Parents putting financial health at risk to fund university costs

When it comes to funding a university education, it is parents and grandparents who typically look to provide the money. But even though this may be the case, last year’s graduates from English universities are still left with an average of £44,000 debt (source: Sutton Trust), with some parents still, on average, expecting their children to leave university with £23,000 debt.

Students are closer to the mark, predicting an average debt of £35,000. Students expect, on average, to take 17 years to pay off their debt once graduated; research from the Sutton Trust suggests three in four graduates will be paying off student debts into their 50s.

Empty nest, empty wallet

While a substantial number of parents (61%) seem willing to help with the financial costs of university, rising to 73% for Londoners and a low of 47% in the South West, a significant proportion (78%) of these will be relying on their own cash savings.

Some 62% of parents say they will use a proportion of their cash savings, while 20% will be putting themselves potentially at financial risk, saying they or their child’s other parent will use all or most of their cash savings. 9% of parents said they or their child’s other parent would take out a bank loan in their own name to help fund their child’s university costs – something that seems particularly drastic – and 8% of parents said they would sell shares or other financial investments.

Parents overestimate amount needed for regular saving in stock market

Most parents look to cash savings to fund their children’s university costs, and there is a perception that quite large sums of money are required to invest in the stock market. Parents estimated, on average, that the minimum amount required to invest monthly in an investment saving scheme was £81.51 per month, when in fact the minimum amount required to invest in a children’s investment company savings scheme is much less, namely £25. Parents in the 35–44 age bracket overestimated this figure the most (£91.76 per month), and of course it’s this group who are likely to have the most time on their side.

The research suggests that many parents massively underestimate the amount of student debt their children will graduate with. Parents are willing to make huge financial sacrifices to help their children through university, and many grandparents are sharing the financial burden.

Bank of Grandma and Grandpa

A fifth (20%) of grandparents are contributing or planning to contribute to children’s university costs, to the tune of £2,402 on average per year. A quarter (25%) of grandparents are already contributing financially to everyday family expenses, and of these 12% of parents say that their child’s grandparents currently contribute financially to holidays, 4% to school fees, and 3% respectively to building projects and childcare, while 2% are contributing to a property deposit.

An education or a first home?

Interestingly, one third of students (33%) said that they had a savings and investment scheme which their families had ‘earmarked’ for their future. Half of these (51%) wanted the money to go towards their first property, 44% wanted to spend it on university costs and a free-spirited 16% wanted to spend the money on travelling.

Want to assess the options available to you?

Current university students may face leaving with massive debts as well as a degree, but parents can act now to ease the financial burden. It’s crucial not to be afraid to seek professional advice. We can assist you to get a clearer idea of the opportunities and drawbacks involved in making further education-related choices. If you would like to assess the options available to you, please contact SFIA Group Ltd on 01628 566777 or email colin_a_sanders@yahoo.co.uk for further information.

Source data:

The research was conducted by Opinium from 8–16 June 2016 amongst 1,006 UK parents with children aged 13–18 who are planning to go to, or are already at, university, and 1,014 UK full-time students planning on going to, or currently at, university.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.