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Money Matters

Universal Credit - what it means for students

The introduction of Universal Credit is the biggest change to our welfare benefits system in over sixty years - affecting millions of people with children or on a low income. It is steadily being rolled out across the country and replacing most of the current benefits and tax credits systems. We have put together this guide to help you understand how Universal Credit affects students.

Firstly we explore what Universal Credit is and how it differs from existing benefits. Then we look more specifically at how it affects students - including some 'real-world' case studies to show how different the amounts can be in certain circumstances.

What is Universal Credit?

Universal Credit is a new benefit that is replacing several existing benefits, including:

  • Income Based Jobseeker’s Allowance;
  • Income Related Employment and Support Allowance;
  • Income Support;
  • Housing Benefit and
  • Tax Credits.

Universal Credit has now been introduced throughout the country, meaning that it is not possible to make a new claim for the above-mentioned benefits and new benefit claimants will need to apply for Universal Credit.

Please note - Universal Credit will not replace DLA/PIP, Contribution Based Jobseeker’s Allowance and Contribution Based Employment and Support Allowance. Therefore it is still possible to make a new claim for those particular benefits, if you qualify.

 

Who can apply for Universal Credit?

Full-time students can only qualify for Universal Credit if at least one of the following circumstances applies:

  • You have a dependent child
  • You have limited capability for work AND are in receipt of DLA/PIP
  • You have a non-student partner. They can make a claim which includes you as their student partner.

The above restrictions do not apply to part-time students, but you would need to show that your part-time course is compatible with any work-related requirements that are part of your UC claim. For example, if you are applying for Universal Credit as a job-seeker, DWP may require you to be available for work at certain times during the week as part of your UC claim in order to receive the benefit. 

How does Universal Credit differ from existing benefits?

Universal Credit is one single benefit, which can make it easier to adjust to a change of circumstance e.g. fluctuating income. In other words, if you have a change of circumstances you are only updating one benefit - instead of having to contact a number of different offices to change multiple benefits, which would then have to interact/coordinate with each other.

It is paid monthly, as opposed to weekly or fortnightly.

Student income, such as your Maintenance Loan, is also applied differently - meaning that students who already claim benefits may find their entitlement is reduced once they move onto Universal Credit.

It is paid to one claimant (payments cannot be split between two claimants in the case of a couple claim), including any assistance towards rent, with some exceptions.

How is Universal Credit calculated?

A claimant’s maximum Universal Credit is calculated using a 'standard allowance' for each adult/couple, plus additional 'elements' for each child, childcare (if you are working), and disabilities. Housing costs can also be included i.e. your rent or, in some cases, support for mortgage interest.

The claimant’s income (excluding some disregards) is then deducted from this to give the amount of Universal Credit awarded.

Therefore the calculation is:
Maximum Universal Credit - Allowable Income = Universal Credit to be paid

Income from a student's Maintenance Loan and certain grants will be included. This is one of the main differences between Universal Credit and the Tax Credits system, where student income is generally ignored. This is also one of the main reasons why students with dependent children may find they receive less under Universal Credit than under the current benefits/tax-credits system. Please contact us if you require further details.

 

Increase in Universal Credit during COVID-19 pandemic

During the early stages of the COVID-19 pandemic and UK lockdown, the government announced significant changes to the amount of Universal Credit paid to claimants from April 2020. As mentioned above, Universal Credit is made up of a number of allowances, one of which is the ‘standard allowance’. From April 2020, this was increased by approximately £90 per month.

(Working Tax Credit also increased in a similar way, but those claiming Child Tax Credit only will receive a much smaller increase.)

So what does this mean for you? Well, this of course depends on your circumstances....

  • If you are currently claiming Universal Credit: 
    You should expect your monthly payment to increase, assuming nothing else has changed regarding your situation.
  • If you are currently claiming Child Tax Credit but not Working Tax Credit: 
    You MAY benefit from a move to Universal Credit, but please seek advice from us first, as you cannot return to tax credits once you have made a claim for Universal Credit. A move to Universal Credit will also stop any Housing Benefit – again, please seek advice.
  • If you have previously applied for Universal Credit but were refused on the basis that your income was too high: 
    You can re-apply and MAY now receive some Universal Credit following this recent change. Seek advice from us if you would like to discuss this in more detail.

Please be aware that these increases may be a temporary measure for one year only. Again, we advise that any student considering making changes to their current benefit claims contacts us prior to making any changes, so that we can discuss the full impact of this.

I am a full time student and currently in receipt of some of the benefits which will be replaced by Universal Credit. When will I be affected by this?

Your current claims will be unaffected until either:

a) you have a change of circumstance resulting in a new claim for benefits or 
b) you are moved onto Universal Credit via the process of ‘managed migration’ (see below).

If you make a new claim - for example, you need to claim assistance with rent and are not currently claiming this - you will need to claim Universal Credit and your other claims will cease. 

So what is ‘managed migration’? This is the process where the government is starting to move people onto Universal Credit automatically.

