Will Your Kids Go To Uni?  Here’s How Much It Costs.

University costs are increasing and so are the costs of taking out a student loan.  With government targets for 50% of school leavers to go onto further education and more and more parents hoping and expecting their children to go to university, it’s something that doctors should be aware of and plan for financially for their children.

An undergraduate starting their degree this September will pay £9,000 a year in tuition fees.  Some universities are planning to increase this to £9,250 next year.  So before any living costs are taken into account, tuition fees will add up to at least £27,000 over a three year undergraduate course.

As for living costs, the University of Kent’s cost of living calculator puts these at between £10,078 and £20,686 a year for a student living off campus.  This includes the cost of their books, food, clothes and travel to and from campus. 

Student loans are, of course, available to help finance going to university.  All undergraduate students can take out a tuition fees loan to cover up to £9,000 a year.  Maintenance loans are also available to go towards living costs, although the amount that can be borrowed depends on household income.  The maximum amounts available are £10,702 a year for students living away from home and studying in London, £8,200 a year for students living away from home and studying elsewhere in the country and £6,904 a year for students living at home.  The actual amount offered will be lower for higher earning households.

If the full tuition fee loan and maximum maintenance loans are taken, this adds up to debt of over £52,000, or over £59,000 if studying in London.  Unlike student loans of the past, new loans start accruing interest straight away, and at a relatively high rate given the current very low base rate.

While still studying, a student’s loan will accrue interest at the rate of RPI (the Retail Prices Index – a measure of inflation) plus 3%.  As RPI is currently 1.6%, student loan interest is currently 4.6%.  After they graduate, the loan accrues interest at the rate of RPI.  For those earning more than £21,000 the rate increases incrementally up to RPI plus 3% once earnings reach £41,000.

Loan repayments are taken automatically from salary at the rate of 9% on income over £21,000 a year.  However, research carried out by The Sunday Times found that these repayments don’t go towards paying off the debt until income reaches £51,000 – at lower salaries it only pays off some of the interest.

Doctors with the resources to do so might consider funding university costs by means other than student loans.  We have a series of articles on financial planning for university costs or for personalised advice contact Richard Higgs, Chartered Financial Planner, on 0117 966 5699 or richard.higgs@wealthwestmedical.org.uk.

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