Dodge the debt

25th May 2007 at 01:00
Putting a child through university will always be expensive, but there are steps you can take to prevent yourself being saddled with debt.

Alison Brace reports

For anyone who has not had much to do with higher education since they smiled for the camera at their own graduation ceremony, paying for college life may come as a bit of a shock.

English universities now charge annual fees of up to pound;3,070 and student loans are available so the prospect of years of debt looms ahead.

If your offspring is on the verge of fleeing the nest, it's worth considering how you can ease their, and your own, financial burden.

Research carried out for the Association of Investment Companies shows that students estimate they will be pound;6,199 in debt by the time they graduate. Their parents estimate about pound;7,000. In fact, according to the National Union of Students, the figure is more likely to be pound;13,500.

So what can you do? First of all, check whether your child is eligible for a maintenance grant. About half of all new full-time students are entitled to receive up to pound;2,765 a year if their family's income is below Pounds 38,330. See www.direct.gov.ukstudentfinance to work out your entitlement. If your child is starting uni this autumn, your application needs to be in by the end of June.

Students receiving a full grant are also entitled to a bursary of at least pound;305 from their college or university if the institution charges the full tuition fee of pound;3,070. To see what might be on offer for your child, visit www.direct.gov.ukbursarymap.

Student loans are the cheapest form of borrowing to mop up the rest. The loans are charged at the level of inflation and repayment only begins once the student is earning more than pound;15,000 a year.

If you don't want to see your child saddled with debt, start saving early.

Consider paying regularly into a dedicated high-interest account and make sure you use your full tax-free ISA entitlements. Even better, talk to an independent financial adviser (IFA)who will devise a plan to help your money work for you in the long term. Visit www.unbiased.co.uk for an IFA in your area.

If you have between five and 10 years to play with and are comfortable with risk, an adviser may suggest an investment trust children's saving scheme, where a regular amount of money is invested in stocks and shares. For information, visit www.theaic.co.uk.

Accommodation is one of the biggest expenses of living away from home. To consolidate costs and secure a long-term investment, many parents consider buying a property for their child.

The Teachers Building Society has just launched a 100 per cent buy-to-let mortgage designed to help parents buy a property for their child without the need to re-mortgage their own home to fund the deposit. Parents can purchase a home up to the value of pound;250,000 within 10 miles of the university to rent out to their student daughter or son and a maximum of three other friends. One of the parents must be a teacher or education professional to qualify.

Once you've sorted out your child's finances, the key issue is then making sure they don't blow it all in freshers' week. The Department for Education and Skills has teamed up with Martin Lewis of www.moneysavingexpert.com and the National Association of Student Money Advisors to launch a Talking Money drive to get parents and teenagers discussing budgeting in preparation for higher education.

"It's time parents and students started talking, considering their cash, understanding how the system works and discussing how to live within a budget," says Martin

Parents who are education professionals can purchase a home up to the value of pound;250,000 to rent out to their student daughter or son and friends

Money talks

See www.moneysavingexpert.comparentsguide to download a free PDF version of the Talking Money guide or send an email with your name and address to talkingmoney@robertguy.co.uk

Student Loan Companywww.slc.co.uk

The Teachers Building Society www.teachersbs.co.uk

For more information on fees in Wales, see www.studentfinancewales.co.uk

For Scotland, visit www.student-support-saas.gov.uk

For Northern Ireland, visit www.delni.gov.ukstudentfinance

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