So, my son has just proved himself wrong and got the right grades to head off to Uni, studying a combined degree in Business Studies and Sociology. As his Mum I could not be prouder, then I started to see the true cost of his success.
As a financial adviser I have planned for this as an outcome and made some good inroads into the first two years costs ready to cover the third over the next year, but what if I hadn’t?
The place itself costs £9250 per annum, this is the fee to the University. There is the option of student finance for this and is the most commonly used way to finance these fees. But in real terms this is just the tip of the Iceberg.
There is then the cost of accommodation. The first year they pretty much stay in halls so you would expect this to be priced around the student finance loan to cover these costs, but it doesn’t. The loan is for just over £4000 which effectively gives them £100 per week for their accommodation but this is not enough to cover even the basic accommodation at Canterbury (my son’s choice of uni) as this is anything from £120 per week to £167 per week. You can apply for an enhanced loan of another £4000 but this is means tested against your parents’ income. Of course, my son had the £167 per week accommodation as there seemed to be a lot more of that available!
Then there is the food and entertainment budget, I explained to my son that I would not be covering all of this and that he needed to get a job, we applied for a few before he went and teed up an interview for a local burger chain that, paid good money and fed you when you worked so it seemed perfect,……he slept through the interview time and strangely enough hasn’t found a job since! Apparently, “I don’t need to send him that much really as its only £1.50 a pint” so at least those food groups have been covered!
Even if he puts the place fee and accommodation fee onto a loan he will finish his course with £47,790 debt. However, I don’t think that is the figure to concentrate on.
When you look at the repayment scheme it is not that onerous as you only pay when the graduate starts earning £25,000 (rising to £25,725 in April 2019) and then the payment is based on the difference. So, say you earn £35,000 then you only make the payments on £10, 000, at 9%, which is only £900 a year. After 30 years any residue debt is wiped off and the loan doesn’t show on your credit file. In real terms most graduates will not fully repay their debt.
Other things to think about are what payments stop, child benefit ceases at 18 and if you are receiving child maintenance payments then the other parent has the choice to stop these too, not however, if the child is staying at home and going to college, if this is the case then the payments continue to age 21.
This all stacks towards early planning, university is an expensive outcome and one that could be spread over several years rather than waiting until the last minute and racking up a lot of debt.
Wendy Devlin Dip CII, CeFA, CeMap (MP & ER)
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