Debt Advice Handbook 15th editionChapter 17: Student debt 2. Stages of debt advice
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2. Stages of debt advice
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 prefer to use this service. There can, however, be issues of impartiality, independence, confidentiality and trust 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.
To create a position of trust, be aware of the different causes of student debt and do not make a judgement about the client’s position. Clients often do not seek help for the causes of problems, but for 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;
    •coping with an income paid in irregular instalments.
Students and their families have been impacted by the cost of living crisis, and have seen the price of outgoings such as accommodation and food rise faster than any increases in student support or wages from paid employment.
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 their 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 their 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 debt status on the creditor list, it is important to consider the sanctions connected with non-payment 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 their 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 most institutions withhold awards until the debt is cleared. Students entering some professions (eg, teaching) need their degree conferring or their 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 they 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 repayment offers must reflect this.
List income
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. These are to help the student with the extra costs of studying; they are not to help with living expenses. Including them as income is not necessary, 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 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 their parents’ income and financial statements from Student Finance England or Student Finance Wales may refer to a ’family contribution’ payment (or similar). However, this contribution cannot be enforced and, in reality, many students do not receive any parental contribution. Older students in cohabiting relationships, or students who are married or in a civil partnership at any age, may have their spouse, civil partner or partner’s income taken into account in student finance calculations in the same way as parental income.
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 helpful for students, as 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 circumstances. It can be spread over 52 weeks if it is likely to be their main source of income over this period or, if they have 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 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 help prevent further financial difficulty. You should also help the client deal with irregular income, and regular and irregular expenditure.
Advisers often have local knowledge that may help students who are new to the area reduce their expenditure – eg, shops and services that offer student discounts such as TOTUM and UniDays.
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 does not need to include study-related costs and related funding.
Tuition fees: full-time undergraduate students
For most students, these do not need listing, 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 they then pay their own fees), apportion over the course length and include the corresponding amount of tuition fees.
 
Ways of reducing costs
    •Ensure that liability is correctly attributed.
    •Ensure no (further) assistance is available.
    •Students can usually apply for a loan to cover any fee liability.
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 they then pays their own fees), apportion over the length of the course and include the corresponding amount of tuition fees.
 
Ways of reducing costs
    •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 in 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 they then pays their own fees), apportion over the length of the course and include the corresponding amount of tuition fees.
 
Ways of reducing costs
    •Ensure that the client has applied for any fee support for which they are eligible 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 (including access to ebooks)
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.
 
Ways of reducing costs
    •Suggest: checking whether texts are available online (increasingly core texts are); where not, 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.
Stationery, materials and costs related to field trips
Attribute over the length of the course.
 
Ways of reducing costs
    •Printing facilities should be provided by the institution. Cost needs to be measured against individual printing costs.
    •Bulk purchasing may reduce costs, if possible.
Transport costs
Transport costs may vary depending on time of year, personal circumstances and whether the student has 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.
 
Ways of reducing costs
    •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/contents 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.
 
Ways of reducing costs
    •Check whether this is necessary, as some policies held by parents can cover items temporarily removed from the family home.
    •Some institutions may have block insurance for their halls of residence and it may be worth checking what any such policies cover.
Telephone and broadband
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.
 
Ways of reducing costs
    •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