Being the parent of a student is interesting. Whilst you do get chunks of your life back during term time, you also must remember that your kids are by no means independent of you, especially financially. There is a very good chance that the support arrangements will call upon you to provide funds for your offspring.

From a financial perspective it has been our experience (quite a few of our staff have had children who have gone through university) that the student loan will provide just enough money to exist on. In other words the loan will just about cover the cost of a room and food for a year if you are prepared to work at it (which most students seem to be).

However, for something approaching a life a student will almost certainly require additional funds; how much depends on their interests and expectations. If they insist on catching the winder skiing and visiting every Grand Prix then this could prove expensive.

It helps a great deal of a student can spend some time in summer building up a "fighting fund" to take back with them to help pay for the coming year.

Students and Banking

Student bank accounts are special deals from the major clearing banks that you really should take advantage of. Unfortunately, the banks don't make it easy to plan ahead as a you might want to do. None of the literature about the accounts are made available until the summer, near when the A level results will be available. If you ask at the banks before then you get a copy of the previous years terms which will not relate to the new offering.

To be competative the banks change their offers every year. Some banks will offer rail cards or free CDs, but we reckon that lots of free money is always the best offer to go for (i.e. interest free overdraft). It is also an idea to for a student to open a new  account from a different bank to that currently used for their savings. It is not unknown for the savings and student finance get merged, often by the bank, without the account holder's consent. It is better to work with different institutions - one for savings and one for student finance. Having a history with more than one bank also helps you when needing mortages and other similar products after graduation.

When deciding what money to spend, irrespective of your view of debt, it is always better to spend the "free money" from the subsidised loan or overdraft, rather than to dip into savings of either the student or parent. There will be plenty of scope for dipping into the savings later!

Loan Arrangements

The process of paying starts around March/April before the student goes to university. Parents and students are usually invited to a presentation at their school or college and told the details of the Student Loan mechanism. Essentially you will be offered the chance to fill in a form and request means tested support, or forgo this is you have income above a certain level and just receive the minimum loan. There is some useful information here. Of course, getting a bigger student loan is not completely good news, the loan does of course have to be repaid.

The loan is paid at the start of each term of study through the year. The course fees are paid to your institution and added to the loan amount. After graduation the loans are paid back, but are only deducted from salary when the income of the working student exceeds a particular threshold. Whilst the loans do attract interest, this is at a very low level.  In other countries, where student loans have been around for ages, this is a well established way to pay for higher education. In fact it is not unknown for people to only complete paying for their education when they reach their fifties.

You should also check out the bursaries and scholarships which are offered. A bursary is a means tested award made by a university to a student on the basis of their particular situation. If your family income is below a certain level you can apply for these. A scholarship is an award made on the basis of where you live, your personal circumstances and your academic performance.

Paying it Back

The process of paying back a student loan starts in the April after graduation. Nothing is paid by the graduate until they hit the threshold income. The repayment amount is a percentage of any income over the threshold.

The government reckons on a repayment term of 10 to 15 years, although you can pay the loan off early if you like.

Is it worth it?

At the end of the day we still believe that a university degree is cost effective, in that it provides the graduate with much greater earning potential. It is also a great experience for the student themselves.  In the great scheme of things the debt which is acquired during a university education is probably not that significant when considered in the light of things like mortgages.