IN THE BACK
/ PLATFORMS /
BRIGHT
and
BANKRUPT
Graduates now leave university with debts of up to £54,000.
John Blowers finds out how you can soften the blow for your children
I
RECENTLY
ATTENDED MY SON’S
GRADUATION at Bath
University, the
culmination of four
years’ hard work and, I suspect, some
monumental beer drinking.
He graduated with a 2:1 in politics
and now begins the task of finding
a job, as he’s going to need to find
work fast. The reason? He’s in debt to
the tune of £30,000 and I have to say
we haven’t fared much better, having
sent him many thousands more to
keep the local pubs running.
As we drove back home we began
to wonder exactly how much the
whole exercise cost, because we
simply hadn’t planned for it. In my
distant memories, I recall most of the
cost of going to university was either
paid for by the government through
a series of grants, with my parents
throwing a little bit of cash in here
and there (but never quite enough).
These days it costs more – a
lot more – and I do sympathise
with parents who may have been
subjected to years of school fees too.
If you have several children, the
amount we’re talking about is mind-
boggling.
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We haven’t fared
much better,
having sent him
many thousands
more to keep
the local pubs
running
Anyway, after some pretty basic
calculations, we worked out that
we must have spent (or borrowed
through student loans) around
£54,000. Could this be right?
Well, the Institute for Fiscal
Studies (IFS) recently produced a
report on the university funding
situation, which was convenient
given the maths we were trying to
carry out in the car journey home.
The average amount of debt that
children from lower-income families
accumulate during a degree is
£57,000, according to the IFS, as they
receive more loan assistance. These
loans can accrue interest of nearly
£6,000 before the student has even
graduated, with interest rates of 6 per
cent or more in some instances.
Worse still, the IFS seems to think
that these new graduates could still
be paying off their student loans
while in their 50s. How on earth
are they going to save for a house,
pay off the mortgage or save for
retirement in these circumstances?
So how can we help our little ’uns
avoid this debt millstone around
their necks? The secret – as always –
is in the planning.
People these days tend to have
children in their late 20s or early 30s,
so with university fees arriving 18
years later, this means when you are
approaching your 50s. This should
be your peak earning time, which
you can take solace from, but for
most people, an extra £18,000 per
year (per child) of taxed income can
be difficult to rustle up.
So, we should all try to set up a
fund as early as possible to fund our
children’s education. Or even your
grandchildren’s if your own children
are feeling the heat from the current
economic climate.
There are many ways to go about
this, but you need to start early.
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