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Living costs are the real obstacle to university – for parents

student debt cats

Dear Daughter is thinking about what to do when she grows up. Architecture is one option she’s considering: what a fabulous and exciting career. The only issue is that it’s about seven years of university tuition.

Being a supportive parent, on Tuesday I took her to the Renzo Piano exhibition at the Royal Academy in London (he who designed the Shard at London Bridge). It’s fascinating stuff but OMG the physics involved. You can see why you need to study for so long – and OMG the fees it would cost.

Coincidentally, that evening I caught the Martin Lewis TV show: ‘Ten things Your Kids Should Know’. This touched on university fees, amongst other good advice. I thought it was worth summarising here as the subject is widely misunderstood.

Yes, tuition fees are huge and you do need a loan if you can’t pay outright. But you only pay back a small percentage every year. This is currently 9% of your earnings above a certain threshold, which is more like an additional tax than a repayment. In fact, many students may never earn enough to pay off their debts, about 75% of university leavers, says the Institute for Fiscal Studies. And 30 years after graduation, the debt is cleared anyway.

So far, so good, but the real clincher is living costs. You can get a so-called maintenance loan for this but the amount available to borrow depends on the parents’ household income. The maximum amount is £8,700 (£11,354 for studying in London) says Which? This, however, requires the household to be on less than £25,000 a year. Any more and the credit line dries up on a sliding scale. Which means parents will have to fill the gap.

Martin was pretty blunt on this point. If you’re very skinted or very minted, it’s not a problem. Those in the middle, who are probably pretty stretched already, will have to cough up. And if you’ve got two or three kids at uni at the same time, that’s going to be a big blow to the budget.

Martin’s message to parents was to start saving as soon as possible – not when your child makes the decision to study at the age of 18. He didn’t mention that the child could make their own contributions via holiday jobs and so on. Even so, it’s a pretty sobering thought, particularly as my Aperol fund will now be shrinking for the foreseeable future.

For the SMM guide to saving for kids, see here.

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Thursday, 13 December 2018