Ready to foot the bill?

Many parents do not realise how much they may have to contribute to college costs, says Tony Lyons

If your child is going to university or college next month, are you ready to foot the bill? Many parents of the 800,000 or so students heading for higher education will be unprepared for the costs involved. If you haven't worked it out by now, there's no time to delay. Latest estimates are that, if your child decides not to take out the loans, it will cost around pounds 15,000 to pounds 18,000 for a three-year degree course.

The maximum grant has been fixed for a number of years at pounds 1,855 outside London and pounds 2,340 in London for students living away from home. But that's fast becoming irrelevant, since fewer and fewer students qualify for any grant, let alone the full amount.

If their parents have a joint income of over pounds 16,050, the grant is reduced. Earn more than pounds 32,500 after allowances and they will get no grant at all. It is estimated that under a quarter of this year's intake will receive a full grant while as much as a third will get nothing at all.

All that will be covered by the state are tuition fees - and this year's intake is the last for which those will be fully paid. From 1998, students going into higher education will contribute around pounds 1,000 a year, depending on parental income, towards the cost of tuition. This will be paid for by much higher interest-free student loans, which will only be paid back once the student is earning.

If your child is going to Liverpool or one of the other cheaper university towns, the National Union of Students estimates that they will need at least pounds 4,300 a year.

More expensive towns will cost at least another pounds 1,000 a year. Although the loans are designed to cover most expenditure, in practice they do not do so at the moment. Unless you had the foresight to start a savings plan early enough - and not many did - any contribution would have to be made out of income.

This could put a hefty dent in your salary. There are ways of reducing the impact but none of them is cheap. If there is sufficient free capital value in the house, it can be used to raise a first or second mortgage.

Some institutions offer special deals on money borrowed to pay for education. But you should expect to pay the going rate of interest. The Halifax, for example, has a drawdown loan that allows a minimum of pounds 1,000 a time to be taken up to four times a year.

There is a pounds 150 arrangement fee charged for setting up the scheme. Personal loans from a bank are another possibility, but relatively expensive - most charge at least 18 per cent interest.

A better option for those with gold credit cards is to use the low-cost loans that some offer. NatWest's gold card, for example, allows up to pounds 10,000 to be borrowed with interest of 3 points over base rate, with a minimum charge of 10 per cent.

If you have a with-profits endowment policy, money can often be borrowed from your insurance company. Most insurers offer loans at reasonable rates, with the capital being repaid out of the policy's maturity value.

If you do not like the idea of borrowing money, and you cannot afford the student finance being paid out of income, then you will have to raise money by other means. For example, life assurance policies can be sold.

There are a number of firms now trading in second-hand policies who all tend to offer more than the surrender value paid by the insurer.

No matter how much you have to scrimp and scrape, it will always be worthwhile paying for your child's university lifen

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
Katie Hopkins makes a living out of courting controversy
General Election
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Labour will raise the national minimum wage to more than £8 an hour by October 2019 (EPA)

Barclays new Blue Rewards hands cash to customers. What’s the catch?

Joining Barclays Blue Rewards costs £3 a month but then lets customers in for handouts of up to £15 a month

New research reveals that despite the recovering economy, four out of five low-income households have seen no sign of their financial situation improving

Hard-up families could be eligible for financial help

A charity is urging anyone struggling financially to see if they could get help from the state

When is the best time to buy foreign currency?

Video: With an election looming, a hung parliament could hit sterling

General Election 2015: Vote for the party that will boost your finances

Experts warn that the general election is unlikely to lead to stable markets. Simon Read talks to two investment managers who are advising caution

Make the most of your money in 2015-16: The end of the tax year is the beginning of the next...

The new tax year brings with it a raft of new rules and regulations

General Election 2015: Will pension reform be a major factor?

Video: Tom McPhail, head of pensions at Hargreaves Lansdown, says May's outcome could alter your pension

General election 2015: David Cameron's promise brings uncertainty to investors

Video: Simon Read talks to Fidelity's Tom Stevenson

Have you won one of the £1m Premium Bonds' jackpots?

Video: The Independent's Personal Finance Editor runs you through the key facts about Premium Bonds

Give me the money: but not all providers are ready for transfers to Junior Isas

Parents will be able to switch dormant child trust funds to more competitive Junior Isa

Millions of dormant junior savings accounts were yesterday given the go-ahead to swap to better deals as the Government agreed to allow switching. Samantha Downes reports
Hard labour: a woman bears the load in a factory. But equal treatment is causing pension problems

Women to lose benefits from contracted-out pension scheme

Workers were promised that the state would pay inflation increases on parts of their pensions. But now the DWP disagrees
The Budget, says one critic, should have done more to encourage construction of affordable homes

Help for buyers but where are the homes?

A vote-winning Budget promised less tax, greater savings flexibility, and government handouts for first-time housebuyers
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Pricing Analyst

    £30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

    £21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

    Ashdown Group: Head of Client Services - City of London, Old Street

    £45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

    Why Mohammed Emwazi chose Isis

    His friends were betrayed and killed by al-Shabaab
    'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

    Open letter to David Cameron

    Building the walls of fortress Europe has had deadly results
    Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

    You don't say!

    Tory candidates' election tweets not as 'spontaneous' as they appear
    Mubi: Netflix for people who want to stop just watching trash

    So what is Mubi?

    Netflix for people who want to stop just watching trash all the time
    The impossible job: how to follow Kevin Spacey?

    The hardest job in theatre?

    How to follow Kevin Spacey
    Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

    Armenian genocide and the 'good Turks'

    To continue to deny the truth of this mass human cruelty is close to a criminal lie
    Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

    'Lou needed care, but what he got was ECT'

    The truth about the singer's upbringing beyond
    Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

    This human tragedy has been brewing for years

    EU states can't say they were not warned
    Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

    Women's sportswear

    From tackling a marathon to a jog in the park, the right kit can help
    Hillary Clinton's outfits will be as important as her policies in her presidential bid

    Clinton's clothes

    Like it or not, her outfits will be as important as her policies
    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders