University students in the UK will pay higher fees from 2025. With the average student in the UK graduating with debt of £44,940, we have some advice for parents who want to give their young people the best possible financial start to their working life.
University fees to rise in the UK
In early November 2024, the UK government announced an increase in the maximum fees for standard full-time university courses in England. They will go up from £9,250 to £9,535, an increase of £285, or 3.1%. This is the first increase since 2017 and will apply to new and existing undergraduates from the 2025/26 academic year.
The majority of students in the UK pay for their degree course using a Tuition Fee loan. The eligibility criteria can be found here.
Some students are also eligible for a maintenance loan, intended to cover accommodation, food, books and general living costs, which is means tested. Maintenance loans will also rise, also by 3.1%. The lowest-income families will see an increase of up to £414 per year from 2025.
Increased debt for many students
Higher tuition fees and increased maintenance loans will mean most students need to borrow more to attend university, and many will leave with increased debt.
According to the Student Loans Company, the average debt for a UK university graduate is £44,940. While this is substantial, student loans are designed to be repaid only under specific conditions. Currently, repayments begin once an individual earns above a minimum income threshold of £25,000, ensuring that, in theory, repayments remain manageable and proportionate to income. Under current rules, student loans in the UK are written off after 40 years.
Nevertheless, interest is still payable and accrues as long as the debt exists. For students in England, the interest rate on student loans is normally set at the retail price index (RPI) measure of inflation. According to the BBC, one loan holder accumulated interest alone of almost £55,000, although this is a highly unusual case!
It’s also important to note the broader financial implications of student loan debt. For example, when applying for a mortgage, lenders may consider student loan repayments as part of affordability assessments, potentially affecting borrowing capacity.
Clearly, student loan debt can influence an individual’s financial situation for many years after graduation.
But what if, as parents, you could give the gift of a debt-free university education to your child?
It is possible, and you don’t have to be a millionaire to achieve it.
How £150 a month could change your child’s life
The key to funding your child’s university education is saving early. Let’s look at an example.
Mr and Mrs Bloggs started saving for Jo’s education as soon as she was born. They consistently put £150 into a fund each month and invested it wisely, earning an average return of 5%.
They did this until Jo turned 18. Over that period, they saved £32,550 and, thanks to a healthy boost from compound interest Jo now has a healthy education fee fund of £50,999.
Jo has just secured a place to study her dream course at a university in the UK in 2025. Eligible for home fees, the savings her parents have accumulated will be sufficient to cover her living costs and fees, and she can look forward to graduating debt-free.
Once she starts working, not only will her degree have boosted her earnings potential but she will have higher disposable income that can be directed towards saving for her first home, rather than paying off debt and interest. That’s a pretty good start in life.
Change your child’s life with an education fee plan
Whether you have a newborn or an older child, it’s never too early—or too late—to start planning for their university education. With the rising cost of higher education, setting up a dedicated education fund can provide your child with the opportunities they deserve without financial stress.
Our experienced financial advisers specialise in helping expatriates in Asia create tailored education fee plans. No matter where you are in your savings journey, we’re here to guide you every step of the way.
Contact us to schedule a chat and discover how we can help you achieve your education funding goals. And give your child the brightest possible future.
A leading provider of expat financial services and wealth management services across Asia.
