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Are you doing your sums to help ease the financial burden of putting your university-age children through higher education? Consumer finance writer Teena Lyons offers some helpful advice
Research from the uSwitch.com price comparison website says students collectively have amassed £27 billion in debts over the last decade – equivalent to half the domestic product of New Zealand.
Higher tuition fees leave students with debts of an average of £22,000 and they face up to 11 years hard work to clear them. How can parents help get their children through university without landing with serious long term financial problems?
Step one: Get educated. Tuition fees are paid when you go to university. Students are lent the money and then repay it once they finish and are earning more than £15,000. The amount rises each year in line with inflation, so this year it is £3000 and next year it will be £3,070. This cash will come from a mix of borrowing and from parents. The fees vary according to your country of residence, with grants in Wales and Scotland, see www.universitiesuk.ac.uk for details.
Step two: Borrow right. Not all debts are the same. The official government-backed student loans offer the best deal and should be the first port of call. There is nothing to repay until after graduation and then the less you earn the less you repay. High street banks are desperate for students custom - they know once they sign up they will very likely be a client for life – and offer interest free deals and freebies from iPod Shuffles to a five year Young Persons Railcard. But, beware, after graduation expansive commercial rates of interest will apply, whereas student loans remain cheap for life. And finally, never, ever turn to sources such as credit cards or bank loans - the student will not be able to repay them quickly and the interest will mount up.
Step three: Take all the support available. Take some time to check out what a student may be entitled to by way of scholarships, hardship funds or bursaries – there is loads of stuff out there. First port of call is the university’s welfare department which can offer cash to those with disabilities, young parents, teacher training students, or other special circumstances. It is estimated that while around half of full-time students qualify for some sort of grant, many never take it. Also, check out www.scholarship-search.org.uk to find out if there is any funding – you could be surprised.
Step four: Get smart. From the moment the student loan is paid, encourage them make use of it and any interest free overdraft which is offered, by putting the cash in a savings account to earn interest. If they use an internet account they can move money across to their current account as and when they need it. If they’ve earned less than £5,035 in the year, they are entitled to tax free interest and should ask their bank or building society for form R85, to reclaim interest paid before tax.
* Teena Lyons' opinions are her own and are for general information only. Always seek independent financial advice.
