University becomes more of a financial burden for students, parents and grandparents, survey has found

News - Savings

Written by Ray Clancy

Friday, 16 July 2010 10:41

The recession has increased the financial burden of university costs on students and their parents, according to new research.

Some 82% of parents say the recession has increased the financial strain of university costs while 55% of students are worried they will not find a job on graduation, the survey by the Association of Investment Companies shows.

Some 49% of students think it will take over a decade to repay their student debt and they are more realistic than their parents on student debt. But it is estimated that in 2011 graduates in the UK face an average debt of £21,981.

With the Government considering reducing funding for universities, the financial strain on students is likely to increase so students and their parents need to be financially prepared, the AIC says.

It points out that a £50 a month investment into the average investment company over the last 18 years would today be worth £20,371 and over 21 years it would be worth £28,318, which would definitely be a great help to today’s students who are facing such a financial burden.

The survey also shows that 34% of students predict they will graduate with over £20,000 of debt compared to 19% of parents. It says a worrying 24% of parents might be in for something of a shock when their child graduates as they believe their children will graduate with less than £10,000 in debt compared to 19% of students.

Some 49% of students estimate that it will take them over 10 years to pay off their debt while 8% believe they could be in debt for over 20 years. With such a debt sentence upon them, some 18% of students said that they would put off or postpone doing post graduate studies due to the extra debt entailed.

Employment is also a worry with 55% of students concerned that they will not be able to find a job on graduation, due to the effects of the recession.

Parents and grandparents are offering financial help. Some 25% of parents questioned said they would be the main source of funding for their child’s university education and 12% said that grandparents would be making some contribution as well. Just under half, 46%, of students will be taking out a student loan as their main source of income, the survey also found.

Some 23% of parents said they would sacrifice their annual holiday to help, 21% would not buy new car, 13% would postpone home improvements or extensions, and 12% would not consider moving to a bigger house.

‘Clearly the recession has made it even harder for parents to fund their children’s university education. It is worrying that so many students and their parents are still underestimating the true cost of going to university. Many young people go to university to enjoy some of the best years of their life but the reality on graduation is a huge financial burden which will take years to pay off,’ said Annabel Brodie-Smith, communications director of the AIC.

‘With parents facing an ever increasing financial burden, if you can start saving for your children for the long term from an early age you can give them a financial advantage in life. The sooner you start investing for your children, the better chance of greater returns. Investment companies offer parents a useful way of saving as they can access the long term potential of the stock market,’ she added.