Planning for university fees early is essential
Students living in England are subject to University Tuition fees of up to £9,250 per year.
Many parents and grandparents of course, will recall not having to pay anything towards a U.K. University education. The change to the new system of funding is clearly necessary to attract the right quality of teaching staff, allow Universities to invest in technology and maintain world class facilities.
The reality now is that if you are planning a three year undergraduate course, taking into account the education fees, accommodation fees, and maintenance fees, a graduate student is looking at costs of circa £18,000 – £20,000 per year for University education.
If planning is conducted from birth, potentially using Junior ISAs as a core benefit, with an allowance currently of £9,000 pa parents or grandparents could have committed £162,000 over 18 years in Junior ISA contributions, which with reasonable investment returns, should have generated a fund of somewhere between £120,000 – £240,000 – £295,000. These funds could then be drawn on to help finance University education.
For those students that elect to borrow money to fund University education, it is now not uncommon to leave University with a debt of circa £75,000 after a three year course, if all education maintenance and accommodation fees are borrowed.
Unfortunately, the government have a debt repayment schedule with interest rates tied to the UK retail price index (RPI), interest on debt is currently charged at 4.5% pa, and is repayable once individuals are earning more than £27,295 pa.
If you are employed, the money will be collected by your employer who will take 9% of your income above the £25,000 threshold through the U.K. tax system (Pay As You Earn – PAYE). If you are self-employed you will pay it back via HMRC self-assessment scheme.