For many years now, students looking to enter university have faced the prospect of annual fees of over £9000. With many courses being 3+ years in length, young people are understandably often now thinking twice before submitting their UCAS applications. This is not to mention the living costs that will pile up the costs even further.
As financial advisers to a number of clients with teenagers thinking about university study, we wanted to make you aware of some important information before you make any big decisions…
#1 Do not save up for university tuition fees
This might come as a shock, but in general, we recommend that parents do not set aside large sums of money to pay their child’s tuition fees up-front.
It might sound like a laudable aim, and indeed in many parts of the world (e.g. the USA), it is common and logical for parents to do this. However, in the UK this is actually largely a waste of time and money due to the current system in place.
Under the present rules, new students will have to pay 9% of their wage above £25,000 towards repaying their university tuition fees, after they leave higher education. If they do not repay the full amount within 30 years after graduation, then the outstanding balance is wiped out.
We say this knowing full well that the interest rate on student loans rose from 3.3% to 6.3% after 2012. Yes, this means that on paper your child owes more to the government throughout the course of their life. However, the 30-year wiping period means they can effectively ignore this.
The bottom line is, neither you nor your child needs to worry about saving up to cover the costs of university tuition fees. Neither do you need to strive to pay off the amount early once after completing higher education. The debt will eventually disappear.
#2 Educate yourself about financial perks of university
Although university students are often typecast as poor, remember that there are some great benefits on offer which can help save money.
For instance, if you are a full-time student and live with other students then you are exempt from council tax. There are also many UK banks which offer attractive student bank accounts and perks which you should exploit, such as 0% overdrafts.
Of course, there are also many retail outlets and shops which offer student discounts to those in full-time, higher education – such as gym memberships and food chains. Take an hour or so to make yourself aware of these offers and take advantage of them. Over the course of 3+ years of study, it all adds up to hundreds – if not thousands of pounds – and makes a massive difference.
One little-known loophole which many students can take advantage of concerns the UK TV licence. If your parents have a licence and you live with them outside of term time, then you do not technically need your own TV licence during term time if you watch on a device which is not plugged into an aerial or mains plug socket!
If you are paying for a TV licence, however, then make sure you apply for a refund to cover the summer period when you are back at home.
#3 Buy sensibly when it comes to course materials
University textbooks can quickly rack up in cost when you buy them new. Indeed, it isn’t uncommon for parents to spend hundreds of pounds on these materials for their child prior to the start of a new academic year.
Do not do this! Instead, find cheap second-hand textbooks when you arrive at university. Use the library for the first few weeks and scout out student notice boards, social media forums and online resellers to save on unnecessary costs.
#4 Maintenance & living costs
Some students are entitled to a maintenance loan, with the amount provided at varying levels depending upon parental household income. (The state expects parents to contribute to the living costs of their child whilst they attend university).
So, whilst we do not recommend that parents save up to pay for their child’s tuition fees, we do suggest that they plan ahead to support a child with their living costs. Quite often, it helps to sit down as a family during or prior to your child’s A-levels, in order to talk about how things could work financially if they are planning to attend university.
It could be, for instance, that you agree to provide £1000 or £2000 per year for your child’s university living costs. The rest of their costs might be covered for the year by their maintenance loan, plus earnings they might make through a summer job.
#5 Protect your deposit
It is overwhelmingly likely that students will rent accommodation from a landlord they do not know during university. This is an area where many students run into trouble and financial disputes, so it really does pay to educate yourself ahead of time and to know your rights.
For instance, when you arrive in your new residence your landlord must act within a month to put your deposit into a Tenancy Deposit Scheme. Make sure they do this. If they do not, then you might be able to claim back up to four times the amount you originally put in.
Finally, if there’s one crucial, parting piece of advice we would offer, it is that you draw up a monthly university budget – well ahead of time.
Having a good idea of how much money goes in and out of your student account is crucial to knowing whether you can make ends meet, and live comfortably at university. Be honest and realistic about how much you are likely to spend, as well as which costs you need to be careful not to allow to spiral out of control.
For instance, food and alcohol are often areas where both parents and students frequently underestimate how much the latter will spend during a typical month. If you eat out a lot at the moment as a family prior to your child attending university, for example, how might that affect his/her spending habits once they are living on their own?