The typical university costs of a 3-year course is £66,567 in tuition fees and living costs. Despite this, it seems that the 2012 changes to allow tuition fees to rise to £9,000 are not saving the Government as much as previously expected. We examine student funding and work out how much you need to put aside to enable your children to leave university free of debt.

Key points

  • University costs £66,567 for a 3 year course
  • Funding options – tuition fees and grants
  • Study shows university costs increases may cost the State more in the long term
  • How much should you save to allow your child to leave university debt-free?

University costs – tuition fees since 2012

Since 2012 the maximum tuition fees for a university degree in England are £9,000 per year. The average cost of a course for those who started their degree in 2012 was £8,600 [source]. It is clear that many universities are charging the maximum allowable fees.

The BBC has published a list of tuition fees by university.

Living costs

The National Union of Students (NUS) regularly publishes data on tuition fees, course costs and other living expenses.

Their most recent survey estimates that outside of London the annual university costs could be:

  • £10,133 for course costs
    £8,354 for tuition fees, £709 for travel, £1,070 for books and equipment;
  • £12,056 for living costs
    £4,834 for rent, £1,956 for food, £316 for household goods, £42 for insurance, £2,074 for personal items, £1,524 for travel, £1,310 for leisure [source].

These figures are based on the 2012/13 academic year, so have probably increased.

This brings the total annual cost of a university course to £22,189. Ignoring inflation, over a 3 year course this brings the total cost of a university course to £66,567. Interestingly, this is an increase in expenses of £10,766 in 2 years since we last reviewed these costs.

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University costs – funding options

Most students fund their tuition fees and living costs through a combination of student loans, and other funding sources such as parent support or a part-time job.

Student loans are subsidised by the State, and charge interest of 0-3% above the inflation rate. The maximum you can borrow for tuition is £9,000 (paid directly to the university) and £6,600 for living expenses if you are studying outside London. See here for more information.

If your household income is below £42,620 you may qualify for a grant of up to £3,387. Households with earnings below £25,000 qualify for this figure.

What this means is that if you do not have any other funding sources, student loans will not be enough to fund a university course. Based on the NUS estimates students would have a funding gap of £6,589 if they take the full student loans. The temptation could be to use other, more expensive debt to fund this shortfall. The alternative is a part-time job, or further support from family.

Student loan repayments

Earnings over £21,000 will attract deductions at 9% of income over that figure.  Some recent statistics show that 45% of graduates do not earn enough to repay their loans [source]. Apparently, if this figure reaches 49%, the Government will lose the money they gained by introducing higher tuition fees. If you never earn above the £21,000 threshold the debt would be cancelled after 30 years.

Study shows tuition fees may not save the Government as much money as previously thought

A study by the Institute for Fiscal Studies (IFS) has estimated that each student will borrow £40,000 in today’s terms. The Government subsidy to student loans costs 43% of this figure, meaning an average cost to the State of £17,200 per student. The State also pays £7,600 per student per year to the academic institution. Tweet this.

The study estimates that the tripling of university costs on tuition fees to £9,000 in England to £9,000 have only saved the Treasury 5% of the pre-2012 levels. These savings would be wiped out if tuition fees rise by a further £500. The system that was supposed to fund higher education has delivered 25% additional funding to the universities while burdening individuals with massive debts. In the long-term the system could cost the taxpayer event more.

Financial planning and university costs

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 £66,567 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! Tweet this.

Child’s age 3% growth 6% growth
13  £1,029  £954
12  £844  £770
11  £713  £639
10  £614  £541
9  £537  £466
8  £476  £406
7  £426  £357
6  £384  £316
5  £349  £282
4  £319  £253
3  £293  £228
2  £270  £207
1  £250  £188
0  £232  £171

How to read this table

The child’s age column is the age of your child now. The 3% growth column assumes average annual growth on your savings of 3%. The 6% growth column assumes average annual growth on your savings of 6%. Therefore, if your child is currently aged 6, you would need to save £316 per month if those savings grow at 6% per year until age 18.

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