The cost of going to University is increasing. The OECD’s annual survey of education 2015 showed that England has the highest tuition fees across the industrial world, followed by the US and Japan. On average a student was paying around £6000 a year in fees alone and they could be set to increase from next year.
The Government’s Department for Business Innovation and Skills green paper, published on November 6th 2015, proposes that top English universities should be allowed to charge more than £9,000 a year for tuition fees, as they propose to link the level of tuition fees with the quality of tuition you receive, based on the University’s performance.
The change in fees will make increase the overall cost of attending University significantly and will present more problems for parents wanting to support their children through University.
In 2012/2013 the NUS estimated that the average course cost was £10,133 for each year at University. This was broken down into the sections below. Applying the proposed new fees raises this cost by £646 and leaves the door open for further increases. Adding on average living costs the cost per year comes to £19,206, making the cost of a three year course a staggering £57,618.
Tuition Fees £8354/£9000
Books and equipment £1070
Living Costs (average according to Cost of University study from LV 2012)
Leisure and clothes: £1,707
Utility bills: £616
Household essentials £376
Funding University Costs
So how are you going to give your child the option of attending University.
Firstly, there are the standard ways of generating income to pay for sending your child to University.
- A tuition fee loan, which can be applied up to the full cost of fees and is repayable when the student starts earning £21,000. It is dependable on the place of study both the University and the location. We will assume £9000 per year for this purpose.
- A means-tested Maintenance Loan, which was £5740 for studying away from home outside of London in 2015. This must be repaid when the student starts earning £21,000 or more and it is repayable at 9% of any income above this threshold.
- Maintenance Grants are also available for low income families which are not repayable. Your income must be below £42,620 in order for you to apply and what you receive will vary according to your income level. Extra assistance is available for people studying with disabilities, learning difficulties or mental health issues and in some cases extra support is provided special circumstances such as lone parents.
However, even if you apply for the maximum available in terms of loans you are still facing a shortfall of £4466 per year, £13,398 for a three-year course and this is if you get the full loan amount and if you want to apply for the loan.
So what else can you do? An average Children’s Savings Account is currently paying out 1.56% in interest, according to Moneyfacts 2015. If you save £55 per month for 18 years your outcome would be £13,705.46, just enough to cover the current shortfall, but not allowing for any increases in the future. If you want your child to be debt free then the amount you need to be saving at this rate is £232 a month for the next 18 years, accumulating a total of £57,812.13.
If this seems like a large amount, then speak to us about your options for investing in your Children’s future.
You can currently for example invest up to £4080 in a Junior ISA this tax year. The fund cannot be touched until the child is 18 allowing a potential University Fund to build up. You can choose to split the £4080 allowance between a cash ISA and a stocks and shares ISA or just invest the total amount in one. Over time the stock market tends to outperform cash and therefore there is the potential for greater returns, however you must consider your attitude to risk as stock market investments can fluctuate. They are best invested for the long term.
Pensions, Tax free friendly society Investment Plans, regular savings ISA’s Unit trusts, Investment trusts and Investment Bonds could all help you to save for your child’s university. There are various tax issues to consider so professional advice is essential to make the most of your savings and utilising your children’s or grandchildren’s tax allowances.
Speak to us today about arranging a free initial Pensions and Investments Review and we will review your current situation and future aims and help you plan for your child’s education.
Please note any opinion in these articles is the opinion of Aiming for Utopia Limited only. No action should be taken on the basis of this information alone and we always recommend you seek independent financial advice. We cannot be responsible for the accuracy of content on third party websites.
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