How to manage the cost of university

Sarah Coles
Updated

As nervous A-Level students open their results this week, parents could be forgiven for feeling a bit anxious too – especially when they consider the cost of further education. The sums involved can be hair-raising.

Three-years of study for an English student will cost an estimated £67,000, and while some of it can be borrowed through the government loans schemes, parents could be in the frame for a lot of it. They’d be forgiven for wondering whether it’s worth the cost.

A big chunk of it will fall to the student, through government tuition fees loans and maintenance loans, repaid on graduation. Unfortunately, there’s an increasing chance they’ll have to repay these in full — plus interest — after the rules changed last year. Most people who started university before the change won’t have to repay everything borrowed through government schemes. If they started since last September, most people will.

The maths around student loans changed last year, when the threshold income for making repayments was cut for new students to £25,000 and the length of time before the outstanding debt is written off was lengthened from 30 years to 40 years.

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It means they’ll start repaying sooner, they’ll do so on a bigger proportion of their salary, and they’ll also continue to pay it for longer. The combination means around two-thirds of graduates will end up paying their debts off in full, which is a significant increase.

On top of this, many students will work alongside their studies, but parents will usually still need to top up living costs. This has been the case since maintenance loans were introduced, but in recent years parents have had to do even more because the value of the loans have risen more slowly than inflation.

Technically, it’s going to be worth every penny. People who graduated in 2021/22 now earn an average of £27,500 a year, and over their working lifetime, graduates out-earn non-graduates by £6,500 a year. Over a 45-year career, this could add up to £292,500.

The latest Hargreaves Lansdown Savings & Resilience barometer found that those with degrees were more likely to have enough savings, enough cash left at the end of the month, to own their own home and be on track for retirement than those without.

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The financial benefits don’t end with the graduate either. The impact is felt through the generations. If either of your parents have a degree, you’re likely to be better off financially than if they didn’t.

There are various reasons for this — graduate parents may be able to pay for education to give their kids an academic head-start, provide more opportunities, or simply give their children money to make things like home ownership a more realistic prospect.

Of course, there’s a big difference between a degree paying off in the long run and forking out to support your child’s living costs now. Once you’ve cut your own expenses to the bone to free up any possible cash, there few other options available. It’s why some parents will end up borrowing or remortgaging.

It's a handy reminder for anyone who thinks there’s a chance their child might eventually go to university — the earlier you start saving, the easier it will be.

One popular home for any savings or investments for children is the Junior ISA, which they’ll be able to access at the age of 18, just at the point they may need it for their studies.

It might seem like you’re getting ahead of yourself if you start saving or investing for university before they’ve started school, but as any parent of an A-Level student knows, these major milestones can creep up on you at an alarming pace.

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