The Art of Green Finance

Before we get to saving and investing for a university education, it’s worth asking whether a university education is worth the cost? In financial terms, the answer to this is likely to be yes, but there are a few exceptions. Financial benefit over a career is particularly apparent for people who study for degrees with the highest earning power i.e. dentistry, medicine and engineering. It’s also true for computing, economics and law. For those who choose to study history, languages or creative arts, the financial benefits are less clear cut and some of these degrees may even have an overall negative financial impact. In general, there is a bigger financial benefit of higher education for women than there is for men.

How much will a University Education Cost?

In England, Universities can charge up to £9,250 per year for tuition. For a 5 year degree such as medicine or dentistry, tuition fees therefore approach £50,000. On top of this, there will be living expenses. The average student living costs are in the region of £1,000 per month; more in London and slightly less in the East Midlands and North-East. That’s roughly another £60,000 over a 5 year degree or £36,000 over a 3 year degree.

Of course, this money does not need to be paid out up front. The tuition fees and a means-tested amount of living costs can be funded by taking out a student loan. This is repaid as an effective 9% graduate tax. This may sound steep, but, this will only apply to graduates earning over £25,000 per year. Plus, if the graduates’ income drops, the repayments drop as well. So, bearing this in mind, is it worth paying this money out up front? Possibly, but Martin Lewis argues this is only for the very wealthy.

For parents jointly earning over £25,000, there will be a presumed official contribution to living costs. For a 5 year course at a University in London, this could amount to £33,000!

How to limit the costs of a university education.

Bearing the above figures in mind, it’s definitely worth thinking about how to keep the costs of a university education as low as possible. There are several options:

1. Learn languages… in particular, learn German! I know I said that language degrees are of limited financial benefit in comparison to some other degrees, but that applies to studying a foreign language degree at a British University. Despite the idiocy of Brexit, it is still possible to choose to study your choice of subject at a European university if you have good grades and good language skills (a good A level as a minimum). Although a visa is now required, if you have been accepted for admission by a university, this should not be a huge barrier. And, universities in Germany have non-existant or minimal tuituion fees! If German is not available to study at senior school level, french universities have higher tuition fees than in Germany, but these fees are still less than in the UK.
2. Live at home. Rent is the biggest outlay for most students (apart from tutition fees). If you have a good university within commuting distance, look at this first.
3. Study outside of London. London finds its way onto almost every list of most expensive cities. If finances are tight, avoid.
4. Choose a relatively inexpensive city to study in. Nottingham, has the cheapest overall living costs. However, the differences between cities outside of London are relatively small in comparison to savings from points 1 – 3 (above).

How much should parents save?

For parents thinking about saving for a university education while their child is still small, there is a huge advantage; you can use the magical power of compound interest. For example, if you save 100 pounds per month for 18 years at a (relatively high) savings rate of 5%, you will have saved 35,000 pounds over that time – exactly the amount needed to cover the parental contribution to maintanance costs under current rules!

However, finding a home for savings that keeps up with or beats inflation can be challenging or impossible. You may wish to save a bit more than this, or consider investing a proportion of the money you put aside instead.

Historically, investment returns are better than savings returns 9 times out of 10 if we look at 10 year + time frames. However, there is no guarantee that this will be the case going into the future and in the past few years, we have seen plenty of global events that have rocked global stock markets including Covid and the Russian invasion of Ukraine. Events in the Middle East have so far had a less marked effect on global stock markets but this could of course change if there is a broader escalation of hostilities.

If your child is less than 10 years away from potentially going to university, investing may not be the right choice. Savings or gilts are likely to be safer.

What if my parents have no savings and can’t contribute?

In this case, think hard about limiting outgoings by either living at home or studying abroad (see above). You may even be able to access travel grants to help with study abroad, depending on your course of study. Once you are at university, create a realistic budget using actual student expenditure as a guide and save on costs wherever you can.

As soon as you are old enough, get a Saturday job. Sixteen-year olds must be paid at least £5.28 per hour. If you work 8 hours per week, that’s almost £2,000 per year. You may be offered additional work in school holiday periods which can significantly increase earnings. Even if you only save half of your earnings, that can make a real impact on living expenses. Holding down a job before starting university (and demonstrating that you can balance this with the demands of A-levles) will also increase your chances of getting a student job while you are at university.

If you are studying medicine or dentistry, you may be able to get both an NHS bursary and help with travel expenses. There may also be additional support available via the NHS bursary hardship fund. Further NHS bursary support is available for students with children or adult dependants. Additional NHS bursary support is also available for disabled students.

If you are studying professions allied to medicine (nursing, radiography, phsiotherapy etc.) you may be able to get funding from the NHS Learning Support Fund.

Extra support is also available for those studying to be social workers or teachers.

Whichever degree you choose, you may be able to get additional help from your university, via a scholarship or bursary or via their hardhsip fund. Some of the old universities have a large amount of funding available for this, partly thanks to generous support from alumni who are keen to support good students who might be struggling.

Students studying any subject at university are likely to be entitled to extra help if they have dependents. Disabled students are also entitiled to extra help.