Student income and Universal Credit

This how-to guide looks at how student finance is taken into account for Universal Credit (UC). Only students falling into certain categories can qualify for UC in the first place — this article does not look at the eligibility conditions. See our article on disabled students and claims for UC.

This article was originally published on 14 January 2021. It was updated on 3 July 2023

The article will look at:

• what types of student income are taken into account in different cases
• how to apportion the student income over the right amount of assessment periods.

This will help you to advise clients on how much UC they may be entitled to after they become a student, and to check that the Department for Work and Pensions (DWP) has calculated the student income correctly in working out the UC award.

The student finance landscape is different in each of England, Wales and Scotland. We have seen some particular issues about how Welsh Government Learning Grants will be taken into account for UC, which will be covered in this article. The purpose of the article is not to act as a guide to types of student finance that are available, but to cover how they will be treated for UC.

Undergraduate students

Financial support for students may be in the form of a repayable student loan, or in the form of a grant or bursary that is not repayable, or a mixture of both. The general rule for undergraduate students receiving a loan towards their maintenance is that their student income taken into account for UC is based on the amount of that loan, but most grant income is disregarded. For the purposes of UC, a ‘student loan’ is defined as being a loan towards a student’s maintenance under certain legislation, so loans for other purposes (such as tuition fee loans) are disregarded. A ‘grant’ is defined as being any kind of educational grant or award, excluding student loans or certain payments for people under 21.¹ Maintenance in this context refers to general living costs.

Where a client has a student loan within this definition, their student income that is taken into account for UC is based on the amount of their loan. Any grant they get for the same period is ignored, unless it is an amount that:²

• covers rent payments which are also covered by the UC housing costs element, or
• is for the maintenance of another person, who is also covered in the UC award.

It makes sense that amounts intended for these specific purposes would need to be taken into account separately, as a grant for these purposes would be paid on top of a maintenance loan, but would overlap with payments included in the UC award. An example of this might be an Adult Dependants Grant paid to provide support for the partner of the student. As this partner would also be included in the UC award through the couple rate of the standard allowance, there is an element of duplication, so this grant needs to be taken into account separately.

A grant that doesn’t fall into one of those two categories is ignored. However, the way that the student loan itself is calculated could be affected by a grant received by the client. This is because the amount of the loan taken into account for UC purposes is the maximum student loan that the client would be able to get, as if there were no reductions due to:

• a grant made to the student,
• the income of the student, their partner, parent or someone else, or
• the student not taking up the full amount of loan they are entitled to.³

If the student’s loan is reduced due to one of these reasons, the amount taken into account by UC will be higher than the amount the client actually receives.

If a grant is paid for maintenance, it may overlap with the student’s maintenance loan, and therefore reduce the amount of loan that student receives from the student finance provider. Where the loan is reduced to take into account a grant, UC will use the figure of the maximum loan before any reduction has been made. In practice, this means that although the grant income itself is disregarded, if it has reduced the amount of student loan it will still be taken into account through the way that the loan is counted. However, it is important to check the student finance calculation, as it may be that not all of the grant has been deducted from the loan. If part of a grant does not cover maintenance, so isn’t deducted from the loan, then this should not be taken into account by UC. The grant should not simply be added to the amount of the loan when working out what student income to take into account.

This is illustrated by the example of Joyce in paragraph H6132 of Chapter H6 of the Advice for Decision Making (ADM). In this example, Joyce receives a maintenance loan of £3,875 which has been reduced by £1,625 due to a maintenance grant of £3,250. The student income taken into account is the sum of the loan received and the reduction to the loan made due to the grant, coming to a total of £5,500.

In England, a Special Support Loan may be paid to certain students in addition to a maintenance loan. This covers the cost of books, equipment, travel and childcare, rather than maintenance, and should not be taken into account for UC.⁴

A Young Students Bursary in Scotland should be treated the same way as a student loan.⁵

If the client could acquire a student loan by taking reasonable steps, but does not do so, they are still treated as having that student loan for UC purposes.⁶

Students in Wales

The Welsh Government Learning Grant (WGLG) is intended to provide some support to Welsh students in the form of a grant rather than a loan. A student in receipt of the WGLG will receive a smaller loan, as they receive part of their student finance through a grant instead. There has been some uncertainty about how this has been taken into account for UC.

