Any parent who receives news that their child has achieved some excellent A-level results, will be justifiably proud and pleased that they now have the opportunity to apply for a place at their chosen university.
That initial euphoria soon melts into a more pained expression when it is discovered that if your household income is above £45,000, you are going to have to find an amount north of at least £600 each month, in order to support them while they are at university.
When you look at retirement funding estimations at www.autoenrolment.co.uk, you get a good idea of what will be needed to maintain your current lifestyle after you finish working, which then makes the financial burden associated with sending your children through university, look even more daunting.
Making up the shortfall
A typical student from a family that enjoys an average household income, would have received about £14,300 last year in loans and grants.
When you take into account the total estimated cost of studying for the average student, when you add up tuition fees, accommodation and living costs, the total bill will normally come out at about £22,000 per annum.
As you will quickly see, there is a substantial shortfall between the amount of funding received and the actual amount of money needed each year they study. Doing these sums allows you to see why the average parent who is supporting their child through university, will have to find about £650 per month to plug the gap in funding.
Working out your bill
If you are a parent who is yet to experience the sense of joy and trepidation in equal measure, associated with sending their child off to university, you should try to work out what level of financial support you will be asked to provide.
The amount of the maintenance loan that your child can claim is dependent on the level of household income. If it is less than £42,875, then a student should be able to claim the full entitlement. The amount of financial support available diminishes in line with the rise in household income that you currently have.
The parental contribution is calculated at £1 for every £10 of income above the current threshold, so the more you earn, the less financial support you can expect to receive.
Use the student finance calculator to work out exactly what you can expect to receive in financial support, which will then give you the chance to work out how much you are going to have to find each month out of your own resources.
More people than ever before are delaying starting a family until they are more financially secure, but parenting a child who is then going to university when you are officially a pensioner, has its complications.
There is a growing number of older parents in the UK who are finding that they are having to pay for their children when they are on a retirement income. They may even have a student debt residue owing themselves, which thankfully gets cancelled now when you turn 65 or 30 years after you first took out the loan.
Formulating a plan
Whatever personal situation you find yourself in with regard to funding your child’s university education, you need to formulate a plan to deal with the cost you are facing.
Your child only becomes liable to start repaying the student loan when they are earning over £21,000 per annum in England and Wales, or £16,365 in Scotland. After they reach and exceed that threshold, they will have 9% per annum of what they earn above that figure, deducted by their employer as part on their monthly salary deductions.
Do not be tempted to take out a loan to repay the loan on your child’s behalf. The main reason why this would not be a good idea is that the interest rate for a student loan is often much lower than many other loans available.
If your son or daughter look destined for a well-paid professional career after they leave university, it might make sense to pay the loan back if you have the resources, as it will clear a debt that will probably be paid in full anyway as their earnings rise.
It is estimated that about 60% of graduates won’t have paid their full loan back after 30 years, so bear this in mind, as you could be stretching yourself to fund a repayment that may not make financial sense, especially when you consider how much you have paid to fund their time at university already.
Ruby Harris is a personal finance consultant. She enjoys sharing here ideas and insights through blogging. Her articles mainly appear on personal finance related blogs and websites.