Supporting your child through university
How parents can offer a helping hand with the costs of higher education
Affording a higher education is no longer as achievable as it used to be and, as a parent, it’s natural to want to help if you can by supporting your child through university. While for many generations tuition was effectively free, in 2010 the cost for students in England and Wales rocketed to up to £9,250  a year. As well as steeper tuition payments, many students need to move away from their family home, often relying on additional maintenance loans.
To complement Mrs Mummy Penny’s informative article on Goal Setting – saving for your children to go to University, we have broken down some financial options for parents looking to help their children to afford higher education.
Average cost of university
The total cost can vary significantly for each student, depending on factors including their choice of city, whether they live with their parents, and their spending habits. According to a Which? Student survey the average monthly costs can be higher than expected, see the table below for a breakdown:
This is in addition to accommodation, which the same survey found could cost anywhere from £250 to over £770 a month.
Added up over the nine-month academic year, this means your child could easily be spending almost £9,000 (or more in London).
Covering the cost with student loans
There are two loans that undergraduate students typically receive, designed to cover different costs:
1. Tuition loan – This covers the fees for taking part in an undergraduate degree and is paid directly to the university in the student’s name. For the 2019/2020 academic year, this is up to £9,250, dependent on the specific cost of the student’s chosen course.
2. Maintenance loan – This is designed to cover living expenses such as rent, bills, food, toiletries, study materials and other day-to-day costs. How much a student will receive depends on when they start the course, where they will live and their family household income. Here are some guideline numbers for the 2019/2020 academic year:
Many students choose this as a practical way to cover the costs of university. But unfortunately that means graduating with a student loan of up to £62,766 for a typical three year course.
The alternative is usually some level of financial support from family members.
Student loans are not typical loans
How much the student repays depends on how financially successful they become after completing their degree. In this sense it is a “tax” on how well they do in their career, or their education is “no win, no fee”. Although some people irrationally fear the loan, it is not the same as, for example, credit card debt as it is means-dependant, so graduates in theory should never be financially destroyed by university debt.
After graduating, the student will pay 9% of all money earned above £25,000 – if they never earn more than this, they never make repayments. This threshold will be increased to £25,725 on the 5 April 2019. After 30 years all the debt is wiped. If your child graduates when he or she is 21, the debt will be wiped when they are 51, even if they haven’t paid it all back.
All in all, the student loan system is designed to be fair rather than a deterrent to education. Parents wanting to support their children through university may wish to consider helping out with day-to-day living expenses. The child’s household income affects the maintenance loan amount granted, so there is a hidden expectation that parents who are able to will top up their children’s bank accounts throughout their study time.
Supporting your child with university costs
To help you decide if supporting your child through university is an option you can afford, and how best to get the money together, here are some questions to ask yourself:
1. How much would you like to contribute to their education?
Most parents don’t cover the full costs of higher education, but you may still want to support your child through university to whatever extent you can. The first step is to decide on a level of support that’s realistic for you.
Perhaps consider their accommodation costs alone. For nine months of the year at a monthly cost of £250-770, the total over three years would be between £6,750 and £20,790. With the right saving or investing strategy, and enough time, this might be a realistic goal for your family, and a considerable help to your child.
2. How long do you have to get the money together?
Once you have a figure in mind, the next step is to calculate how long you have to get the money together – simply, how many years until your child will be going to university.
If this is three years or less, you’ll probably want to choose a very low risk strategy like cash savings, to ensure that you don’t get back less than you put in.
But if you have more years, you’ll need to bear in mind that when storing money in a cash account, inflation can eat away at your savings. Investing your money could offer you higher returns than saving your money in a bank account, and could help protect your money from the erosive effect of inflation.
Another option could be that parents help their children to repay student loans at a later time, taking advantage of the very low interest repayments.
3. How much risk are you willing to take?
Investing always carries risk, so before choosing this strategy you’ll need to fully understand the risks and be willing to accept them. That said, if you’re investing over the long term, as many parents are, you should also be aware of the greater growth potential that investing offers.
For example, if you had saved £20,000 in a cash account at the start of 2003 and the rate kept up with the average, you would have saved almost £28,000 by the end of 2018. If you had invested the same £20,000 in a product that kept up with the FTSE All-Share index, it would be worth almost £66,000. That’s almost 2.5 times more in 15 years.
4. How much can you afford to put away?
This might be a lump sum that you have now, or a monthly amount that you’re able to contribute over several years. Either way, it’s important not to overstretch yourself.
Reducing the cost of university
If you’ve done your sums and you’re unable to support your child through university to the extent you’d like to, your other option is to look at ways of reducing the cost.
1. Studying abroad
Not all university fees are the same, and spending a few hours to browse universities abroad could save tens of thousands of pounds. And you don’t necessarily have to be multi-lingual, with many prestigious programmes offered in English. For the ultimate “away from home” student experience, the following countries offer low cost or free university tuition for international / EEA / EU students:
2. Grants, bursaries and scholarships
Grants, bursaries and scholarships come in many shapes and sizes. Save the Student has listed some of the most unusual examples– if your child loves triathlons, can speak Welsh or has the surname “Graham” it’s a link worth clicking on. Money Saving Expert has also listed some useful grants to be aware of.
Your child could also explore grants, bursaries and scholarships offered by the university. With a few hours’ of researching, he or she could save a lot of money.
3. Degree apprenticeships
A degree apprenticeship could be a good option if your child is interested in earning money and gaining experience while studying. It combines skilled work with part-time study and can take between three and six years to complete, often with businesses working in partnership with universities.
Degree apprenticeships cover a variety of sectors including business, health, science, legal, engineering and more. The training costs are co-funded by the government and employer, while the student is paid a wage throughout. Wages can range significantly, depending on the type of work, and will be slightly less than a fully trained employee.
An added bonus is that 80% of apprentices are retained even after the programme is finished, avoiding the degree-first job lag which so many graduates struggle with. You can find out more and search for opportunities on with UCAS.
4. Working while studying
Your child could join the UK students who work a part-time job to supplement their maintenance loans. Or they may find a programme of part-time study, through evening classes, distance or online courses, allowing them to work full-time if they choose.
All in all, there are a lot of options when considering how to afford your child’s higher education, and a little early planning could make a big difference.
If you have any ideas to help afford university, we’d love to hear them in the comments below.
With investment your capital is at risk. The tax advantages of ISAs may change in the future and also depend on your individual circumstances.
Opinions given within this article are the authors own personal views. The views and opinions are effective from the date of publication but may be subject to change without notice. This article is not intended to constitute personal advice and no action should be taken, or not taken, on account of information provided.