We have seen cases where it has been successfully argued at First-tier Tribunal that only the amount of maintenance loan actually received by the client should be taken into account. This is because in the student finance regulations, the amount of maintenance loan payable depends on the amount of grant that the client is eligible for.⁷ As a result, there can never be a situation where a grant has reduced a loan. This means that it is only the actual amount of loan that should be taken into account.

Even if this argument does not succeed, advisers should still make sure that the DWP doesn’t just add the client’s WGLG to their actual maintenance loan when taking their student finance into account. Any part of a grant that isn’t taken into account when student finance works out a student’s loan amount should not affect the maximum loan a student is considered to have. This would apply if a student gets a special support payment as part of their grant and to the £1,000 base grant available to Welsh students. Internal DWP guidance suggests that this is the approach that should be taken.⁸

Students receiving only a grant

If a client is receiving a grant only, and no loan, then their student income taken into account by UC is based on the amount of the grant.⁹ The whole of the grant is taken into account, unless it is covered by one of a list of exceptions.¹⁰ The exceptions are

• an amount for tuition or examination fees
• an amount due to a disability
• an amount for childcare costs
• an amount for books, equipment, and travel expenses
• an amount for costs of term-time residential study away from the educational establishment
• an amount for the costs of maintaining a home elsewhere during the course, unless this is covered by the UC housing costs element
• an amount for the maintenance of another person, unless they are also covered by an amount in the UC

Students receiving a teaching bursary, social work bursary, or NHS grants for health care professional courses may be receiving a grant only, and no loan, so these provisions would apply. The grant would be taken into account, but additional grants covering the additional expenses listed here would be ignored.

In practice, there will be a similar outcome whether the client receives a grant or a loan. If the client receives a grant only, then a grant paid for maintenance will be taken into account, but any grants or amounts of a grant paid for the specific additional costs listed are ignored, unless those additional costs overlap with elements in the UC award. If a client receives a loan, then all grant income is ignored other than the specific additional costs that overlap with the elements of the UC award. However, any grant paid for maintenance is likely to reduce the client’s student loan, so is still factored into the way the student loan is calculated for UC.

Example

Linda is an undergraduate student with a partner and one child. They receive a WGLG of £5,000, an Adult Dependants Grant of £3,094, a Parent’s Learning Allowance of £1,766, a Childcare Grant of £1,500, and a maintenance loan of £5,800. Linda’s notional maximum maintenance loan of £9,800 was reduced by £4,000 because of the WGLG. It would be wrong to simply add the WGLG to the maintenance loan, because this would come to too high a figure in this case (£10,800), with too much student income being taken into account by UC as this amount would be higher than the maximum available loan of £9,800.

All the grants Linda receives are disregarded except for the Adult Dependants Grant of £3,094, which is paid to cover maintenance costs for their partner who’s also included in their UC award. Linda could argue that the maximum amount of loan is actually £5,800 rather than £9,800, as it is calculated based on the amount of grant rather than reduced because of the grant. This would mean that only £8,894 of student income should be taken into account.

If this argument doesn’t succeed, then the maximum loan of £9,800 should be taken into account, added to the Adult Dependants Grant of £3,094.

Postgraduate students

Postgraduate students are covered by the same rules as undergraduate students.

For master’s degree students, the amount taken into account is 30% of the maximum postgraduate master’s degree loan that the client would be able to get if they took reasonable steps.¹¹ The guidance suggests that the 30% figure reflects the amount of the loan that would typically be available to spend on maintenance costs.¹² As with undergraduate loans, even if a master’s degree student chooses not to obtain a loan, they would still be treated as having this income if it would be reasonable for them to do so. The amount taken into account is before any reduction due to a grant made to the client or the income of the client, their partner, parent or someone else.

A PhD student may be receiving a stipend, or studentship, to support their studies. This is likely to fall within the definition of a “grant” in regulation 68(7) of the UC Regulations 2013. They may also be receiving a grant to cover tuition fees, which is ignored due to regulation 70 of the UC Regulations 2013, or a grant to cover other specific costs that are disregarded under regulation 70. A PhD student may also be receiving a salary, for example for teaching, which would be taken into account as earned income rather than as student income.

Example

Tammy is studying for a PhD. She receives a studentship of £15,000 towards her living costs, and £4,000 towards her tuition fees. She also receives a Disabled Students Allowance. Tammy’s partner George is studying for a master’s degree. George receives a loan of £11,000, which is the maximum he is eligible for.

