How to help reduce student debt

Autumn 2007

Despite a small percentage fall in graduate debt this year, the average student now owes £11,123 on graduation, compared with only £5,096 ten years ago, according to research by uSwitch.com. With higher tuition fees for 2007/08 and inflation that still nudges an annual 4% - as measured by the Retail Price Index (national statistics August 2007) - it seems all too likely that they long term trend of growing student debt will continue.

Parents and families should bear in mind that the days of free higher education for most students is almost certainly over. The annual university tuition fees are currently up to £3,070 and are normally financed through special student loans. Indeed costs may weel rise a lot further in the future. The actual cost of the course is often many times this figure, especially in medicine, the sciences and practical degrees. There is already pressure from a number of universities to increase the fees ceiling.

So if you could expect that your child or grandchild could go to university or college, you should think about creating a special fund to help them through these years. Students who are not forced to work during the term time to finance themselves can find it much easier to study effectively and get a good deal more out of their course. There are several excellent options for building up a tax-efficient fund for a student-to-be. The right one for you and your family will depend on circumstances. For the long term, ISA's child trust funds and even offshore bonds could play a part. While fixed rate deposit accounts and guaranteed growth bonds may be more appropriate if college days begin soon.

Students with good parental support are often those with the lowest debts. But they can also help themselves by:

Invetigating the chance to obtain a student loan via the Student Loans Company (www.slc.co.uk). It is generally the best long term borrowing
Working during the vacation and possibly also taking a part time job (no more than 15 hours per week) during term time, as long as it does not affect their studies.
Drawing up a detailed budgeting plan at the start of each term and sticking to it.
Making sure they have a student bank account with interest-free overfraft.
Finding out about university help with student fees, as well as the Students Union hardship fund.