Understanding the Student Finance Maintenance Loan Gap
Student finance in England consists of two main components: the tuition fee loan and the maintenance loan. The tuition fee loan (currently up to £9,250 per year) is paid directly to the university and does not require immediate repayment — it is repaid gradually through earnings after graduation once income exceeds the repayment threshold (currently £25,000 per year under Plan 5). Most students will not repay their tuition fee loan in full over their working life, and any remaining balance is written off after 40 years.
The maintenance loan — designed to cover rent, food, and living costs — is means-tested based on household income. In 2024–25, the maximum maintenance loan for a student living away from home and studying outside London was approximately £10,227 per year. However, students from households with income above £65,000 receive a reduced amount — in some cases as little as £4,000–£5,000 per year. For students living in London, where rent alone can easily exceed £10,000–£12,000 per year, this leaves a very significant gap.
The result is that many middle and higher-income families effectively subsidise their children's university living costs out of income or capital. For a single child studying over three years, parental contributions can total £10,000–£20,000 or more — a meaningful sum that not all families can meet comfortably from current income.
Some families also choose to contribute to tuition costs, particularly for postgraduate study where the loan system is less generous. Masters degrees and professional courses can cost £10,000–£20,000 in fees alone.
Secured Loan vs Remortgage for University Costs
For homeowners looking to raise capital to fund university costs, the choice is often between a secured loan and remortgaging. The right answer depends on your current mortgage situation. If you are on a competitive fixed rate with significant early repayment charges remaining, a secured loan — which leaves your existing mortgage intact — is often the better route. Breaking a fixed-rate mortgage to remortgage and raise additional funds could trigger an early repayment charge of 1%–5% of the mortgage balance, potentially costing thousands of pounds.
If your fixed rate has expired and you are approaching a remortgage anyway, adding the university contribution to your new mortgage balance may be the more cost-effective route. Mortgage rates are typically lower than secured loan rates, and you may be able to absorb the additional borrowing without materially affecting your monthly payment if the term is extended.
A secured loan sits alongside your existing mortgage as a second charge, with its own rate, term, and monthly payment. This gives you flexibility to manage the repayment separately — for example, matching the loan term to the period over which you expect the financial pressure of university contributions to last, and then repaying it relatively quickly once your children have graduated.
A whole-of-market mortgage broker can model both options side by side and recommend the most cost-effective route based on your current mortgage terms and the amounts involved.
