Paying to Learn

Decades of subsidised degrees grind to a halt next year, when many universities will be charging students the maximum possible fees for their courses. It may be a lot more than you bargained for.

Learning to pay

2011 marks the last year of low-cost academic fees. From 2012, most of Britain’s universities have been given the green light to charge a whopping £9,000 for each year of study. That means that for a full-time student, just the cost of education, before you start to incorporate living costs, travel or even text books, will nearly triple to £27,000 for a three-year course. For longer courses – such as medicine, which can take six years – you are looking at £54,000.

There are also loans for living costs, which (from September 2012) amount to £5,500 for students studying away from home but rise to £7,675 for those studying in London. Assuming that students can make that stretch to actually cover their costs – a big assumption, especially for those whose terms are longer such as veterinary, dental or medical students – that points to a basic graduate debt of £50,000 on a three-year course based in London, or a shocking £100,000 for a six-year degree. By comparison, sending a child to senior boarding school in the UK costs an average of almost £24,000 a year.

Payback time?

The terms of the loans appear quite generous at first glance. No payments are demanded until borrowers are earning more than £21,000, and then you are charged a maximum of 9% of your earnings over that threshold. On a salary of £25,000, that amounts to around £30 a month, or closer to £600 a month on a £100,000 salary. There is no potential for deferring – repayments will normally be taken automatically from a graduate’s salary.

Bear in mind, though, that interest is also charged. Student debt goes up at the rate of inflation plus 3% while you study, and at inflation thereafter. With the retail prices index
currently at 5%, that’s not a trivial rate. The good news? Anything that hasn’t been paid off after 30 years is written off.

The cost of higher education has never been higher, and student loans may not cover the full cost. Please contact us so we can make sure you are prepared.