Aiming for University ?

This weekend thousands of young people across England will be celebrating obtaining a place at university, as A-level pass rates rise to another record high of 97.6%, with an unprecedented 27% of entries achieving an A grade.

Just over 8% of the entries were awarded the A* grade, which was introduced this year and is meant to help the most competitive universities select the best candidates.

This is the 28th consecutive year that pass rates have risen, intensifying the battle for a place at university and placing further pressures on the clearing system, leaving a predicted 170000 students without a place.

This can be a very stressful time for students and parents alike, and the pressures for both do not stop once a place has been awarded. The financial cost of funding a university course can place a heavy burden on student and parent.

If you are a parent with younger children and dream that they will go to university, it’s hard to ignore the problems of covering the cost of a degree. However, an analysis of the situation and some pro-active financial planning can be a great way to set those nagging worries to rest.

The rest of this article focuses on the situation in England.

How much does university cost ?

There are two main costs - what it will cost to study and what it will cost to be a student - accommodation, living expenses, food, books, travel and leisure costs etc..

Tuition fees vary from one university/college to another, the maximum tuition fee for England for students starting in 2010/11 is £3,290 a year. Students do not have to pay tuition fees until after they finish studying.

Depending on household income tuition fees will be paid for a student or a student loan for the fees can be applied for.

In a survey conducted by the National Union of Students in 2008, the average cost to be a student was £4,900 per year, with students in London especially hard hit.

Future Funding : A Graduate Tax ?

David Willetts speaking to James Landale on the Andrew Marr show (Sunday 8 August) came close to confirming that the Government favours a graduate tax. He stated that -"We’re talking about a graduate contribution paid by people out of their earnings when they’re in employment subsequently".

So, if this is confirmed as the future method of funding tuition fees, it still leaves parents or students to find the cost of living from somewhere.

How can you estimate what that might be when your child goes to university?
Taking the average of £4900 per year, if we increase this by the annual rate of inflation of 3.16% (average RPI over last 20 years), then parents with a child aged 8 in 2010 could be having to find around £7,000 in 2020 for their child’s first years life as a student.

It’s quite common for students to find some part time work to help fund these living costs, but, too many hours spent at work can affect a student’s academic performance negatively. The Association of Graduate Recruiters reports that more than two thirds of employers require at least a 2:1 degree.

Armed with this knowledge, many parents will want to make a contribution where they are able to, and the earlier consideration is given to this then the less pressure there will be at the time the funds are needed.

So, if you are a parent with young children think about pre-funding university costs in a flexible way and in a way that minimises your tax liability now and that of your child in the future.