, important that loans are listed as such. Most creditors will otherwise suggest that they should be used to make repayments. If a loan is not listed, the financial statement is likely to show a hugely unrealistic deficit, so explain that the loan is used only for living expenses, that interest is accruing, and that repayment will be required at a future date.

Disabled students can receive non-means-tested additional allowances in their loan or grant. These are to help the student with the extra costs of studying; they are not to help with her/his living expenses. It is not necessary to include them as income, as they will have been already allocated.

Students with dependants may also be entitled to additional allowances. These should be included, but need to be balanced by the expenditure incurred – eg, childcare costs.

If a grant, bursary or any other additional allowance is paid, it must be listed as income.

Parental contributions, if paid regularly, should be listed as income. These are intended to make up for any shortfall in the grant or loan. Note: a student’s support partially depends on a means test of her/his parents’ income and financial statements from Student Finance England or Student Finance Wales may refer to a ’family contribution’ payment (or similar). However, this cannot be enforced and, in reality, many students do not receive any parental contribution.

Period to be used

Students, institutions and advisers tend to think of students’ income within the framework of the instalment periods for which it is paid – ie, termly, quarterly or annually. Creditors are more likely to understand income expressed in weekly or monthly periods. Breaking down income into these periods is also a helpful exercise for students, as the irregular payment periods often reduce their budgeting ability or financial control.

If a grant is paid to a client, establish the period it is meant to cover. If extra weeks’ allowances are paid, the payment period should include the total number of weeks.

For final year students, this income ceases to be taken into account once the course has finished (usually at the start of the summer).

How income from a student loan is listed depends on the client’s personal circumstances. It can be spread over 52 weeks if it is likely to be her/his main source of income over this period or, if s/he has an alternative income during the summer vacation, it can be listed as spread over the length of the course. Consider the financial benefit to the client when deciding how to show this income to creditors. The client should be made aware of the distinction between the income calculation for benefit purposes and that shown on a financial statement or part of a budget plan.

List expenditure

In addition to the items outlined in Chapter 3, students have additional expenditure, which must be included and which may be required by the course. At this stage, you can help the client identify areas where it may be possible to reduce expenditure – eg, by claiming help with health costs. This area is often where you can be of most use to a client, as some students may have little or no experience of budgeting and financial planning. This process should also highlight how debts have arisen and, therefore, help prevent further financial difficulty. You should also help the client deal with irregular income, and both regular and irregular expenditure.

Expenditure	Period to be attributed	Ways of reducing cost
Tuition fees: full-time undergraduate students	For most students, these do not need listing here, as repayment of fees is deferred through a loan. The loan for tuition fees is only available to pay a student’s fees, not as general income. Otherwise, if a source of income is paid directly to the institution solely for tuition fees, it can be ignored in any financial statement (along with the corresponding tuition fee liability). If the income is paid to the student (and s/he then pays her/his own fees), apportion over the length of the course and include the corresponding amount of tuition fees.	Ensure that liability is correctly attributed. Ensure no (further) assistance is available. Students can usually apply for a loan to cover any fee liability. In Wales, eligible Welsh-domiciled students who started their courses before 1 September 2010 or after 1 September 2012 and before 1 September 2018 can apply for a non-means-tested grant to cover some of their fees, and the adviser should ensure they have done so.
Tuition fees: part-time undergraduate students	For part-time students studying at more than 25 per cent intensity (that is, no slower than four times the normal length of a full-time course), a loan is usually available, so again these do not need listing – though for Welsh-domiciled students studying in Wales, the fee may be higher than the loan available and thus the excess will require listing. If any other source of income is paid directly to the institution solely for tuition fees, it can be ignored in any financial statement (along with the corresponding tuition fee liability). If the income is paid to the student (and s/he then pays her/his own fees), apportion over the length of the course and include the corresponding amount of tuition fees.	Ensure the client has applied for fee support from Student Finance England or Student Finance Wales. Check whether any extra help can be provided from university hardship funds or from an employer.
Tuition fees: postgraduate or second degree students	Postgraduate Certificate of Education (PGCE) students are treated as undergraduate students in the student finance system, as above. Otherwise, loans for both master’s- and doctoral-level study are available, but may not cover the cost of the course. Excess fees should therefore be listed where a student’s entitlement to a loan does not cover these costs. Second degree students cannot normally receive further support for tuition fees (with the exception of some part-time courses in science and technology) and so fees should be listed. If a source of income is paid directly to the institution solely for tuition fees, it can be ignored in any financial statement (along with the corresponding tuition fee liability). If the income is paid to the student (and s/he then pays her/his own fees), apportion over the length of the course and include the corresponding amount of tuition fees.	Ensure that the client has applied for any fee support from Student Finance England or Student Finance Wales. Check that liability is correctly attributed. Ensure the client has been categorised correctly by the university or college and that no further assistance is available.
Books/reading packs	The period over which expenditure on books should be attributed should mirror the period of time over which the student loan or main source of income is attributed – ie, over the length of the course or year (43 weeks). Attribute a realistic figure for the particular course. if this cannot be determined, use the set figure for books included in the student loan.	Suggest: using the university library; sharing resources with students on the same course; second-hand book stalls or schemes; and local libraries. Students in the year above can advise on books that are absolutely necessary. Increasingly, core texts are available online.
Stationery	Attribute over the length of the course.	Printing facilities should be provided by the institution. Cost needs to be measured against individual printing costs.
Materials – eg, fabrics, photographic equipment, costs related to field trips	Attribute over the length of the course.	As above. Bulk purchasing may reduce costs, if possible.
Transport costs	Any transport costs the student has may vary depending on time of year, personal circumstances and whether s/he has any dependants. If these costs cannot be attributed, use the set figure for travel in the student loan, plus the cost of at least four journeys home per year. Some students on particular courses (eg, nursing and teacher training) may have higher travel costs than others, in which case this should be made clear.	Some students, usually those on professional courses related to health or social care, may be able to claim travel expenses related to placements, so check to ensure that they have done so. Season tickets are often available, as are discounted student travel cards.
Room insurance	Attribute over the rental period, which can differ from the length of the course, or for the life of the policy or payment plan.	Check whether this is necessary, as some policies held by parents can cover items temporarily removed from the family home. The amount of cover can be too little or too much depending on the student’s personal effects. Some institutions may have block insurance for their halls of residence and it may be worth checking what any such policies cover.
Telephone/broadband	As above.	Almost all students own a mobile phone and have broadband in their homes. Some creditors may need convincing that these are a necessity rather than a luxury, although most now do not question this. Given the impact of coronavirus pandemic and a greater requirement to study from home in the foreseeable future, broadband especially should be counted as essential. However, the student may need guidance on how to ensure costs are kept to a minimum – eg, on the type of contract, comparison of the different packages provided by providers, and alternatives, such as using university-provided internet services.

Advisers often have local knowledge that may help students who are new to the area reduce their expenditure – eg, shops and services that offer National Union of Students (NUS) discounts. There is a free NUS discount card and app called ‘TOTUM’ which attracts nationally agreed discounts. For a payment of £14.99, it can incorporate other features such as the International Student Identity Card.

If you and the student decide to use a period of 43 weeks to list the main student income and expenditure, it is usually necessary to draw up a new financial statement showing revised figures for the remaining nine weeks, the long summer vacation. This statement does not need to include study-related costs and related funding.