Parents struggle to support their children through university

With the UK in recession and university costs set to rise, parents and students are finding it difficult to meet the financial obligations of higher education according to the latest student debt research released from the Association of Investment Companies (AIC). The vast majority of parents (86%) are finding/will be finding it harder to support their children through university (or believe it will be harder in the future) due to the UK's economic troubles.

Parents think their children will live at home (36%) to save money and 13% of grandparents (11% last year) are contributing/ will contribute to university costs. With tuition fees of up to £9,000 being introduced this year, 19% of parents surveyed think their children should choose a lower charging university. Whereas a quarter of students plan to study a vocational qualification in order to get a well-paid job on graduation.

Financial strain

The financial concerns for students are clear, with 54% of students expecting to graduate with over £20,000 of debt (compared to 49% last year) and 14% expect their debt to be over £40,000.  However, in reality the amount of debt on graduation is likely to be much greater. Push.co.uk, the independent guide to university life suggests the average debt for students starting a UK university in 2012 will be £53,000.  Some 16% of students who expect to graduate with university debts think it will take over 20 years to pay it off and 39% of students surveyed think it will take between 10 and 20 years to pay off this debt.  More parents (20%), who expect their child to have university debts, think it will take longer than twenty years for their children to pay off their student debt and 39% of parents think it will take between 10 and 20 years.  50% of these parents expect their child to graduate with over £20,000 of debt and 14% anticipate their child will graduate with over £40,000 of debt.

Recession fuels cost concerns

The UK recession has increased the financial strain of university costs with 86% of parents surveyed agreeing that the UK's economic troubles will make it harder to support their children through university.  Over a quarter of parents (26%) would like their children to delay university for a year, with 14% supporting this delay for financial reasons and 11% believing their child would benefit from work experience.  Less students want to delay university (20%), however, 15% of these would do so for financial reasons, 3% to gain work experience and 2% for other reasons.

With tuition fees of up to £9,000 being introduced this year, nearly a fifth (19%) of parents think their children should choose a lower charging university, and this was particularly the case in the Midlands (23%).  Interestingly, students have a different opinion with only 12% deliberately  choosing a lower charging university.  Students in the South were less concerned (7%).

Home alone?

With rising university costs, those at university are potentially more inclined to live with their parents during term time to avoid debt and this idea appeals to parents of would be students. Of students at university, 23% of those surveyed will live with their parents during term time, with 18% doing so for financial reasons and 8% would have preferred not to.

36% of parents think it is likely that their child will live at home whilst at university to save money.  However, tomorrow's students have a different view with just 17% planning to live with their parents during term time. 

Annabel Brodie-Smith, Communications Director, Association of Investment Companies said: "With the recession and the introduction of tuition fees adding to the financial strain of university expenses, families are clearly looking at ways to save money.  It's not surprising parents are under financial pressure and some are keen for their children to live at home and to attend lower cost universities.

"If it's possible to save for your children over the long-term, you can give them a financial advantage in life.  The sooner you start investing for your children, the better chance of greater returns.  Investment companies offer parents an efficient way of saving as they can access the long-term potential of the stock market.  Investment companies invest in a range of companies on your behalf, spreading your investment risk and they are available from as little as £50 a month, or over £250 lump sum.  If you had invested £50 a month in the average investment company over the last 18 years you would now have an impressive £21,647."

Is a degree worth the expense?

Some 67% of students are worried about their job prospects due to the current state of the UK economy, which is up 2% on last year and 8% up on 2010.  Over a quarter of parents (28%) think their children should reconsider whether university is the best option for them.

Some 30% of students say their university debt will influence their career choice and they will target better paid jobs in order to pay off debt.  This was particularly true of students in the Midlands (36%) and the North (35%). A quarter of students plan to study a vocational qualification in order to try to secure a well-paid job on graduation. Concerns over graduate debt are also causing 21% of students to abandon or delay postgraduate studies.

How to finance university?

Some 14% of parents surveyed think they will be the primary source of university funding, but the majority (51%) think their children will be funded through student loans and 12% think their children will be mainly funding themselves through part time work.  Interestingly, more students (64%) expect student loans to be the main source of university funding with 14% thinking their parents will be the primary source of funding and only 6% of students expect part time work to be the main source of funding.

Bank of Mum and Dad (and Grandparents)

Nearly half of parents (49%) will use some of their cash savings to fund their children through university. Almost a quarter of parents (23%) are expecting to use most of their life savings to help their children through university, and this was particularly the case in London (30%).

When parents were asked what they would be prepared to sacrifice first to help their child through university, 22% were willing to sacrifice their annual holiday, 17% were willing to sacrifice a new car first and 16% were willing to first sacrifice early retirement, whereas 13% were willing to sacrifice home improvements/extension first.

Overall 13% of parents surveyed think their child's grandparents are planning to contribute or are contributing financially to students' university education (up from 11% last year). Over half of these parents (58%) say grandparents are helping out with university costs due to the extra financial strain caused by the UK's economic problems. Most grandparents contribute in Scotland (16%), the North of England (15%) and the East (15%).