University fees: how much should you be saving?
Although there’s a fair amount of debate over the value of a degree and if higher education increases your chances of getting a job, over half of teenagers go on to study at university. If you think your child will want to go, it could be time to start saving for their time there.
Let’s start with the bit you don’t need to worry about. Tuition fees for first-time UK undergraduates are funded by the Student Loan Company and are only repaid after the degree if the graduate earns enough money in their job. Currently the repayment levels are 9% of everything above a £25,000 salary broken down into manageable monthly repayments taken out of their pay packet before the wages even get into their bank. Student loans are repaid over 30 years and if the graduate’s salary dips below the repayment threshold, repayments will stop until they are back above it.
What do we have to pay for?
Here is the part that you’ll have to cough up for. Students will also receive a ‘living’ or ‘maintenance’ loan to live off whilst they are at university which should cover their rent for accommodation and everything else they will need to live. But, this is where you as a parent may have to subsidise. Of course, the student could also help to subsidise with part-time earnings but this may not always be enough to cover their costs if they have a lot of contact hours on their course.
How much will you have to pay?
The living loan is ‘means tested’ which will result in a potential gap between the full loan and what your child will receive, based on parental earnings. The means testing is calculated on residual income. Your total family income before tax and minus pension contribution, give or take an allowance if you have any other dependent children. For students living away from home studying outside of London the parental contributions are as follows. The full loan is £8,700 a year.
||Student will receive
||Minimum parental contribution per year
|£25,000 or less
| £62,187 or more
The maximum amount of money you would need to contribute, based on this year’s statistics, is around £5,000 a year per student. Meaning, on a three year course, you may need to save at least £15,000 to fund a single child through university. For students living with parents or studying in London, the full loan is different and you can find the full list of loan and parental contribution amounts on Money Saving Expert.
If your child is an early teen and talking about wanting to go to university it’s a great idea to start saving as soon as you can. View our entire range of savings accounts and see which one would fit your lifestyle and savings goals. To also encourage the future students themselves to save, check out our #SavingSwaps and set them a goal to save for their own university adventures.