This article is taken from Merryn Somerset Webb’s free weekly personal finance email, MoneySense. Click here to sign up now: MoneySense
This weekend’s newspapers made depressing reading for hard up parents. Every teenager in the country seems to have managed to get at least 5 A levels which means that most of them will be going on to university.
Why is this bad news? Because university is extremely expensive. According to a variety of surveys, the average student graduating this summer owes £12,363 and 5% of them owe a whopping £20,000. And no wonder. The maximum student loan outside London is now £4,510 whereas average living costs come in at more like £8,120.
Worse, all this spending upfront now brings no guarantee of a higher income later – so subbing your child now doesn’t automatically mean he’ll end up with the cash to pay off your mortgage or help out with your nursing home fees later.
Now that 40% of people go to university, having a degree isn’t that special any more – pretty much everyone who wants one gets to have one. The result? You can’t expect much of a premium for having one. Or for that matter any premium at all. According to the Higher Education Statistics Agency a good 25% of graduates now go into jobs that didn’t require them to have degrees in the first place: more graduates now work in low paid office admin and customer services jobs (27%) than in “professional occupations” (25%).
Recent research also shows that the average graduate now has to wait until they are 33 – that’s after 12 years of full time work – for their earnings to overtake those of someone who skipped university and started working at 18. Remember that number is an average and as such is skewed by the salaries of well-educated doctors, lawyers and bankers. Many graduates will never catch up. Should this surprise us? Not that much. After all, the traits that employers say they value most (“innovation” and “the ability to think creatively”, according to the Council for Industry and Higher Education) are generally unteachable.
The point is this: for those who plan to study something vocational at university – mechanical engineering, law, mining, architecture etc – and who want a career in that field, university is probably worth it. But those who are not planning to study anything vocational, who are not going to a particularly top university and who do not have a real passion for their subject might want to give it all a bit more thought. Might the three years be better spent?
If your child does make the decision to go to university, how can you make sure it is as financially painless as possible? There are some obvious answers. Make sure they get the best bank account with the lowest overdraft fees – there is a £2000 difference between the best and worse offers (Lloyds offers the least and HBOS the most). Don’t let them be distracted by freebie gimmicks into taking the wrong account – a free rail card for five years (Natwest) is a good thing to have but many of the other things on offer (cheap theatre tickets and so on) are freely availably to students anyway. Teach them basic budgeting (see www.loveisnotenough.com to download a budget spreadsheet). Find them cheap housing or persuade them to study near home, and make sure they work in the holidays.
More valuable however might be to get them started on a free money hunt. There are hundreds of grants, bursaries and scholarships about for students, some of which are big enough to make a real difference. Some come direct from universities, some from charities and some from big companies hoping to use student payouts to improve their odds of hiring good grads later.
Many are awarded to those who can prove academic excellence and to those taking science degrees – i.e. those who really should be going to university in the first place. Southampton has, for example, 15 grants of £2000 for those studying biological sciences and Shell offers a technical scholarship of £10,000 to 2 mechanical or chemical engineering students payable over the three years of their degree. And my own years at university were partially financed by a generous no strings attached grant from the Wiggins Teape paper company.
The best news of all however is that there is limited competition for all this cash: a survey last years showed that 95% of students had no idea this sort of money was on offer and had made no effort to apply for it. This is excellent news for those who bother to do a little research: the fewer people apply the better the chances of success for those who do. The Sunday Times points to a couple of useful websites for this. See egas-online.org.uk, hotcourses.co.uk and educationuk.org and you can find full details at www.ucas.com.
Merryn Somerset Webb
Editor, MoneyWeek
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