The Cost of Your Child Going to University

Assuming the Coronavirus Lockdown permits, Emma, my older daughter, will be going to university in September. And while I am so proud of her for doing so, I’m also a little upset. The thought that our little family unit will soon start breaking apart makes me sad. I mean, I knew this day would come, but where has the time gone? I’m just not sure I’m ready for the girls to leave home. You know something else I wasn’t ready for? The cost of sending my child to university…

The whole process of going to university really isn’t cheap, for anyone involved. And the chances are that you, as the parent, will be involved financially.

In the good old days, when I first went to university, there was something called a Maintenance Grant. This Grant, as it was known, was free money from the Government, so students could go to university. The Grant started in 1962, when the Conservative Government of the time introduced the Education Act. After the passing of this Act, the government literally paid you to go to university.

This meant that in 1989, when I left college, I had two choices:

1. Get a job
2. Be paid to go to university

It will come as no surprise to anyone who knows me, that I chose option 2.

Originally, the Grant was standardised, and all students received the same amount. But in the early 80s, the Conservative Government of that time, changed the rules. Thereafter, a portion of the Grant was dependent on parental income. So since as early as the early 80s, there has been a parental cost to sending your child to university. For those families with incomes below a certain threshold, students were still entitled to the full Grant. I, for example, was paid a full Grant. That said, the actual value of the Grant was already in decline, by the time I went.

And, because the size of the Grant was decreasing, a loan was made available to students to make up the difference. This loan facility was run by the Student Loans Company. A company that really wasn’t messing around when it came to naming itself!

What’s essential to be clear on, at this stage, is that the Grant, along with the new loan option, related solely to maintenance. Maintenance being the costs associated with taking a university degree: food, accommodation, and the like. The actual degree itself, the tuition costs, had always been free to the student.

That is, until 1998, when the newly elected New Labour Government passed the Teaching and Higher Education Act. This Act introduced university tuition fees for the first time. The tuition fee was set at £1,000 per academic year and took the form of a loan. At the same time, maintenance grants were scrapped for all but the very poorest households, meaning that most student’s needed a much bigger loan.

It was also at this point that tuition fees started differing among the home nations of the UK. I’ll come back to that in a bit.

In 2004. the same New Labour Government introduced the Higher Education Act. This increased tuition fees from £1,000 to a maximum of £3,000. An effective tripling of the tuition fees, and subsequent loan. Something that seemed to pass without complaint from anyone.

Well, except me.

I mention this now, because of what happened in 2010, which I will get to in a bit. First, a bit of light digression:

You see, in 2003 I did complain about the proposed Higher Education Act. Admittedly only in a local, free music and events magazine called the Weekender. A publication that I was only writing for because I happened to know the guys who ran it, and they were always looking for content. Unfortunately for them, at the time I was heavily influenced by Warren Ellis’ Transmetropolitan graphic novels. And no one should ever be heavily influenced by Warren Ellis!

As such, I thought it would be amusing to use the same Gonzo journalistic style as the protagonist of Transmetropolitan, one Spider Jerusalem. And, because I didn’t want the content of my articles to impact on my work life, I wrote under a pseudonym. The name I chose? Snake Damascus…

I’m trying to get at two things, here:

1. I’m easily amused
2. My writing in the Weekender wasn’t subtle or well balanced

This latter point wasn’t helped by the fact that Emma was only a year old, and Ceri was on the way. And I wanted them both to be able to go to university, if they wanted to. But, in terms of the cost of sending your kids to university, this new Act put the writing on the wall…

It was inevitable that, by the time my daughters would be old enough, it was going to cost a fortune for your child to go to university. The Weekender was aimed at a young adult audience, people in their late teens and early 20s. So, in my article, I wrote:

By the time you have kids, you can expect the cost of a university education to be at least £30,000. Combine this with the probability that you will have at least two children. The chances are, then, that you will have to cough up more than £60,000 to give your kids a fighting chance of getting a degree.”

Weekender 030, February 2003.

I might have then ranted for a bit…

But what I was seeking to get across, was that this was something worth trying to prevent. But very few others raised an objection. And, inevitably, the tuition fees were duly tripled.

Fast forward to 2010, when the country was run by a coalition Government of Conservatives and Liberal Democrats. It was at this point, and following the publication of the Browne Review, that it was decided to effectively triple the tuition fees again. This time, however, there were protests all through November and into December. There was marching in the streets of London, and other cities…

Good! Great! Excellent!

But where the Hell was all this passion in 1998, when tuition fees were introduced?! Where were all the marches in 2004, when the fees were tripled the first time?! Personally, I feel that there should have been strong protests in 1998, 2004 and 2010. If so, the ones in 2010 might have worked. Instead, there was only a meaningful protest when it was the Conservative Government that was making the changes.

And that is why I hate party politics!

Not that the protests made any difference. The proposals were passed and the tuition fees increased to a maximum of £9,000 per academic year.

Right, digression over, and back to the matter in hand…

Ultimately, it doesn’t really matter why the cost of sending a child to university is so high, just that it is.

How high?

Well, as I mentioned before, that depends where you live.

In terms of tuition fees:

• English students get charged up to £9,250 per academic year
• Northern Irish students get charged up to £9,250 per academic year
• Welsh students get charged up to £9,000 per academic year (studying in Wales)
• Scottish students get charged up to £1,820 per academic year (studying in Scotland)

From the point of view of the cost, to you, of your child going to university, these tuition fees only matter if you intend to pay everything up front. Otherwise, these tuition fees are all allocated to the student, in the form of a student loan. There is no means testing for these tuition loans. So, if a UK student goes to a UK university, they will be get a student loan for tuition fees.

