03 Sep 2018
Parents and students are said to be vastly underestimating the amount of student debt being accumulated - by sometimes as much as tens of thousands of pounds.
The Association of Investment Companies (AIC)
has published latest student-debt research.
Students think they will leave university with an average of £37,935 worth of debt.
Parents on the other hand expect their children to leave university with £23,954 of student debt.
However, AIC says both estimates are lower than that of the Institute for Fiscal Studies, which last year forecast that student debt would rise to over £50,000.
Although help with university costs remains the top priority for parents (48%) and students (43%), students are increasingly concerned about getting on the housing ladder.
AIC says this year the key financial priority for 38% of students was help towards buying a first property - a 5% increase on 2017.
In contrast for parents, help towards buying a first property is less important than it was last year, with 34% rating it their top financial priority in comparison to 38% in 2017.
More than 40% of students expecting to leave university with debt felt that it will take them more than 20 years to repay it once they’ve graduated.
AIC says that, when it comes to financing university, student loans are a popular option amongst both students and parents.
More than eight out of 10 students say they either have or are planning to take out a student loan, while 73% of parents expect their children to take out a student loan.
Nevertheless, 65% of students think it is realistic that their family will be able to help them financially whilst they’re at university and 62% of parents said they were currently contributing or planning to contribute financially to help their child finance university. Nearly 20% of those parents that contribute or plan to contribute financially stated that they would be using all or most of their cash savings.
When asked the main ways they have ever saved specifically to help towards their children’s future, 66% of parents said they saved via a cash savings account. While cash may still be the preferred choice, this was followed by saving in an investment company (15%), then bonds (12%).
Annabel Brodie-Smith, of the AIC, said: “Like last year, parents still underestimate the amount of student debt their children will graduate with, but those who have a long time to save towards their children’s futures may want to consider alternative options to cash to try and get the most from their savings.
"Interest rates are still near record lows and this will have had a significant impact on cash savings. Parents may want to consider investing part of their savings in the stock market for long-term growth opportunities - £50 a month over the past 18 years invested in the average investment company would have grown to £35,125, clearing a significant portion of the estimated student debt of around £50,000. £100 a month would have grown to £70,250."
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