Rising university fees and accommodation costs are putting a strain on family finances, as the cost of the average three year degree exceeds £26,000 for the first time. AA Loans* has seen a rise in personal loans taken out by parents to help support children through university as the cost of studying and living continues to increase.
Although not a traditional way to pay for university costs, almost twice as many people (80%) took out a loan for this purpose in 2013 compared to 2012. The average amount borrowed also increased to £7,574 in 2013 from £6,885 in 2012. In both years, the highest number of borrowers applied in September.
Students starting university in September 2014 could feel the strain with accommodation costs. Figures show that the average weekly rent for students has gone up by 25% since 2009/2010 to £123.96 per week for a 44 week private accommodation contract.** This results in an average spend of £5,454.24 on rent per year.
Undergraduates living away from home and outside London can apply for a maintenance loan of up to £5,555 this year to help pay for accommodation. However students can be left with a shortfall for additional living costs such as bills, food and other expenses.
... students are increasingly turning to the 'bank of mum and dad' for much needed support
Mark Huggins, director of AA Loans
Mark Huggins, director of AA Loans, says "We have seen an increase in parents taking out a personal loan each year to help out their children as the cost of university living continues to rise. Not only are fees increasing but in many cases student loans are falling short of day-to-day living costs and students are increasingly turning to the 'bank of mum and dad' for much needed support."
Recent figures released by the Office for Fair Access (OFFA) show that 62% of universities plan to charge the maximum fee of £9,000 for at least one of their courses this autumn, and 28% will charge the maximum fee on every full time course.
Huggins adds: "When students go to university they're thrown in at the deep end in terms of looking after their finances.
"But it can be a valuable lesson in money management. Encouraging them to understand the importance of being responsible with money and learning to budget will help them not just during their time at university, but throughout the rest of their lives, too."
Huggins says, "Sometimes though, asking parents for financial help will be unavoidable and parents are increasingly looking to take advantage of the low loans rates currently available."
To help with educational costs, AA Financial Services currently has a 4.3% APR representative for loans between £7,500 and £15,000.***
AA loans are provided by Creation Consumer Finance Limited. The AA acts exclusively in relation to loans as a credit intermediary for Creation Consumer Finance Limited. Find more information on AA Loans here.
* Information provided by the AA's provider, Creation Consumer Finance Limited
** Information obtained from NUS/Unipol Accommodation Costs Survey 2012/2013
*** 4.3% APR representative for AA members for loans between £7,500 and £15,000. Representative example: £7,500 over 60 months at a fixed interest rate of 4.3% per annum would result in a representative APR of 4.3% APR monthly repayments of £138.86 and a total amount payable of £8,331.60.
15 August 2014