# Martin Lewis shares three key things school leavers must know about student loans

Yet for most, even though it’s called student loans, thinking of it as a debt is a nonsense, unrepresentative concept. In fact, once at uni, many realise, the real problem is the ‘loan’ isn’t big enough.

The amount you borrow is mostly irrelevant – it works more like a tax

What you repay each month depends solely on what you earn, ie, nine percent of everything earned above £27,295.

As proof, take £28,295 earnings – £1,000 above the threshold – as it’s easy maths…

• Owe £20,000: you repay £90/yr

• Owe £50,000: you repay £90/yr

• Owe £3,000,000 (if tuition fees were absurdly hiked to £1m a year): you repay £90/yr

The only difference what you owe makes is whether you’ll clear the borrowing within the 30yrs before it wipes.

There is an official amount parents are meant to contribute, but it’s hidden

Students get a maintenance loan to cover living costs. For most under-25s – though they’re old enough to vote, get married and fight for our country – the amount is dependent on household income – for most a proxy for parents income.

In England the loan starts reducing with household income of just £25,000, until for those earning around £60,000-£70,000 and above, it’s roughly halved.

This difference is what I define as the expected parental contribution – after all it’s been reduced due to their income. Yet parents aren’t told.

I’ve met various ministers and asked them to improve this – so far none have done it. To help, instead we’ve built ‘a how much do you need to save calculator’ at www.moneysavingexpert.com/students/student-loan-parental-contribution-tool/ which calculates it for you.

READ  UK mortgage payment holiday extended by three months

For example for someone with £50,000 household income in England, with a student living away from home, the loan received is £6,092/yr, which is £3,396 less than the full loan – so that’s the parental contribution.

PS Bizarrely the income assessment for 21/22 is based on income in the 2019/20 tax year. If you think your 2021/22 tax-year income is likely to be more than 15 percent lower, you can ask for a ‘current year assessment’.