Today, Ian Wells, 62, will be going on a protest march for the first time in his life.
Wells, a management consultant from Malvern, Worcestershire, studied psychology at Manchester University in the Seventies for free. His tuition fees were paid for by the local authority, and he received a means-tested grant of £11 a week. His daughter is not so fortunate.
Claudia, 24, graduated from Brighton University with a fine art degree in 2015, and £43,000 of debt. “My reaction to her student loan statement was one of utter shock,” says Wells. “I expected the figure to be high, but seeing it written down was a real wake-up call. I constantly worry about Claudia’s future – the impact on her life of repaying this debt is going to be devastating.”
Wells raised the subject with The Intergenerational Foundation, a think-tank promoting fairness between generations, over the summer and discovered he was far from alone in his concerns.
“Dozens of stressed parents have contacted us about high student fees, inadequate maintenance loans and volatile interest rates on repayments,” says Liz Emerson, one of the co-founders.
With the help of the Foundation, Wells set up a group called Parents Against Student Debt to campaign for a fairer deal. He encourages like-minded parents to sign up to the campaign here or on Facebook.
He also hopes that the sight of parents on today’s march in London, organised by the National Union of Students and calling for the return of maintenance grants and the writing off of student debt, will make politicians pay attention. “Student debt affects everyone,” he says. “The current system is so unfair that it’s going to have to change.”
Aren’t students meant to be broke?
Student loans are calculated in two parts. The first block covers tuition fees, costing up to £9,250 a year. The second is for living costs, and depends on where the course is and, crucially, how much their parents earn.
The maximum they could get for next year outside London is £8,430. Say accommodation costs £5,000; that would leave them with just £88 a week for the 39-week academic year to cover food, travel, clothes, phone bills and books.
If their parents earn more than £69,803, making them among the highest earners, they will be expected to give their child more than £5,300 a year to make up the shortfall. It is implicit that parents, whatever their income, will help out.
But don’t despair, there are ways to do it
If your child is under 18…
Danny Cox, a chartered financial planner at Hargreaves Lansdown, suggests opening a Junior Isa in your child’s name.
Putting away £150 a month from birth to the time they are 18 could produce £52,000 based on a five per cent annual investment return; £340 a month (the maximum) would produce £119,000.
You could use this money to contribute towards university costs so your child doesn’t have to take out a loan; or let them take out the loan but help them after graduation.
If your child is starting university next year…
Depending on your circumstances, you might:
Use your savings Nick Bamford, executive director at financial planners Informed Choice, says this is often best as interest rates on savings accounts are so low.
Remortgage your house Many lenders will extend mortgages to homeowners up to the age of 85, says Simon Collins, product technical manager of mortgage brokers John Charcol. Keep your mortgage below 60 percent loan to value for access to the best rates.
Cash in investments This is easy from a stocks and shares ISA, says Danny Cox, because there is no tax to pay, and selling shares or funds isn’t expensive.
But if your investments are low, you might want to keep them where they are. If you’re selling shares or funds not in an ISA, you might have to pay capital gains tax. Limit profit-taking to £11,100 so that the gains will be tax free.
Dip into your pension Angus Hanton, an economist and co-founder of The Intergenerational Foundation, cashed in some of his pension to put two sons through university. But given that many people haven’t saved enough for retirement, Nick Banford warns this should be the last resort.
Help them budget
“Parents need to be upfront about money with their children before they go to university,” says Martin Lewis, founder of MoneySavingExpert.com. “If they’ve never talked to them about it, they’re not going to use what they have very well.”
Save the Student, a money-saving website run by students and graduates, is a helpful source of tips for campus life.
Offer them a room
More than a quarter of UK students live at home. Suggest your child stays in halls for the first year to make friends, then moves back with you for the rest of their course. Whether you do their washing is up to you.
Encourage them to take a part-time job
Even the most academic universities recognise students might need to work. LSE, for example, allows 15 hours’ work a week during the term and full-time work in the holidays.
If your child has graduated…
Before you sell your house or raid your pension, you could adjust your thinking.
“The problem is that we call this a debt when it is more like a tax,” says Martin Lewis. “Because it’s such a weird form of finance, standard logic [where you’d want to repay a debt as soon as possible to stop it accruing interest] doesn’t apply.
“In most cases, this is a debt that you don’t want to repay. Most students will not clear what they’ve borrowed plus interest within 30 years. Many won’t ever do so. If you pay it off now, you may pay more than your child would have done through the repayments.”
To find out more, visit www.studentdebtcenter.org
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