How to fund a university education

With university fees increasing enormously from September, how do you spare your child from years of back-breaking debt? Tim Bennett examines the options.

The cost of going to university is rocketing. From September, students in England will face paying average annual tuition fees of £8,385, says Alexandra Goss in The Sunday Times. Three-quarters of universities are levying the maximum £9,000 for at least one course, while a third will charge it for all degrees, according to the Office for Fair Access. That's well over twice the average paid in 2011-2012. Taking living costs into account, this year's average student could graduate with £53,400 in debt. So what's the best way to pay for all this?

Most students won't be able to just write a cheque, so many will be forced to take out a student loan instead. But watch out. Financial adviser Hargreaves Lansdown has looked at the interest payable on a student loan, based on borrowing the £9,000 of tuition fees every year, plus £5,000 of maintenance costs. If a student lands a £40,000 a year job, they'll end up paying back £133,240 over 29 years, including interest of £89,750 (this assumes average inflation of 3% a year plus salary growth of 2% above the retail price index). So what can nervous parents do?

First, your children should consider whether they need to go to university. A would-be doctor or lawyer needs the relevant degree. But outside of the obvious professions, will a degree course boost job prospects? They might be better off joining an employer earlier and working their way up.

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Second, make sure they get any help that they can with fees. a good place to hunt for subject-specific scholarships or bursaries, as are individual university websites.

Third, how about studying abroad instead? Fees at foreign universities can be lower than in Britain and they'll gain valuable experience and, potentially, language skills too. Visit

What if you are among the 15% of parents who, according to HSBC, plan to pay their children's university fees themselves? First, ensure you have looked after your own pension and other financial needs first your children should have many more years of earning potential ahead of them than you do. If you are still determined (and able) to pay their fees, then be careful how you save for it.

Junior individual savings accounts (Jisas) are heavily promoted as a tax-efficient way of saving for children. However, your child gets control of the account when they reach the age of18, and may not share your views on how it should be used. Top up your own Isa (you can save up to £11,280 per year) and use that when the time comes instead.

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.