How do I Afford my Child’s University Education?

Many parents worry a lot about the cost of university, both for themselves and for their children. Since the introduction of student loans there have been increasing concerns about the costs, especially among those that feel that the loan system can lead to unnecessary debt for graduates. However, it is important to understand how the loan system works now and how it might change in the future so that you can work out properly whether you can afford to help your children out and whether, in fact, you will need to.

How student loans work

Students are all leant enough money to cover their tuition fees. Their family income is assessed and they will be awarded a maintenance grant if it is felt they need it. This is to cover things like rent, transport, books and food, but it is only given to those from lower earning families. It is calculated on a scale, so depending on the household income you will be lent anything from the maximum amount to nothing at all. The amount will vary as it changes with inflation. Repayments are also means tested, with them being taken through tax once a graduate is earning beyond a certain threshold and the loan is written off after thirty years if the graduate has no repaid it all.

Proposed changes and what might change

There have been some recent changes to the student loan scheme which may come in within the next year but it will depend on whether they are approved by parliament. These include using some grants instead of loans for the least well-off students, reducing the course fees and for loans not to be written off after thirty years but after forty years. This means that more students will be likely to repay all of their loans as they will have to repay it over a longer period. However, with some of the students from the poorest family having a grant instead, although not for the full amount, they will not have to repay so much. The lower fees will also reduce what has to be repaid. It is hard to calculate but as many graduates were not repaying everything within the thirty-year period there may be more chance they will within the forty years and with fees being less and therefore less to repay, many more may repay what they borrow in full.

How parents have to help out

In better off households the students do not get so much maintenance grant. Without this money it would be impossible for them to pay rent and buy everything else they needed, even with a part-time job. This is where parents have to step in and help. They will have to make up the short fall if their want their children to attend university. Many people would say that it is fair that better off parents do this, but the parents still need to think about how they will be able to afford it.

How parents can afford this

There will be some families that will easily be able to afford to do this and pay rent for their children as well as give them money for buying what they need as well. However, some of the families that are less well off or have a lot of expenses of their own or several children at university at the same time could struggle. There are things that you can do though, as parents, to make it easier –

  • Choose local universities so children stay at home
  • Start saving from when they are young
  • Encourage children to save and earn to help themselves
  • Parents both work full-time, when they may not have done in order to support their children more when they were at school and living at home
  • Parents do evening or weekend work to get more money in
  • Parents downsize their home or sell things they do not need to generate some money
  • Parents get a loan to help out.

These are just a few suggestions that could be helpful. It is good to try to calculate exactly how much extra you might need and how much money you will save if they are not living with you. Your food bill will go down, but it is unlikely that much else will change really, so you may not save lots of money. They will obviously still need to eat, but also pay rent and utilities as well as books, transport and they will want some money for fun such as evenings out. Figuring out exactly how much this will cost can really help you and this will enable you to be able to do a better job of calculating how much you will need to provide for them, obviously after taking away the amount of loan that they will be entitled to.