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University debt headache for parents

By Martin Fagan - news@consumerchoices.co.uk

Parents wildly underestimate the amount of debt their child will leave university with, says Standard Life.

More than half of parents completely underestimate the maximum amount of debt their child could leave university with, according to research from savings, investments and pensions company, Standard Life.

When asked to take into account the increase in tuition fees to a maximum of £9,000 per year from 2012, and any other debts accumulated from living costs, student loans, bank loans, overdrafts and other expenditure, 58% of parents thought the maximum debt their children could leave with was £40,000.

Some 42% of parents thought their child’s student debt would be lower, with 9% believing the total accumulated debt would be under £25,000.

However, this £40,000 is far below the maximum figure calculated by Standard Life, which has calculated the average debt per student graduating in 2015 will be £54,000.

As this figure is calculated for students starting three year degree courses in 2012, Standard Life said parents need to remember it will increase for each subsequent generation of undergraduates.

For a student starting a three year university course at age 18 in 2020, assuming inflation on fees and living expenses increase at a “modest” 2.5% per year, Standard Life calculated that the average student could need £17,743.28 in their first year, £18,186.87 in their second year and £18,641.54 in their final year, making a total of £54,571.69.

Despite this, to help ease the costs of their child's university education, 21% of parents have started to make regular savings. 53% of parents are saving less than £50 a month towards their child's university costs, 27% are saving £50 - £100 and 11% are saving more than £100 each month.