Tammy’s studentship of £15,000 falls within the definition of a grant so is taken into account as income for UC. The portion of her studentship that covers their tuition fees, as well as the Disabled Students Allowance, are both ignored.

George’s postgraduate master’s degree loan is taken into account. 30% of the maximum amount of the loan is taken into account, which comes to £3,300.

How to calculate student income

Once you know what student income to take into account, this income needs to be apportioned over a certain number of UC assessment periods. This includes the assessment period in which the course begins, or in which a subsequent year of the course begins if it lasts longer than a year. It also includes any subsequent assessment periods in which the client is carrying out the course. However, it excludes an assessment period in which the course ends, or which falls within the long vacation or in which the long vacation begins. The “long vacation” is a period of at least a month, which the DWP decides is the longest vacation during a course lasting more than one year. The student income taken into account is then divided by the number of assessment periods, and a fixed amount of £110 is then deducted from each assessment period in which the student income is taken into account.¹³

Example — undergraduate student

Charley is starting the first year of a 3-year undergraduate degree. The course start date is 25 September 2020. The summer vacation begins on 15 June 2021.

Charley’s UC assessment periods run from the first day of each month to the last day of the month.

Charley’s maximum loan of £9,800 and Adult Dependants Grant of £3,094, together coming to £12,894, are taken into account. It needs to be taken into account in the assessment period from 1 September to 30 September 2020 (the assessment period in which the course starts), the assessment period from 1 May to 31 May 2021, and all the assessment periods in between. It should not be taken into account in the assessment period from 1 June to 30 June 2021, as this is the assessment period in which Charley’s long vacation begins. This means the student income is apportioned over 9 assessment periods.

Once it has been apportioned over the 9 assessment periods, and the £110 deduction is applied, the amount of Charley’s student income taken into account in each assessment period is £1,322.67.

Example — postgraduate students

Tammy is in the second year of her PhD. The academic year starts on 15 September 2020 and the summer break starts on 20 July 2021.

George is undertaking a master’s degree which lasts for one year. The course starts on 25 September 2020 and ends on 31 August 2021.

Tammy and George’s UC assessment periods run from the tenth day of each month to the ninth day of the next month.

Tammy’s studentship of £15,000 needs to be taken into account in the assessment period from 10 September to 9 October 2020 (the assessment period in which their second year starts), the assessment period from 10 June to 9 July 2021, and each assessment period in between. It should not be taken into account in the assessment period from 10 July to 9 August 2021, as this is the assessment period in which her long vacation begins. This means the studentship is taken into account over 10 assessment periods. Once it has been apportioned over the ten assessment periods and the £110 deduction applied, the amount of Tammy’s student income taken into account in each assessment period is £1,390.

George gets a postgraduate master’s degree loan of £11,000. 30% of this, £3,300, is taken into account. It needs to be taken into account in the assessment period from 10 September to 9 October 2020 (the assessment period in which their course starts), the assessment period from 10 July to 9 August 2021, and each assessment period in between. It is not taken into account in the assessment period from 10 August to 9 September 2021, as this is the assessment period in which George’s course ends. The loan is therefore apportioned over 11 assessment periods. Once this has been done and the £110 deduction is applied, the amount of George’s student income taken into account in each assessment period is £190.

Josh Gilbert is a benefits expert in the Expert Advice Team at Citizens Advice

The information in this article is correct as of the date of publication

References

[1] Regulation 68 (7), Universal Credit Regulations 2013 (“UC Regs 2013”)

[2] Regulation 68(3), UC Regs 2013

[3] Regulation 69, UC Regs 2013

[4] Advice for Decision Making, Chapter H6 paragraph H6131

[5] Regulation 68(7), UC Regs 2013; Advice for Decision Making, Chapter H6 paragraph H6007

[6]Regulation 68(5), UC Regs 2013

[7] Parts 7 and 8, The Education (Student Support) (Wales) Regulations 2018

[8] DWP Spotlight guidance published following a Freedom of Information request on 27 April 2023

[9] Regulation 68(4), UC Regs 2013

[10] Regulation 70, UC Regs 2013

[11] Regulation 69(1A), UC Regs 2013

[12] Advice for Decision Making, Chapter H6 paragraph H6133

[13] Regulations 68(1), 68(7) and 71, UC Regs 2013