For a long time, I worried about this. I really didn’t want my daughters to be saddled with such massive loans at the start of their working lives. Surely it would be better to try and find a way to raise the funds, such that the girls didn’t have the debt in the first place? And, as the girls got closer to university age, the more I grew concerned.

Until, that is, I spoke to one of my hockey team-mates, who is a university lecturer. He explained that it would be a complete waste of my money to pay the tuition fees up front. Mainly because there is virtually no chance that the girls would have to repay all the loans they take.

The reason for this is the way the repayment rules are set out:

• You only repay 9% of your salary, above the threshold amount
• Anything you haven’t repaid after 30 years is written off…

For worked examples of the repayment rules, as well as details on the applicable interest rates, see the Repaying Your Student Loan page of the GOV.UK site.

So in regard to the tuition fees for a student based in England, like Emma, a standard three year degree would cost £27,750. Emma, however, is doing Pharmacy, which is a four-year course, taking her loan up to £37,000.

But remember, that £27,750 or £37,000 is only for the tuition fees. That money only covers the cost of being able to take the course.

So, what about things like:

• Accommodation
• Food and drink
• Books and stationary…?!

Because none of those things are covered by the tuition fees.

No, for those aspects of being a student, you will need another loan. A Maintenance Loan.

And this one is means tested!

Assuming your child will be living away from home while at university, but outside of London, the annual maintenance loan can be as much as £9,203. If they’re studying in London, this goes up to £12,010. If they’re living at home and commuting, it goes down to £7,747.

However, that is the maximum amount, which is only available to those whose parental household income is below £25,000 per annum. If the household income is above £25,000, then about half of the total value of the maintenance loan is means tested. How much of the second half that the student is entitled to declines on a sliding scale, as household income increases.

For a decent worked table of the variables around the maintenance loan, see the Student Maintenance Loans Guide 2020 page on the Save The Student site.

In our case, the maintenance loan that Emma can apply for is £4,289. At least, it is according to the Student Finance Calculator on the GOV.UK site.

This leaves Emma an annual shortfall, from the maximum available maintenance loan, of £4,914. So, either Emma gets a job while she’s studying, or I have to cover this. And, let’s not forget, I’ve got another daughter looking to start university the following year…

But I’ll circle back to this little quandary in a minute.

First I want to revisit the total amount, in loans, that Emma will have to take out. And why it’s a better solution that she do so.

So, with a tuition loan of £9,250 and a maintenance loan of £4,289, that’s a total annual loan of £13,539. Her course is four years long, which adds up to a grand total of £54,156. That said, the amount she can borrow will increase slightly each year. Furthermore, the interest on the loans will start immediately, so the real amount that Emma will owe by the time she graduates will be higher. Let’s call it £56K, so we can start crunching the numbers with a nice, round figure…

Actually, let’s not!

I started writing up the maths to properly explain all the details and variables, and then I realised that I was actually boring myself! If you’re interested enough in all the calculations involved, you’re probably able to do them yourself. If you can’t do it yourself, you’re probably not going to be interested in my maths. Regardless, it would have resulted in several paragraphs of dense calculations, and I’m not going to do that.

The point is: in order to fully repay all of the loan within the 30 year period, your average salary over that time will need to be close to £50k per annum…

If you’re averaging £50K per annum, for 30 years, you can comfortably afford to repay the whole loan.

If you’re not averaging £50K per annum, for those 30 years, you won’t have to repay the whole loan.

Either way, there’s really no point in paying these monies up front, just to avoid your child having to take out the loans. Well, not unless you can comfortably afford to do so. Which is why Emma will be taking out the loans.

So, that covers the costs to Emma, for going to university. But, what about the cost to me, to send my eldest child to university? This brings us back to the small matter of that £4,914 a year shortfall. For four years…

I mean, it’s not like Emma can afford to live on just the £4,289 maintenance loan for the whole year. Not least because the cost of the university accommodation available to her, ranges from £2,736 to £8,300 each year. And if you’re not interested in sharing a room with someone you’ve never met, the lowest price is still above the total of her maintenance loan.

Which means that Emma will definitely need an injection of money from somewhere. To work out how much, I’ll put together a rough budget:

• Accommodation – shouldn’t be more than £6,000
• Text Books and stationary for the course – depends on the library facilities – best allow £200
• Food, drink and sundries, per week, for 38 weeks – say £40/week – £1,520
• Travel for visits home – £25 round trip, allowing for 10 trips – £250
• Socialising – let’s allow £10/week for the 38 weeks – £380
• Club/society costs – about £50

Which gives us a grand total of £8,400. Of which £4,289 is covered by the maintenance loan, leaving a shortfall of £4,111. Obviously, it’ll be more than that, because it always is, so I’ll allow £5K a year. And that will be the cost that I have to pay to send my older child to university: £5,000 a year for four years.

A total of £20,000, or about two thirds what I anticipated, back in 2003. Although, to be fair, the total cost including Emma’s loans, will be around £75,000, which is more than double what I talked about in the article. And, at the time, I was expecting to pay all of the cost of my kids going to university, so they could avoid the debt. Thankfully, that’s turned out not to be necessary.

Still, how will this gap in the finances of £20,000, for Emma to go to university be covered? Well, Emma could get a job…

But, the reality is that it’s already covered.

You see, back in 2003 I did more than just write a stroppy article. My wife and I also started an ISA for each of our daughters (after Ceri was born). We adjusted our finances to make sure we could afford to pay into these ISAs every month. As time passed, and we were able to pay in a bit more, we did so. Which is why, 17 years later, Emma has a nest egg that should be enough to cover this cost.

And that would be my strongest advice to anyone with a child who they might wish to go to university at some point, mitigate the cost now. Start an ISA, if you can. But definitely look to do something. Because the one thing that seems certain is, that the cost of sending your child to university is only going to go up.