On Guarantors - Let’s Guarantee Fair Access to Private Student Halls.Hall News
So you’ve accepted that offer from your dream university and even managed to find the perfect accommodation just 5 minutes from campus, but just as you are about to pay your deposit you notice something in the contract, who’s going to be your guarantor?
What Precisely is a Guarantor?
If you have secured a place in a university halls then it is unlikely you will need one, but check the details carefully as there are exceptions. However, most providers of private student accommodation will ask for a third person to act as guarantor on the tenancy agreement. Essentially this person is agreeing to pay the rent if you fail to do so. It is a binding legal agreement that allows the property provider to take legal action against the guarantor if they need to chase outstanding rent.
So What’s the Problem?
For most UK students it isn’t a problem; parents or guardians are usually willing to take the responsibility and trust the student will be prudent enough to cover their rent. Yet for many students the need for a guarantor can pose a major obstacle in accessing higher education.
The majority of private property providers require that a guarantor is a UK resident, so that any arrears can be easily chased within the UK legal system. This makes it very difficult for international students who don’t have any family or friends living in Britain. The NUS found from their research that of the 66% of international students that were asked for a UK based guarantor, over half were unable to provide one.
An individual who acts as a guarantor has to prove that they have a high enough income to cover any liability and often they must also be a homeowner. This means the request can be a major setback for students from low-income or unemployed households. For students who are care leavers or estranged from their parents the options for who can act as their guarantor can be even more limited.
It seems blatantly unfair that international and underprivileged students are being hit hardest by this system. So what are the options available to them?
The demand from a property provider if a guarantor can’t be provided is often that the entire yearly rent be paid in advance, which for an average priced room in a private student hall could equate to £5,000 - £8000! Even for students who are fortunate enough to have the funds to pay this colossal sum it is highly undesirable to do so.
Commercial ‘Co-Signer’ Guarantor Companies
A common alternative to paying upfront is to employ one of the commercial ‘co-signer’ guarantor companies out there. In exchange for a fixed fee these companies will enter into an agreement with the property provider as the students guarantor, taking on liability for rent in arrears. These companies also generally deal with any administration and account management involved.
Although they stand in as guarantor, these companies ask for a co-signer on the agreement. A co-signer is someone who agrees to pay the company back should they have to cover any unpaid rent, which may sound remarkably similar to a guarantor, except usually the co-singer can forego credit checks and the need to be a UK resident.
It is clear how this may be a useful service for international students and those who can’t find anyone who quite meets the exact requirements of being a guarantor - but on closer inspection elements of the system can seem a bit exploitative. The fee to be paid upfront is often as high as 95% of the monthly rate, which for the all-inclusive rents of private student halls could range from £300 - £1000. Leaving the fee aside, just the need for a co-signer, and generally one who can prove they are employed, still presents an obstacle to underprivileged students and those whose decision to go to university is unsupported by their family.
The difficulties faced by students because of the demand for guarantors has not gone unnoticed by certain universities, and as a result there are in place some university guarantor schemes. In these schemes the university steps in as guarantor for a moderate administration fee, perhaps £30-£50. If there is outstanding rent then the university pays and will then chase the student for it. This is a good option if the university provides it, but that is the problem; these schemes are very limited in availability. Currently in the UK only 15 such schemes are operating with some only open to up to 10 students per year. Universities with finely tuned budgets are not necessarily eager to put their resources into potentially risky ventures, and a majority of accommodation departments choose to refer those in need of a guarantor to the commercial sector instead. Even in schemes that are in place, not every student is eligible. To take the example of the very robust and reasonable scheme in place at LSE, it is only available to non-UK students, also the properties have to be selected from certain listings and with a rent cap of £720 per month .
Another response to the guarantor problem has come from the private sector with the appearance of a non-co-signer guarantor company: YourGuarantor. This company acts as a rent guarantor for students, but their insurance policies are arranged so that there is no need for a co-signer, only the student enters into the scheme. They also have the advantage that the fees are substantially cheaper than former types of commercial company, with an average service cost of 3.5% of total rent, (which for a typical room in private student hall equates to around £150 - £200). YourGuarantor is also the only guarantor company authorised and regulated by the Financial Conduct Authority, meaning their products are very tightly regulated and above board. In the absence of suitable university schemes this company can offer an open access and affordable alternative.
Fair Access To All Students
In these times of economic uncertainty there is a real need for the UK to continue to remain desirable for international students, as our excellent education institutions are an important global export. Alongside other issues such as visa restrictions, the guarantor problem is a less talked about, but equally disruptive, barrier to overseas students choosing to come to the UK. It is important that all parties involved in the student journey, including the private rental sector, are all pulling in the same direction. Help, information and real choice should be made available to these important guests to our nation.
Also in an era when universities are pledging to deal with Britain’s social mobility problem, in line with such initiatives as the Fair Access and Participation Plan, the complications of guarantors needs to be tackled. Regardless of background, no UK citizen should be deprived of the chance to excel in our prestigious universities.
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