Rising university fees: What could this mean for families and their savings?

22 November 2024

By Ben Potter, Investment Manager 

University fees in England will increase to a maximum of £9,535 for the 2025/2026 academic year, an increase of £285. Maintenance loans will also rise by £414 a year. The current fee cap of £9,250 has been unchanged since 2017. This increase will only apply to English students attending English universities.

We have been hearing a lot about how universities are struggling to stay financially solvent due to inflation causing the ‘real value’ of fees to drop, declining numbers of international students who pay higher fees than domestic students and overall lower numbers of students enrolling in courses. 

Despite the declining number of students enrolling, the number of student loans issued is expected to increase by 6% between 2022 and 2028; the main reason being the climbing cost of living and its impact on parent’s ability to support their children at university. This will undoubtedly mean that more people will be paying back loans for longer than before. The amount you repay depends on your gross income and acts like a tax. You will pay 9% over a specific threshold for an undergraduate degree, and 6% for a postgraduate degree. However, the interest added is fixed depending on your income level for the period you are repaying it. 

Those with bigger loans won't have bigger monthly payments, but they will have to repay the loan for longer. However, there is a cap on how long you will be repaying your student loan and this depends on where you live. Students in England, who have enrolled on a university course since September 2023, will have 40 years to pay it off, after which time any outstanding balance will be written-off. In Wales it’s 30 years, in Northern Ireland, it is 22 years, and Scottish students who study in Scotland do not need to pay anything back as they are not charged university fees. 

The amount you repay monthly is very small as governments want to encourage more students into further education and recognise that finance could be a barrier.

If you are a parent and expect your child to go into further education it is sensible to start saving money or investing it to support them through this expensive period of their lives. The chances are costs will increase further in the coming years, making planning for your children's higher education even more crucial.

There are ways you could prepare for this, but the best way is to start as early as possible. Setting up a Junior ISA, or JISA, is a great, tax-efficient way to save for your child’s future. A JISA allows you to save up to £9,000 a year in your child's name until their 18th birthday, after which time it can either be turned into a regular ISA account, or the child can withdraw the proceeds. There are two types of JISAs, a Cash JISA and a Stocks and Shares JISA. A Cash JISA works as a bank account as it only holds cash but no tax is charged on the interest earned. A Stocks and Shares JISA allows you to hold a variety of investments without having to pay tax on any gains or any interest earned.

While the upcoming changes to university fees might seem daunting, families have options to ensure the changes have minimal impact on their child’s future financial health. At Walker Crips Investment Management, our team of experts are ready to help you plan for these changes and secure your financial future.

If you’d like to explore your options or need more advice, don’t hesitate to reach out. We’re here to assist you every step of the way.

This article is for information only and should not be construed as an invitation to engage in investment activity without undertaking professional advice. References to government legislation are correct as at 21 November 2024.