There are many reasons for selecting private education, but in all cases you need to consider the long term costs. Private school fees vary considerably,the average fee per term is almost £3,000. Those in the South East pay significantly more, with school fees for the year topping £10,000. (Data from Standard Life Bank.)

In addition, ancillary costs such as for uniform, games kit and extra-curricular activities can have a significant impact on the overall cost, possibly adding up to 10%.

Financial planning is essential to make sure you have the right funds available to pay the school's fees at the appropriate times, eg. at the start of each term.

How much does a university education cost?

Tuition fees are currently (2007/08) up to £3,070 per year, rising to £3,145 for 2008/09. Until 2010 fees will rise no more than the rate of inflation. On top of fees there is the cost of books and stationery, accommodation and other general living expenses. For the academic year 2005/2006 a student expected to pay, on average, a total somewhere between £8,810 and £10,493. (Data from nusonline.co.uk, National Union of Students.)

For a child who is seven years old now, the minimum sum required for a university education is likely to be over £40,000 (based on a three year course, low inflation in the meantime and current levels of government support). However, this sum could well be much greater as some courses are much longer than three years (eg. medical and veterinary courses).

How can you pay for a university education?

Student loans and grants - In September 2006 a new system of financial support for students was introduced, and the following loans and grants are currently available:

1. Tuition fee loan - up to £3,070 (2007/08) or £3,145 (2008/09), independent of income.
2. Maintenance loan towards living costs - dependent on income, location of university, and whether the student lives away from home; up to £6,315 (2007/08) or £6,475 (2008/09). 75% of the maximum loan is not income-assessed, the remaining 25% is income-assessed.
3. Maintenance grants - up to £2,765 (2007/08) dependent on income (but each £1 of grant will reduce the maintenance loan by £1 up to a maximum of £1,230). From September 2008 it is expected that one in three new full time students could qualify for the full maintenance grant, which will be up to £2,835.
4. Special support grant - up to £2,765 (2007/08) for students who get means-tested benefits such as Income Support and Housing Benefit (eg. students with dependents, single parent students and disabled students).
5. University and college bursaries.
6. Other sources of funding are also available, including NHS bursaries for a range of health professional courses, and university scholarships and hardship funds.

As many of the grants and loans are means tested, it can mean that there is actually only limited support available.

Student loans are a good way of raising cash for fees and living expenses. The loan does not have to be repaid until the student begins work (earning greater than £15,000 per year) and even then only the amount of the loan plus an adjustment for inflation is payable. The loan is usually repaid by deductions from salary. Overall this means that the loan is a cheap way of raising funds, although the maximum loan for maintenance is (2007/08) £4,510 per year (£6,315 for those in London and £3,495 for those living at home) or (2008/09) £4,625 per year (£6,475 for those in London and £3,580 for those living at home). (Data from www.ucas.com.)

The average student debt on leaving university in 2006 was around £13,252, and students who started their courses in 2006 are expecting to leave after three years with a debt of about £14,779. (Data from Guardian Unlimited - education.guardian.co.uk.)

Self-funding - is another option. Students can work part-time to help pay their own costs, but this may adversely affect their studies and still leave them with a large debt after graduation.

Support from parents and other relations - often helps students through their time at university, but this usually means planning many years ahead so that sufficient cash is available at the right time. The final amounts needed can vary enormously, and depend on various factors, including: choice of university, type of course, type of living accommodation and rate of inflation.

How can I help pay for my children's education?

A good way of ensuring that sufficient funds are available to help your child through school or university is to start saving regularly as soon as possible, so that your investments have sufficient time to grow to the required level. These investments should be made in a tax-efficient manner to maximise the potential returns.

For example, you would need to invest a sum of about £280 per month for each child from age seven to generate sufficient funds to pay for a typical three year university education.

Alternatively, you can make lump sum investments. For medium to long term investment periods then these could be based on stocks and shares to give a better likelihood of giving a good return. Shorter terms do not have the necessary time to smooth out the volatility of equity based investments. Hence lower risk accounts should be used, though as interest rates are low at present the return is not likely to be substantial.

Investments can be made using one or more collective funds to reduce risk.

Are there any other ways to help fund education?

Another consideration for education funding, and for raising children generally, is the effect the death of a parent would have on the family's finances. Similarly, the effects of a parent suffering a severe illness should also be considered.

© John Bramwell 2005-2008
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