Students in England are set to receive clearer information about the cash gap that parents may need to plug alongside their loans.
The move comes after MoneySavingExpert founder Martin Lewis wrote a formal letter requesting this in June.
Mr Lewis’s letter highlighted an implicit “parental contribution” built into the student finance system – and it argued that this needs to be made explicit.
Students’ loans are reduced, often by thousands of pounds, due to family income, and parents may need to fill the gap.
MoneySavingExpert said that loan letters to students do not mention that they could be receiving less than half the maximum loan for living costs due to a means test of household income.
The reduction in maintenance loans starts at a family income of just £25,000, affecting millions of students and parents. Many parents are unaware that the system implies they should make up the shortfall, MoneySavingExpert said.
This could leave parents unprepared and unable to find the cash to help. Or parents who have the money could refuse to give students any more, not realising the loan size has been reduced.
Ms Donelan wrote to Mr Lewis and committed her officials to working with the Student Loans Company (SLC) to ensure that future communications with students explain the difference between someone’s maintenance loan and the maximum possible award, adding: “We will ask the SLC to make clear that this additional funding might be from several sources, which may include from a student’s parents or household members where applicable…”
Some initial changes to pre-application online information for prospective students have already been made, MoneySavingExpert said.
It added that while it is too late to make changes to the individual, physical letters and online portal information students receive for the 2021/22 academic year, the minister has committed to asking the SLC to do this in time for the next academic year.
Loans are reduced because of household income, therefore parents are expected to plug the gap – it’s as simple as that
Martin Lewis, MoneySavingExpert
Ms Donelan said: “Every student deserves clear information about student finance so they can make informed decisions about their future – especially as they embark on this exciting next step in their education.
“We are determined to make the application process simpler and more transparent, and we are working with the Student Loans Company to make these important changes.”
Mr Lewis said: “Politicians argue day and night about tuition fees, but the biggest practical problem faced by students is that many don’t have enough to live off.
“A huge part of that is because the system does not give families the benefit of foresight when it comes to living loans. Loans are reduced because of household income, therefore parents are expected to plug the gap – it’s as simple as that.
“After years of campaigning and meetings with countless universities ministers, I’m delighted to finally have met one who listened and understood that students and their families are missing vital information needed to plan financially for university.
“At my TV roadshows, I’ve met students living off cold baked beans, because parents believe the loan is enough for them to live on and they should be independent – not realising that their incomes meant the amount received was half what’s deemed to be the true living cost.
“There is work to be done on these changes, but we will be pushing for the SLC to specifically tell parents and students how much their personal shortfall is after family income means testing.”
The system in England works differently to other UK nations, and MoneySavingExpert said it has also been in discussions with ministers in other UK nations.