School and College Funds

A Guide to Saving for University fees

What are the costs?

We estimate that when living costs - such as rent, food, clothes, entertainment, books and tuition fees are taken into account - the average cost of a three-year university course (2011-12) will be in the region of £53,000. The full projected cost for the 2011/2012 academic year alone is £16,980 - rising to £17,659 for 2012/2013 and again to £18,633 for 2013/2014. This assumes inflationary rises of 4% pa. Many economic forecasters will quote figures of nearer 2% for this period which reduces the expected costs to £52,000 but, no matter what happens, it is a significant amount of money.

You can substantially assist with the costs of your child going to university by forward planning - the earlier you start to plan the greater the potential funds you can achieve. As part of the planning process, you need to consider whether you want to fund the full costs of university and pay them as and when they fall due, or whether you would prefer to allow your child to receive the student tuition and maintenance loans and then help repay these loans after graduation. The second option might be worth considering if you need more time to accumulate sufficient savings.

Years before funds needed	Estimated cost of attending university for three academic year with costs escalating by 4% each year	Monthly savings needed for three year course assuming 6% net investment growth each year	Lump sum investment needed for three year course assuming 6% investment growth each
0	£53,005
1	£55,125	£4,720.80	£51,922.49
2	£57,330	£2,254.25	£50,862.32
3	£59,623	£1,523.31	£49,823.79
4	£62,008	£1,157.71	£48,806.46
5	£64,488	£938.23	£47,809.91
6	£67,068	£791.81	£46,833.71
7	£69,751	£687.13	£45,877.43
8	£72,541	£608.53	£44,940.69
9	£75,442	£547.31	£44,023.07
10	£78,460	£498.26	£43,124.19
11	£81,598	£458.05	£42,243.66
12	£84,862	£424.47	£41,381.11
13	£88,257	£395.99	£40,536.17
14	£91,787	£371.51	£39,708.48
15	£95,459	£350.23	£38,897.70
16	£99,277	£331.55	£38,103.47
17	£103,248	£315.00	£37,325.45
18	£107,378	£300.24	£36,563.33

So how much do you need to save?

Newborn baby (18 years to go until university)

If you are a parent with a newborn baby you will now need to save around £300 per month to cover the expected cost of a three-year university course starting in 18 year's time. Alternatively, using the same growth assumptions, investing a lump sum of £36,563 might be sufficient. Either way, early forward planning is likely to result in significant savings compared with an expected outlay of around £107,378 assuming you make no provision at all and pay for the cost of university in 18 years time directly out of earned income.

Practical planning and things to watch out for

A stronger housing market might mean that students in private accommodation could face above inflation rent increases. Future rises in the maximum student loan facility might not be enough to keep pace with rising rental costs.

Taking time to project the costs you are likely to face in each academic year well in advance is a very worthwhile exercise. It will also help you to identify as early on as possible when university costs are likely to double up where you might have two or more children who could attend university at the same time. It can also highlight years when paying university costs are likely to impact on other plans for the family, such as moving home, paying wedding costs for older children and in some cases funding your own retirement.
Increasing numbers of students are opting to stay on to do postgraduate courses to help potential employers differentiate them from the graduate masses. These courses not only represent a full one year’s extra living expenses, but tuition fees are sometimes far higher than for graduate courses.

It is worth bearing in mind that even when the costs of university start to fall due when your child begins his or her course, you may still need to continue setting aside savings, either to meet the costs for future academic years or to help build up savings to pay for younger children’s university education.

Many universities have introduced an additional range of innovative support packages, such as bursaries, that are now available to a larger number of students. So, it will be worthwhile contacting individual universities and colleges to find out what financial help is available.

Few families can afford to save towards both university fees and a deposit for a child’s first home. However, where there’s a choice it’s often more beneficial for you to let your child fund the university fees by taking on the available student loans and for you to continue saving towards the eventual cost of house purchase. Your child will save more money in the long run by having a smaller mortgage. The typical standard variable mortgage interest rate is usually around 2-3 times the interest rate due to be paid on a loan from the Student Loan Company. Funding for a deposit on a house rather than for university costs also gives you longer to build up your savings.

An initial review is offered on a no charge and no obligation basis.

We have a community of independent financial advisers based throughout Scotland, England, Wales and Northern Ireland as well as a variety of services available over the telephone or via the internet. So even if you are not based near to one of our branches, we can still ensure that you will get quality independent financial advice from our IFA team.

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