Funding Children’s Education and University Studies
Funding your children’s education and university studies might seem like an increasingly difficult challenge when faced with the current cost-of-living crisis. According to Student Loan Statistics, the average debt for a student who started their studies in 2021/22 is £45,800 once they have finished their course. Over recent years, this staggering level of debt has left many students questioning whether it’s worth studying at all.
Although it’s a common scenario for students to juggle part-time employment with their uni work, the latest financial pressures have taken this to a whole new level. As a result, parents are increasingly having to step in to financially support their child while at university. Many families are facing ever-growing energy bills, mortgage payments, along with other rising daily costs. So, what can you do to protect your money and savings?
Financing school pupils
A typical term in a private school can cost several thousand pounds. Despite a small increase of 2.1% (ONS) in those attending independent schools over the past year, there has been around a 7% decline for the past decade. As more affluent families face difficult decisions with their household spending, school fees are likely to be one of the costs cut.
For more information on the average costs of private schools and tuition fees, please read our previous blog, Supporting Grandchildren Financially.
Financing university students
When it comes to university, there are other considerations. As a young adult living away from home, there will be rising household bills and living costs on top of study expenses. Depending on whether your child goes into student halls or a shared house, you may need to buy extra items of furniture too.
University tuition fees are currently capped at £9,250 (2022/23), and there is always the option for a young person to apply for a student loan. There are three types – Tuition Fee Loans, Maintenance Loans and Postgraduate Loans. But parents may find themselves having to pay off this debt after their child leaves university. Once a graduate earns over a certain income level, they will be expected to start paying their student loan back.
Saving options for education costs
Depending on the age of your child, it could be worthwhile opening a tax-free ISA. This will give you a regular way to save as they age, so you have a cash pot ready to support them with their education. You cannot have more than one cash ISA, but you can have a Cash ISA and a Stocks and Shares ISA. The current ISA allowance is £20,000 for the tax year.
You could also look at opening Junior ISAs in their own name, so they have their own money to use as they wish when they reach 18 years. Similar to an adult ISA, you can choose between a Junior Cash ISA or a Junior Stocks and Shares ISA, or they can have both.
There are currently a few fixed-rate savings accounts, which offer higher interest savings rates than a standard bank account. Our strategic partners can advise you on suitable savings strategies, as well as pension reviews – please get in touch with our team.
Equity release for funding education
If you have positive equity in your home, you could consider releasing equity from your property. Equity release is a type of long-term loan known as a Lifetime Mortgage and can give you access to cash funds locked within the value of your home. If your home is now worth more than you originally paid for it, this usually means you have some positive equity.
Equity release is available to those aged 55 or over, and the loan only gets repaid after you have passed away or if your home has to be sold due to you going into long-term care. We are an authorised equity release broker, so you will always receive accurate advice.
Are you an accountant or an IFA with a client who needs to fund their child’s education? Equity release will enable them to support their family without dipping into their savings. Please get in touch with our team; we should be able to offer your client a practical solution.
If you need help funding a child’s education or university studies, please talk to our friendly team for advice. Call 01455 238 650 or send us an enquiry.