How mum and dad can help with cash

Parents should assist as much as they can, but shouldn't worry if they can't.

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Twelve thousand pounds – that is the average debt of students graduating this year, according to a Barclays Bank survey, and next year it could well rise to £13,000. For any parent with a son or daughter starting university this autumn this can be a worrying prospect, because things can only get worse.

But if you are wondering whether it is wise to urge your offspring to go to university at all, there are two points to bear in mind: first, starting salaries for graduates tend to be £3,000 to £4,000 a year higher than those who don't go on to higher education, and by middle age the differential could have reached £15,000; second, the payback system for the student loan, the major source of borrowing, ensures that the debt is manageable. So, providing a student gets a degree, university is not something to turn your back on lightly.

So what could you and should you, as a parent, be doing to help?

You are, of course, already an important part of the funding system, whether they like it or not. The system works like this: all students, except Scottish students studying in Scotland, are expected to pay towards their fees. The full rate for the coming scholastic year is £1,100. How much a student actually pays is means-tested on parents' joint residual income. (That's income minus tax-deductible elements.) Around one half of students pay nothing.

Students are also eligible for a student loan. According to Barclays' student survey, 94 per cent of students see it as their first line of borrowing. The maximum loan for most students this autumn will be £3,905 – slightly more for those studying in London and less for those living at home. Part of that loan is also means-tested on parents' joint residual income. So, any of the fee element that the Government doesn't pay and any of the loan that a student is not eligible for, parents are expected to stump up. The full whack for one child would set you back more than £2,000 a year in England and Wales, and more than £3,000 in Scotland.

The critical word, however, is "expected". Nobody can force you to pay anything. But if you don't, the only person to suffer is your child.

Once you have discovered how much you are expected to contribute (this is done through your local education authority), you have then to decide how much you can actually afford to give. While many parents pay more than their allotted contribution, the average according to Barclays' student survey is £681 more, others really can't afford to pay what is even expected and this is where the system falls down.

Whatever your situation, be honest with your child. They need to know exactly what their financial position is in order to budget.

The next decision is how and when you will pay out. You could decide to pay a certain amount into their account each week or month, to pay their fees, bills or rent – and with rents averaging around £53 a week, that would be a generous offer.

If students are in university accommodation then rents are based on a 38-week academic year and utilities are included. In the open market, contracts are generally for 12 months with bills on top. A large deposit may also be required in advance and many parents help out with that.

You could, of course, give them an allowance by the term and let them get on with it. After all, learning to cope financially is all part of the student experience. A word of caution, however, the student loan already arrives in a lump sum, generally at the beginning of each term. Most new students have never had so much money in their possession before, and freshers' week is a massive temptation, as Dave Siddle, a civil engineering student at Leeds explains:

"Out every night, drinking, clubbing, making new friends. You soon go through your money. Everybody says budget, but of course nobody does. As soon as money comes in, you spend it."

Whatever you decide, discuss it with your offspring first and stick to your decision. Then try not to get involved in their financial affairs unless they involve you. Most students crave independence, and hate still being dependent on parents.

There is, of course, a basic flaw in the whole university support system: it isn't enough. The NUS estimated the shortfall for this year at £4,000-£5,000.

Many students fill that black hole with a job. Around 40 per cent work during term time and 80 per cent during the vacations. Working is not necessarily a bad thing and can be a definite plus on a student's CV. Problems can arise during the final year when many students feel they should give up term-time working because of study pressures, just when the loan is decreased. (This is because they are expected to have a job by the summer, after graduating). So parents could step in and help out here.

If you want to spare your child the depressing prospect of debt altogether, you may find just paying out to avoid them taking the student loan isn't the best option, especially if you are having to borrow to do so. The cheapest money that can be borrowed is likely to be the student loan. Interest is charged at the rate of inflation so you pay back in real terms the amount you borrow. The current rate is 2.3 per cent and will be going down to 1.3 per cent in September.

So letting your child take out the student loan and then looking at ways to pay it off for them could be better. The pay-back system for the student loan is operated by the Inland Revenue and deducted from a graduate's pay at source at a rate of 9 per cent of salary above £10,000. The first payment is in the April after a student graduates. You can of course pay it off quicker if you want.

Fear of debt may be putting some students off university, but student numbers are increasing. We currently have more than one million first-degree students going through university. The UK's university dropout rate is among the lowest in Europe. One way or another, most students make it through. If you are looking for advice then I'd suggest you should help financially as much as you can, but don't feel guilty if you can't.

Finace advice for parents

* Don't let debt deter your offspring from going to university. The pay-back system is reasonable, and graduates tend to earn more than the rest.

* Pay what you can afford towards maintenance/fees, not what's expected

* Be honest with your offspring about how much and for what you will pay – and stick to it.

* Investigate the student loan as a source of borrowing if you want to fund your child through university and will have to borrow to do so.

* Help out more in the final year when the loan is less and pressure of study may preclude a term-time job.

* Be ready to help with unexpected expenses, i.e. deposit on house, essential equipment, field trips

* Checkout savings schemes to fund university while children are young

* Tap every additional source of student finance available – even your own employer

* Interfere as little as possible, but... Be ready with sympathy and support should things go wrong.