A parents guide to student finance

The financial impact of being a student has never been more stark.

With tuition fees costing up to £9,000 a year and students having to fund living costs on top of that, most students taking a three year graduate course can expect to come out with a total debt approaching £50,000 unless they take part-time work, live at home or receive financial assistance from their parents.

Student debt

However, the financial cost should not necessarily put you off. The vast majority of students will be in the same boat and have the opportunity to finish on a level playing field in terms of debt in comparison to each other, if not with graduates who completed their studies before the tuition fees were introduced.

Even so, there is plenty that you and your child can do to mitigate the costs of going to university and in this guide we will look at the ways of doing this.

A parental guide

Most parents find it difficult to see their kids leave home for the first time, but understanding the reality of managing a budget independently for the first-time can help turn natural parental concern into extreme anxiety. Here at Myfinances.co.uk we want to help ease your mind on that.

The financial context

Student debt is at an all-time high and so are both youth and graduate unemployment levels. Link this with the ongoing double-dip recession and the biggest squeeze on household finances since the Second World War and it is easy to feel despondent.

How can parents help?

But there are ways to help and if you encourage sensible decisions and help your child find the best deal on all of the financial expenditure they are going to incur during their undergraduate lives, then you can keep debt levels down to a minimum.

Here are ten ways you can help.

Financial assistance from parents

The first and perhaps most obvious way of helping is to provide hard cash to your children.

Of course, for many parents and families this is not possible as they are under intense financial pressure themselves.

However, if you are able to provide some money to your children then it makes sense to do this on a monthly or termly basis.

If you have an annual amount in mind, it could make sense to hold it back until January and then make six monthly payments to help get them through the second part of the academic year. Most students don’t have a problem with cash initially as they are relatively flush with the loans. The problems come after Christmas an dthe first term is over.

If you give your children all of the money upfront it is more likely to be wasted.

Another alternative is to buy something for them outright that they will need for their studies such as a laptop or some specialist equipment.

Part-time working

Encourage your students to work a part-time job, either at university or in the holidays.

Unless you are on the most intensive course, most students do have enough time to work ten hours or so a week in a part-time job. This may only pay enough to cover supermarket shopping and drinks at the student bar, but it will be a help.

If you have had job at home before you went to university, it makes sense to not burn any bridges and try and keep it open for when you return home during the holidays.
Seasonal work is a good bet because there is usually more of it in the summer when your studies are over and there is more time.

When I was a student, I lived in North London and signed on with a recruitment agency that covered temporary staff for Wembley Stadium. This meant when coursework deadlines and exams were coming up I just rang them up and said I wouldn’t be available for this week. When I had less on, I let them know my availability so they could use me for events, sometimes working almost full-time.

Student loans

Parents should ensure that this is their child’s first port of call for borrowing money.

Student loans are the backbone of student finance now. And why not? They are the cheapest loan you will ever get and do not have to be repaid until you have a full-time job earning a reasonable wage.

The interest you pay on the loan is linked to inflation.

You currently repay nine per cent of everything you earn above £15,000, so when you come to repay it, it just becomes another monthly outgoing.

If you never earn enough then the loan is wiped after 25 years.

Student bank accounts

It is vital to make sure your children take up the best deal that offers the longest interest-free overdraft. Currently there are some good deals available that offer up to £3,000 interest-free.

Explain the money wasted if you go beyond this or borrow unauthorised funds from your bank.

Read more: The top five student bank accounts for 2012

Student insurance

One way parents can help is to put their kids on their own home insurance. This can save them money but may end up being self-defeating if it raises the cost of your own insurance significantly.

It may be better to offer to pay for their own stand alone policy, enabling them to build up their own no-claims bonus.

Either way, thefts from student accommodation are well above average rates, especially in the first term and most students take a lot of expensive equipment with them that is easily lost or damaged, so insurance is a priority if you want to save your kids money in the long run.

Read more: The ultimate guide to student finance

What bursaries/grants are available?

Research which non-repayable bursaries or grants are available from the college or university and help your child apply for them if he or she is likely to qualify.

Most universities will have a limited amount of bursaries or grants available to poorer or disadvantaged students.

Some specialist courses may also have funds available.

Living at home

It is becoming increasingly popular for students to reduce the cost of university by living close to home. If you have a university nearby and it runs a suitable course of sufficient quality this is an option worth considering.

Of course, part of the whole student experience is becoming independent and moving to a new area to discover new horizons.

But If you live in London, Manchester, Brighton or other cities that are popular with students why move to another area that may not be so attractive for student life?

Buying a student property

This option will not be possible for many parents, but as part of a generation that have down well out of the property boom from the mid 1990’s until 2007, many parents will have lots of equity or even paid off their mortgage.

If that is the case, buying a property to let out to students is a good option. If your son or daughter is one of them you get inside information on what is going on and of any potential problems.

The more rooms the better as you can rent them out and pay the mortgage each month. What’s more you then don’t have to charge your child for rent.

Budgeting

Your child is unlikely to have had to budget before in their lives, so before they go draw up a budget based on their estimated income and known expenses.

Be as realistic as you can and emphasis the importance of sticking to it. Of course, they may not stick to it at first but at least it will be something to refer back to when the money runs out.

Money-saving tips

There are all sorts of ways of saving money in life and as a student. Here are just a few.

- Share meal costs with house-mates
- Set out ground rules over bills and household expenditure with house-mates
- Don’t spend all your grant at the start of term – you will still need the money later!
- Encourage your children to compare deals before they decide on everything from food to electricity
- Set up two bank accounts one for rent and other bills and one for disposable income
- Grab discounts and use an NUS card to get as much as you can at a discount price

Useful links:-

MoneySavingExpert student finance guide 

Direct.gov – Money for university: A parent’s guide