Financing Kids Through University

We all want the best for our kids and we know that a complete education is important for future success. From preschool to university, we do our best to guide our children towards a good, sound education, knowing that it will provide them the tools to secure great jobs in the future.

Wanting our children to have a university education and paying for it are two very different matters - it's now widely accepted that student loans and grants do not cover the costs of student life. It's wise to start planning early if you don't want to be struggling when the time comes for your kids to fly the nest. The options available are discussed below.

What Funding is Available to Students?

1. Grants

If you're on a low household income your children may be eligible for a grant of about £3000 per year, but the threshold for this is quite low and grants are not necessarily going to be available (depending on political decisions) for the long term. Additionally students are now expected to contribute more to tuition fees, so it's fair to say that for the majority of students a grant will make little impact on funding their time at university.

2. Sponsorship

Sponsorships do not need to be repaid, so seeking a sponsor is a potential option during the last two years before your child heads off to university. Sponsorships are most often offered by the private sector. Applications are often long, detailed, and require proof that your child has both an interest and an aptitude for the subject for which they are applying. The majority of sponsorships are given with the stipulation that the student will work for the company that is helping to fund their education both during college and for a designated amount of time after graduation.

3. Student Loans

The majority of students will take out a student loan for part or all of their time at college. These loans are typically given at low interest rates and payments are often deferred until after graduation and until a minimum income level is reached, giving the student ample time to secure and get settled in a job before beginning repayments. Most student loans require that a parent acts as guarantor so that if the student defaults, the responsibility of the debt will fall on the parents.

What Can You Do as a Parent?

In the absence of other help, it's generally parents who step in to help with the financial shortfall experienced by students, indeed as parents we want our children to enjoy their education and not to be unduly burdened by financial pressures. So here are some options to consider as a parent:

1. Personal Loans

If your child is about to go to university and you have been unable to make prior financial provision, you might consider a personal loan. Many parents choose this option, in fact it's estimated that over £55 million will be taken out in personal loans by parents to cover their children's college education. Look for competitive rates, repayment terms and upfront fees available, this can make a huge difference to the amount you spend overall and how easily you will be able to manage the payments.

2. Remortgaging

Remortgaging to cover the student years is becoming more common as grants dwindle and fees increase. If you have equity in your home you could remortgage to release some cash and help meet the costs; you may find your self paying over a longer period, but with repayments that have less impact on your monthly outgoings than a shorter term personal loan.

3. Savings & Investments

If your children are still young at the time of reading this, then now is the time act. There are many investment and savings plans to choose from, but if you want a definite return at a specific time then the less risky the investment, the better. Some savings and investment plans are more tax efficient (such as ISAs) and some offer an element of life insurance to cover you or your partner during the term of the plan.