Students and parents ‘unaware of true costs of higher education’

New figures from the Association of Investment Companies (AIC) have highlighted the considerable levels of debt families are being faced with when children head off to university.

According to the organisation's annual student debt survey, the average end amount of debt for a student that began studying in 2012 will now stand at £53,000 upon their graduation.

However, both parents and students alike are currently underestimating this figure, with the average amount parents believe university life will cost their offspring standing at £22,179, while students expect their total debt will typically rise to £27,140.

In the majority of cases, parents are providing key financial support, with almost one-fifth (19 per cent) stating they are prepared to spend all or most of their cash savings to fund their young ones through higher education.

Indeed, with 63 per cent of parents stating they would contribute towards university costs, the reality of the debt their offspring are building could come as something of a shock.

With the growing costs associated with university life, it is not only mums and dads that are helping out when it comes to providing financial support, but a growing proportion of grandparents are now also helping to foot the bill for their grandchildren's education.

Overall, 16 per cent of parents now state that grandparents are also helping towards paying university costs in 2014 – up from 14 per cent last year, 13 per cent in 2012 and 11 per cent in 2011.

What is perhaps surprising is the willingness of many parents to forego their future financial security to help to pay university costs, with 19 per cent willing to spend all or most of their cash savings to help out their children, 12 per cent willing to sell shares or investments, seven per cent taking out additional loans and six per cent even willing to downsize their home to release additional equity.

Annabel Brodie-Smith, communications director at AIC, commented: "As university expenses continue to spiral, reliance has increased on the bank of Mum and Dad and now the bank of Grandma and Grandpa is becoming significant.

"There's clearly a difference of opinion between the generations about how some university costs might be mitigated, particularly when it comes to whether or not to live at home, or to choose a lower charging university. Judging from the financial sacrifices many parents are prepared to make, in many cases they will end up footing much of the bill."

Ms Brodie-Smith added one of the biggest issues to have been raised by these findings is the significant underestimation that is being made both by parents and students themselves when it comes to the overall amount of debt they are likely to build during their time in higher education.

Families facing financial pressures, be it from university fees, unexpected bills or simply a tightening of their budget as a result of the ongoing cost of living crisis, should consider the benefits of talking to a financial adviser, who could help steer them towards a brighter financial future.

Posted by Joe White