Recession increases financial burden of uni costs
With A Level results out tomorrow (19 August 2010), students considering higher education need to carefully plan for the financial burden of further studies. The Association of Investment Companies (AIC) annual survey into attitudes towards student debt suggests that over three quarters (82%) of parents believe that the recession is making it harder to fund their children through university (up from 73% in 2009).
With the Coalition Government contemplating reducing funding for universities, the financial strain on students is likely to increase and, with the average student starting university in 2010 expected to graduate with £24,702 of debt, students and their parents really need to make sure that they are financially prepared. A £50 a month investment into the average investment company over the last 18 years would today be worth £21,314 and, over 21 years, it would be worth £30,046 which would definitely be a great help to today's students who are facing such a financial burden.
A long term debt sentence
Once again this year, students are proving more realistic than their parents when it comes to paying off their university debt with 34% of students predicting they will graduate with over £20,000 of debt compared to 19% of parents. A worrying 24% of parents might be in for something of a shock when their child graduates as they believe their children will graduate with less than £10,000 in debt compared to 19% of students.
49% of students estimate that it will take them over 10 years to pay off their debt and 8% believe they could be in debt for over 20 years. With such a debt sentence upon them, some 18% of students said that they would put off or postpone doing postgraduate studies due to the extra debt entailed.
The worry of unemployment
55% of students are worried that they will not be able to find a job on graduation, due to the effects of the recession. With the worry of debt levels on graduation, some 32% of students have said that they would prioritise a higher paid job over their career vocation to help pay off their student debt and, of the 27% of graduates who would consider taking a gap year before university, 11% would do so in order to help their financial situation on graduation and 9% would do so to put less of the strain on family finances.
Parents and grandparents are still a huge helping hand
25% of parents questioned said they would be the main source of funding for their child's university education and 12% said that grandparents would be making some contribution as well. Just under half (46%) of students will be taking out a student loan as their main source of income.
Parental sacrifice
Parents are still prepared to make financial sacrifices for their children to help them through university. 23% of parents questioned said they would sacrifice their annual holiday, 21% a new car, 13% home improvements or extensions, 13% early retirement and 12% moving to a bigger house.
Ian Overgage, Acting Communications Director, AIC said: "Clearly the recession has made it even harder for parents to fund their children's university education. It is worrying that so many students and their parents are still underestimating the true cost of going to university. Many young people go to university to enjoy some of the best years of their life but the reality on graduation is a huge financial burden which will take years to pay off.
"With students considering the prospects of university life this week and parents facing an ever increasing financial burden, if you can start saving for your children for the long-term from an early age you can give them a financial advantage later in life. The sooner you start investing for your children, the better chance of greater returns. Investment companies offer parents a useful way of saving as they can access the long term potential of the stock market. Investment companies invest in a variety of companies on your behalf, spreading your investment risk and they are available from as little as £50 a month, or £250 lump sum. If you had invested £50 a month in the average investment company over the last 18 years you would now have over £20,000."