From 2023 future graduates will start to repay student loans sooner, putting more pressure on young people at a time when cost pressures are rising exponentially.
The threshold for repaying student loans will drop from £27,275 to £25,000 and graduates will continue to pay them back for much longer – up to 40 years.
With student loan changes in the UK set to exclude many young people from receiving financial support, The Bank of Mum and Dad will feel heightened pressure to support their children.
Here are some ways you can help your children financially in higher education and beyond.
- Look further than Student Finance
There are plenty of opportunities out there at the grasp of ambitious children. If you believe your child has the potential to apply for extra funding – such as a scholarship – why not encourage them to do it?
Postgraduate Search has a comprehensive list of bursaries and scholarships: don’t assume these are only for low incomes, top grades, or new starters – there are incentives for everything from subject choice and sporting talent to gender and nationality.
You can also search for hardship funds and advice for emergencies or managing debt at the university, too. University welfare teams, lecturers or simply a student adviser can be the best place to start.
- Be careful how you give
Most UK students don’t have to pay tuition costs until after graduation. After that, 9% will be taken monthly from their salaries.
Most won’t ever pay back their entire loans, and some will never pay anything at all if they don’t reach the income threshold. Student debt doesn’t function like normal debt such as a credit card or mortgage. You only pay if you can.
As a parent, you might be wondering how you can help your children financially, but using a lump sum to pay down student debt is not an effective solution. It would be more sensible to put that towards a child’s deposit on a house.
Alternatively, if you have extra monthly income you think can help, giving them money to deposit in a Lifetime ISA (LISA) can be an effective way to help them financially in the long term.
- Help them become organised
Good financial habits come naturally to some, but for your graduate child, they might not be the best with their money despite several years at university learning how to get by.
Helping them develop good financial habits and teaching them about important financial tools such as credit cards, savings accounts and insurance can be a really good way to help them without necessarily just giving them money.
Good financial habits will help them enter their new careers on a really strong footing and prevent disasters in the future.
- Use your Junior ISA (JISA) allowance
If you still have a few good years to wait for your children to go to university, try looking into opening a Junior ISA account.
That way, when they turn 18, your children can use a bigger pot of money to go to university, accomplish their dreams or even use it as a deposit for a house.
This account can also be a useful tool to help to educate your children about finance, as it offers the option to continue saving and investing the money after they turn 18.
Junior ISA subscriptions see their limit maintained at £9,000 per year. The JISA limit was last changed in early 2020, when it was doubled from £4,500 to its current level. So, there are plenty of resources.