The process of managed migration began in July 2019 in the Harrogate area and is due to be extended further later in 2020. The Government hopes to complete the process countrywide by 2024. If you are moved onto Universal Credit through the process of managed migration, you may benefit from ‘transitional protection’, meaning that you will not be made worse off under Universal Credit. Remember though, that transitional protection is not available to those who move to Universal Credit due to a change of circumstances or if you have to make a new claim.

You can find out more information about transitional protection here

Please be aware that you may also need to make a new claim if you separate from a partner or move in with a new partner. This is a change in circumstances that may result in a claim for Universal Credit.

Feel free to contact us if you require further information on the changes which may result in a claim for Universal Credit.

How will my income be affected if my current benefits are transferred to Universal Credit?

This will depend upon your full circumstances, although in many cases full time students may receive a smaller award under Universal Credit than under the current range of benefits.

Feel free to contact us if you wish to discuss your individual circumstances. Also check out our case studies below for an in-depth look at how benefits are calculated in certain student scenarios.

Do I need to do anything now?

If you are concerned about how these changes may impact on your income, feel free to contact us so that we can discuss your circumstances and inform you on the impact of being transferred onto Universal Credit. We can also discuss ways to budget if your income drops.

Students who are currently claiming benefits and/or tax credits should also seek guidance from our service when considering making any changes to their current claims. This includes claiming additional benefits during the summer, changing tax credits from a joint to single claim (or single to joint claim) and making new claims for assistance towards rent. These are changes in circumstances that will trigger a change to Universal Credit.

I am currently in receipt of Universal Credit. How will this change if I become a full time student?

You may become ineligible - unless you fit into one of the categories explained above in ‘Who can apply for Universal Credit?’

If you do fit into one of the categories, your student income will be taken into account, and this may reduce your award. However, this will depend upon your full circumstances - feel free to contact us to discuss this further.

Is there anything else I need to know?

Universal Credit claims can take some time to be processed. There may be a wait of up to six weeks between a claim being made and payment being issued.

Also, during this time, existing claims for previous benefits may cease. It is therefore very important to plan as much as you can in advance if you think you will need to change a benefit claim or make a new claim, as you could be moved to Universal Credit and be temporarily left with no income for that six week period.

Feel free to contact us to discuss how to manage financially during this period. It may be that you will need to budget your student finance Maintenance Loan for a longer period. You could try using our PANDA budgeting tool to help you. Or you may be able to apply to the University Hardship Fund or other funding sources.

It's sometimes possible to apply for an advance payment of your Universal Credit if you will be financially struggling while your claim is being processed. You should do this very early in the Universal Credit application process. Please see the Citizens Advice guidance on how to apply here.

Case Studies - see how students can be affected

In the sections above, we explained that Universal Credit calculations look at student income (e.g. Maintenance Loans) differently to the calculations of the current/existing system of benefits.

To show you how this looks in real-world cases, we have put together some Case Studies that show what would happen in certain scenarios.

In all of the examples, we have shown the differences between what the students would receive in benefits under the current system versus what they would receive under the Universal Credit system. Each link opens up a separate Microsoft Word.doc which explains in detail exactly how the calculations are worked out. At the bottom of each example we show a user-friendly comparison between the two systems, to see if the students are better or worse off under Universal Credit.

Our examples also use the new Universal Credit figures as at April 2020, which have been significantly increased from the previous year, in light of the effects of COVID-19 on household incomes.

Lone Parent 1 (2020) - Rey is a young student, lone parent of one child. See what would happen to her existing benefits if she puts in a new claim or undergoes a change in circumstances that results in a new claim.

Lone Parent 2 (2020) - Leia is a mature student, lone parent of one child. See what would happen to her existing benefits if she puts in a new claim or undergoes a change in circumstances that results in a new claim.

Lone Parent 3 (2020) - Finn is a mature student, lone parent of one child, and he works part-time alongside his studies. See what would happen to his existing benefits if he puts in a new claim or undergoes a change in circumstances that results in a new claim.

Married Student with 1 Child (2020) - Lyra is married, and has one child. Her spouse is employed. See what would happen to their existing benefits if they put in a new claim or undergo a change in circumstances that results in a new claim.

As mentioned above, if you are currently claiming benefits and have any worries about Universal Credit and how/when it will affect you, please get in touch with us.

Useful links

Here are some useful external links that will help you prepare for Universal Credit and give you more information about how it is calculated:

Welfare Benefits Unit - https://www.welfare-benefits-unit.org.uk/resources/ - for a very in-depth look at the benefit. Look for the 'Universal Credit' section of the page, including the list of changes in circumstances that would trigger a claim for Universal Credit. Also includes advice on preparing yourself for the change to UC.

The official Government webgage - https://www.gov.uk/universal-credit - gives an overview of the benefit and how to apply.

Citizens Advice - https://www.citizensadvice.org.uk/benefits/universal-credit/ - gives information and advice on the application process, as well as advice on what to do if things go wrong.

EntitledTo - https://www.entitledto.co.uk/help/Student-income-Universal-Credit - part of their general advice pages on UC.

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