Complex guidance on what income parents must declare can result in lower grants
Parents filling in their part of their son’s or daughter’s student loan application are being “misled” into over-declaring their income, according to a Guardian reader who says students could be missing out on millions of pounds in grants and loans as a result.
Peter Coombes – not his real name – says the Student Loans Company (SLC), which administers the student finance scheme, is failing to make it clear on its complex application forms that parents are only required to declare their household’s “taxable” income, rather than “all” the household income it currently requests.
Parents unaware of the rules could wrongly be including income from Isas and other tax-free savings in their declaration, resulting in their offspring receiving lower grants and payments.
Coombes, who does not wish to be named because he fears it could cause problems for his daughter who is in her second year at university, says many students at English universities whose parents have significant tax-free savings could easily be losing out on £120 a year, although in some cases the amount could be much higher.
Each year, parents or other household members such as a partner have to declare their household income to the SLC, which uses the information to calculate the amount students will receive in maintenance grants and loans.
The legislation governing this area is very clear: parents should be declaring taxable income only, meaning any money they have invested in cash or stocks and shares Isas, and other tax-free savings products such as those from National Savings, does not have to be included.
Despite this, the forms and guidance notes which parents and other household members have to fill in fail to make this clear, a misleading state of affairs the loan company should take steps to clarify, Coombes argues. A form sent to Money by the SLC makes no mention of this major caveat.
Coombes says a two-parent family with £16,000 in cash Isas would have earned about £480 last year, assuming an interest rate of 3%. If declared to the SLC, this would reduce their child’s annual grant by £87 and their loan by half this amount.
A SLC spokeswoman confirms that Isa income can be disregarded: “Interest, dividends and other income from Isas are classed as non-taxable. The guidance on the financial assessment [the Assessing Financial Entitlement guidance document for assessors] has not changed, neither has the regulatory definition of taxable income.
“We regularly review our advice and communications to customers to make sure the information we provide is accurate and accessible.”
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