University challenged by credit crunch

18-07-2008

University challenged by credit crunch
The majority of parents fear the credit crunch will make it more difficult for them to fund their children's university education.

The Association of Investment Companies (AIC) annual survey into attitudes towards university debt reveals 78 per cent of parents believe that the credit crunch will make it harder to support their child financially through university.

Furthermore, parents are underestimating the average debt their offspring will fall into – gauging university debts on graduation to be £9,681, when the true figure is £13,000.

Students themselves expect £12,203 of debt.

Annabel Brodie-Smith, AIC communications director, said: "The credit crunch and the rising cost of living will undoubtedly make it harder for parents to fund their children's university years.

"It's alarming that few of tomorrow's graduates or their families really comprehend the financial implications of top up fees and both have underestimated the amount of student debt they will face on graduation.

"Whilst there are many benefits that come with a university education, on graduation many young people find themselves struggling to repay their debt."

With the rising costs, two-thirds of parents will give up a new car, and 54 per cent would sacrifice an annual holiday.

However, children seem more willing to rely on loans and their parents.

Just 11 per cent of prospective students expect to work to support themselves, although 26 per cent of parents expect their offspring to work.

Some 17 per cent of students expect their parents to support them through university, with 22 per cent living with parents to cut costs.

After university, the effect of debt is also guiding the choices of students.

The prospect of falling £4,402 a year further into debt has put a hold on many people’s postgraduate plans.

Meanwhile, 40 per cent say they plan to look for better paid jobs to repay what they owe.

AIC is now calling on parents to help their offspring prepare for university through saving and investing early.

Ms Brodie-Smith said: "We appreciate the financial strain many parents are under, but if it's at all possible to plan for the future, saving for your children for the long-term from an early age, can give them a financial head start in life.

"The sooner you start investing for your children, the better chance of greater returns."

She added: "Of course many parents are concerned about the current stock market conditions but they need to take a long-term perspective. Parents should consider regular investing as this smoothes out the highs and low of share prices. An investment of £50 a month in the average investment company over the last 18 years has grown to £24,129."

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