Average student debt could reach GBP£50,000 by 2027
- Increased University fees could stretch parents purse strings to the limit
- Child Trust Fund offers ray of hope in meeting rising costs
The average student debt could be on the verge of smashing the £50,000 barrier in 18 years time if tuition fees are allowed to rise to £7,000 a year according to leading Child Trust Fund Provider, The Children’s Mutual.
Responding to today’s announcement, by the BBC, that many university chancellors would like to see increases in tuition fees by between £5,000 and £20,000 a year, The Children’s Mutual has calculated that families may have to find £49,900 if youngsters decide to go to university in 18 years time.
David White, Chief Executive of The Children’s Mutual comments: “What is clear from today’s research is that the cost of university is only going to increase, it’s just a case of by how much. Any parent thinking about sending their child to university in the future will ideally plan how they are going to help fund it and that plan has to be formulated now.
“There is a very real concern that parents could be jeopardising their own financial security to help their children avoid university debt by dipping into their own retirement provision – that’s why we’re urging families of small children to plan early and start saving now.
“Based on the current predictions, if the cost of a three your course is set to rise to 50,000 in 18 year’s time, how many families can afford not to save to meet their children’s university aspirations? However, we believe that there is a ray of hope for parents of younger children in the form of the Child Trust Fund.
“According to our calculations, if families were to save £24 a month into a CTF, it could result in a fund worth £9,750 – potentially subsidising the cost of university by a fifth. However, because the Child Trust Fund has been designed so anyone can save for the child, parents aren’t alone in being able to find the money for their children’s future. If grandparents and other family members helped out and were able to top up the CTF to the full £100 a month over the next 18 years, children could graduate into adulthood with more than £37,100 which could significantly reduce any student debt they may acquire.” (£49,900) The National Union of Students has calculated debts of £32,000 for students if tuition fees rise to £7,000 per year. We have adjusted this figure for inflation at an assumed rate of 2.5% a year for 18 years. (March 09).
 Based on contributions of £24 per month from parents. Projection based on money being invested for 18 years in a stakeholder CTF account, alongside the Government’s initial £250 voucher and another £250 at age 7, with yearly growth of 7% and charges of 1.5% of the account’s value each year. These figures are not guaranteed, shares can go down as well as up and the eventual lump sum could be more or less than indicated.
 Based on contributions of £100 per month from parents. Projection based on money being invested for 18 years in a stakeholder CTF account, alongside the Government’s initial £250 voucher and another £250 at age 7, with yearly growth of 7% and charges of 1.5% of the account’s value each year. These figures are not guaranteed, shares can go down as well as up and the eventual lump sum could be more or less than indicated.