Paying for higher education can be one of the largest financial commitments families face. By planning in advance, you can reduce the need for costly borrowing and help your child start adulthood on a strong financial footing.
Tuition fees for full-time undergraduate programs in England are currently capped at £9,250 per year. Total annual expenses, including living costs, often range from £18,000 to £21,000 in England. There is help at hand from The Student Loans Company (SLC), who provide tuition fees and maintenance loans. Repayments start from the April after the student finishes or leaves the course at a rate of 9% of earnings over the repayment threshold.
Families can use tax allowances like the Personal Allowance (£12,570) and Inheritance Tax rules to save for university costs efficiently. Transferring assets or income to a lower-earning spouse can maximise tax benefits. However, there are traps that need to be avoided to ensure efficiency and compliance, so it is important to seek tax advice prior to taking any actions.
Saving Strategies that you can get going with:
- Junior ISAs (JISAs): Save up to £9,000 per year per child, tax-free.
- Adult ISAs: Parents can use their £20,000 annual allowance to build a tax-free savings pot which they can later use for these purposes.
- Regular Savings Accounts: Child-focused accounts encourage saving but watch out for inflation impact and the parental settlement rules.
- Property Investment: Buying property near the university for rental income, though it involves extra costs.
It’s also worth noting that universities and external organisations offer scholarships and bursaries based on various criteria. It’s essential to research these opportunities early as they can significantly reduce financial burdens.
Practical Steps to Get Started:
- Set a Clear Goal: Estimate tuition and living expenses to set a savings target.
- Review Your Budget: Assess your household income and outgoings to determine how much you can save.
- Use Available Tax Allowances: Consider JISAs, ISAs and explore asset or income splitting.
- Compare Account Options: Check interest rates and features for the best savings or investment accounts.
- Keep Track of Student Finance Changes: Stay updated with changes in tuition fee caps and maintenance loan amounts.
- Investigate Scholarships and Bursaries: Encourage your child to research scholarships and bursaries early.
- Regularly Revisit Your Plan: Review your savings progress and adapt your plan annually.
Planning ahead for university costs not only eases the financial burden but also sets your child on a path to financial security during their studies. Taking proactive steps now ensures a brighter, more manageable future for their academic journey.
