No-one wants to see their child struggle financially but how much should parents be helping out with university fees, or should they rely on student loans?
Going to university isn’t cheap for a young person, even if they live on baked beans and pasta.
The cost of studying at university is estimated to be around £57,000 for a three-year degree, according to SaveTheStudent.
That is around £19,000 per year, so your loved one could still be in touch for more than just help with their washing.
The costs
Tuition fees alone can cost up to £9,250 in England, Wales and Northern Ireland or £27,750 for a three-year degree.
There are no tuition fees in Scotland if the student has been living in the country for three years.
Additionally, a student will also need to pay for materials such as books as well as their own food, energy and accommodation.
SaveTheStudent’s National Money Survey estimates living costs of around £9,720 or £29,160 over three years.
Adding that to three years of tuition fees takes the total cost to £56,910 – more than double the average salary in the UK.
But there is help available.
All students can apply for a tuition fee loan to cover the annual university bill.
UK nationals who are studying for the first time can also usually apply for a maintenance loan to help cover living costs, which varies depending on the university and your household income.
But leaving university with large debts may make it harder for your child to get on the property ladder or access other credit as it will form part of the affordability criteria in applications.
It is easy to see why parents may be tempted to help their child with these costs instead.
Paying your child’s university fees may help give them a more financially stable start in life as it could be easier to access an affordable mortgage rate or other credit if they don’t have a large level of student loan debt.
Here is what to consider.
Financial independence
University is likely to be the first time your child lives alone and learns the importance of running a household and budgeting.
This could be a good chance for them to learn how to setup and pay bills or to put money aside for essentials such as the food shop and their studies.
There a risk of spoiling them if you pay for everything.
Would it be better for your child, and your wallet, if they got a job to cover their costs or if you just made a small contribution each month to get them started?
Will you have to pay anything?
University costs may look daunting but the repayment terms on a student loan are different to traditional finance and it may be that the debt never actually has to be repaid.
Student loan repayments only become due in the April after graduation and only once the borrower reaches a certain annual earnings threshold.
The threshold depends on when a student started their course, but it is currently £27,295 for an English or Welsh student who started a course anywhere in the UK on or after 1 September 2012.
It functions, in effect, as a 9% income tax levy above this threshold. Any student debts are cancelled 25 years after the first April the student was due to repay.
While this dampens their earnings potential it won’t affect aspects of their finances such as credit rating. Mortgage providers will take into account how much they’re paying off each month as a part of income considerations but won’t consider the size of the ‘debt’.
Some employees may not earn above the minimum threshold and may not ever fully repay the loan, so paying for them may just be wasting your money.
Can you afford to wait?
Rather than paying upfront, you could wait until the end of your child’s degree. If they look likely to earn above the repayment threshold, you could then step in and help.
This way, your child will also have hopefully learned how to manage their money during university.
Alternatively, your child may end up with a highly paid role that makes it easy for them to pay off the loan quickly.
Can you afford to help?
Don’t give away money you may need for your own bills, retirement or care needs.
That is especially important at the moment with inflation, or the cost of living, expected to hit 13% over the next few months.
This could mean higher energy and food bills, while mortgage rates could get more expensive as interest rates rise to curb inflation.
Alternatively, you could put money aside for another use such as to help your child with a mortgage deposit once they graduate.
It may be worth speaking with a financial adviser to see how paying your child’s university fees fits in with your own financial plan and the best way of using the money.