Parents failing to save for future college expenses

As sixth formers anxiously await their 'A' level results next week to find out if they have secured that precious university place, new research published today by F&C Investments has revealed that most parents are failing to make adequate financial provisions for the soaring costs of a degree.

Over the last month F&C, the leading provider of investment trust savings schemes, has commissioned a survey of over 4,000 respondents to understand the extent to which parents and students are preparing for the costs of a higher education. The findings come as the Government is under increasing pressure from universities to raise the £3,000 cap on tuition fees despite the National Union of Students estimating that the average debt of those graduating in 2006 was a staggering £13,252.

"The research suggests that parents and guardians are not unaware of the tuition costs involved in sending their kids to college, with 51% correctly stating that tuition fees are 'around £3,000' and a further 22% assuming these will be in excess of £5,000," said Jason Hollands, Head of Communications at F&C.

"Furthermore, some 53% of parents expect the typical graduate to be more than £15,000 in debt and of these 13% believe the average debt will exceed £30,000," he added.

Despite these sobering expectations of the costs of taking a degree, less than a third of parents admit to making any form of financial provision according to the study's findings. Among those who are planning ahead, some 56% have done so since the birth of their children. However, even these diligent parents are overwhelmingly utilising bank or building society accounts (58%) and National Savings (21%) rather than share based schemes (11%), which F&C argues are more appropriate for long-term savings.

"Cash savings are of course very low risk but they also offer low returns and the real value will be slowly eroded by inflation. History overwhelmingly suggests that over long periods of time, such as 18 years, equities make much more sense," explained Hollands.

"While 43% of parents state that if they were starting to save now with a newborn child they would utilise a Child Trust Fund, suggesting that awareness of the Government initiated scheme is widespread, 55% say they would still opt for a cash savings account or National Savings. This shows that there is still a lot of work to do in helping families to understand the options available to them."

On a more positive note, some 78% of student respondents regarded a degree as a good investment that would help them get a better paid job even though 55% believe it will take them around a decade to pay the debt off. 54% of students polled were adamant that the cost of university would not, or has not, impacted their choice of subject while 27% admitted to opting for a course that would lead to better job prospects than the one they would have preferred to have taken. However 19% admitted they were unable to study their preferred degree course because of prohibitive costs.

"Almost half of all teenagers now go on to higher education and with some suggesting that the total cost of a three-year degree could exceed £30,000, financing future college costs is a significant challenge facing families. The message is simple; prepare as early as possible. In this respect, we believe the Child Trust Fund can play an important role in a long term plan, alongside other savings schemes where parents retain some control over the investment," concluded Hollands.