£55,821 – the debt required for a university degree
June 7th, 2012 by Dan Woodruff, Certified Financial Planner with Woodruff Financial Planning
Recent statistics released by UCAS, the body responsible for university admissions in the UK, shows that university applications fell by 8.7% for entry in Autumn 2012. There seems little doubt that the main reason for this will be the increase in the costs of a university education. This article explains why UK students will be burdened with a debt level of £55,821 for a 3-year course. More importantly, we explain what parents and grandparents can do to stop their loved ones falling into a spiral of debt due to the costs of a university education.
University tuition fees
Parents of children approaching university age in the UK will be aware that the maximum allowable tuition fees levied by universities will now be £9,000 per year (with a projected average being £8,000 per year). Obviously, this is increasing the costs of a university education.
Living costs
The maximum allowable loan for this year is £5,500 if you study outside London, and £7,675 if you study in London. However, according to the National Union of Students, the costs of a university education should be £10,607 if you study outside London (£11,697 in London).
Therefore, we can assume that the costs of a university education should be £8,000 per year for tuition and £10,607 for living costs, making a total of £18,607 per year if you study outside London. Obviously, there is a shortfall in living costs which cannot be made up by student loans, meaning extra support would be needed from family or a part-time job.
The total cost of a 3-year undergraduate degree is therefore estimated to be £55,821.
How student loans are repaid
Earnings over £21,000 will attract deductions at 9% of income over that figure. Obviously, some potential students are doing a basic analysis and deciding that this level of debt is not for them.
Financial planning and the costs of a university education
We have put together a basic analysis of how much you need to save to pay for the costs of a university education so that you can ensure that your child is debt-free on leaving university. This shows the monthly savings needed to achieve the lump sum of £55,821 based on the age of your child now using the investment growth rates shown. As you can see, the later you leave it, the more you will need to save each month to achieve your goals. Remember that this shows the cost per child!
| Child’s age | 3% growth | 6% growth |
| 13 | £862 | £799 |
| 12 | £707 | £646 |
| 11 | £597 | £536 |
| 10 | £514 | £455 |
| 9 | £450 | £392 |
| 8 | £399 | £341 |
| 7 | £357 | £301 |
| 6 | £322 | £267 |
| 5 | £293 | £238 |
| 4 | £267 | £214 |
| 3 | £246 | £193 |
| 2 | £227 | £175 |
| 1 | £210 | £159 |
| 0 | £195 | £145 |
Tags: costs university education, student loans, tuition fees, university fees
