Planning for your child’s university

If your children are still little, there’s only so much planning you can do about university. After all, the fees that students paid 18 years ago – and how they repaid them – weren’t the same as the current situation. However, one thing does seem like a safe bet; unless you live in Scotland, it’s unlikely to be cheap.

For courses starting in 2018, the fees for British students studying in England could be as high as £9,250 a year. However, the picture then gets a little more confusing. Scottish universities are free for Scottish students, but English, Welsh and Northern Irish students pay up to £9,250 a year. Welsh universities are up to £9,000 a year for all British students, while Northern Irish universities cost up to £4,160 for students from the region, but up to £9,250 for everyone else in the UK.¹

Unless you’re Scottish, that’s a lot of money to be spending, but it’s also just the beginning. Accommodation is expensive across most of the UK – except in London, where it can be really expensive.

For example, the 2018 NUS and Unipol Accommodation Costs survey suggests that the weighted average rents across the UK for purpose-built student accommodation in 2018/19, excluding London, are £137 a week. In London, it is £200 a week.

Assuming a 39-week rental contract (though this figure can be higher or lower depending on the university and halls), students outside London have to find an extra £5,343, while those in London will need £7,800.

And we’ve still only just started. Students will probably need to buy books and university equipment (some estimates suggest this alone can come to £60 a month)² and they may need to commute from their accommodation to their courses. Then there are the basics: food and drink, clothes, socialising, exercising and so on.

Put simply, it’s a lot.

¹ Source: www.ucas.com, as at January 2019
² Source: www.timeshighereducation.com, as at January 2019

Students can get a lot of help with these expenses, but most of it comes in the form of loans that have to be paid back – with all the associated stress that debt can bring. Being in a position to help them could make a world of difference and not just to their peace of mind. It’s a lot easier to concentrate on your studies if you don’t have to work part-time jobs to pay the bills or struggle to afford the necessary course materials.

There are two main ways you can do this tax-efficiently. You can save for them in an ISA or you can set up a Junior ISA in their name. The tax benefits in both cases are much the same. There’s no income tax or capital gains tax to pay and you don’t have to declare any ISAs on a tax return. In the case of our ISA and our Junior ISA, you also get the same extensive investment range. In most cases you just pay the ongoing charges for the funds you select, or the trading costs if you prefer shares, and our low-cost service fee if you are saving into an ISA. We don’t charge a service fee for investments held in a Junior ISA. You can save into either of them on a monthly basis as well, which can make it easier to build up a significant sum over the long term, as it just becomes one more monthly expense to build into your budget.

Where they differ is what happens with the money. If it’s in an ISA, it’s held in your name, so you can choose what to do with it. This means that if your children choose not to go to university, for example, you can hold it back until they really need it – such as putting a deposit on a first home.

With a Junior ISA, you manage the money for your child, but it belongs to them. On their 18th birthday, they have access to it. That said, it is the perfect time to be able to draw on the savings when it comes to the costs of university – and it may encourage them to take more responsibility, as they have to make the decisions.

You can put up to £20,000 in an ISA this tax year and the allowance is per person, so if you have a spouse or partner, they can put aside a further £20,000. The allowance for the Junior ISA is significantly lower, but it’s still more than enough to make a difference. For the 2019/20 tax year, it is £4,368 per child.

Saving for university is unlikely to be something you get done in a year. It’s a gradual, ongoing process where you put aside what you can, when you can. This means it makes sense to talk with your child about university as soon as they’re in a position to start thinking about it.

While many teenagers don’t really know what they want to do, some have a much clearer idea of where they want to go with their lives. If this won’t be taking them to university, you can change your plans accordingly – as the money you would be saving may be used more effectively somewhere else.

They may be thinking about an apprenticeship, for example, or looking at joining the armed forces. Alternatively, they may want to set up their own business and see university as time (and money) they could use more effectively by getting started.

Even if they’re sure they want to go to university (or are just following the path of least resistance), talking about it well before the time can help them get a clearer picture of the benefits and the costs. You can also encourage them to start their own savings. Even if this doesn’t add up to a large amount, having to spend money that they’ve spent several years putting aside can give them a much greater appreciation of what it represents – so they could, potentially, use it more sensibly.

In the last few years before university, it’s time to look at what’s available to them. We won’t go into detail here, but there are loans, grants and funds your child may be able to access – and student discounts can reduce a lot of costs, so day-to-day expenses can be more affordable.

Loans can cover the full tuition cost of a course and students don’t start repaying them until their earnings have reached a minimum level. There are also maintenance loans for living expenses, which vary depending on how and where you go to university.

Some Government grants are also still available, for students in specific situations, such as those who are disabled or need help with child care.

You can find out more about them on the UCAS website or the Government’s own website.

There are also grants from other organisations, including some charities, plus bursaries that target more specific groups of students, costs or courses. Your child could even be eligible for a scholarship if they’re a high achiever. You can find out about some of the current funding options on the ‘Save the student’ website.

There are also some companies and other organisations that will sponsor a degree. However, it’s worth noting that this may lead to a very different university experience as the sponsor may put demands on the student’s time. There’s more information about this route on the ‘all about school leavers’ website.