The cost of further education

untitled “Education is the passport to the future, for tomorrow belongs to those whom prepare for it today”

The cost of further education in whatever shape that may take has become a huge challenge for many families.  A full-time student in the UK (excluding Northern Ireland) starting a course in August 2016 would expect to pay up to £9,000 a year in tuition fees. A loan is always a possibility to cover some or all of these fees. However, add to this multiple living costs, such as accommodation, books and clothing and the cost of higher education looks and feels pretty formidable. It may be possible to obtain a maintenance grant or loan, depending on the family situation and when the child started their course, to cover some or all of this outlay. Indeed using the University of Kent’s calculator the cost of living during a three year course could be between £30,234 and £62,058. Add in tuition fees at the current level of £9,000 and these numbers rise to £57,234 and £89,058. Even with significant parental support the evidence is that the level of student debt is inexorably going up, with some experts estimating the average debt for a student after three years being £43,500!

What can be done? Apart from the loans and grants, some universities and colleges offer bursaries for students which will depend upon the household income, the course involved and the amount of tuition fees that are being charged. It is worth contacting the relevant course director to see whether they can be of help. Extra grants are also available for students with disabilities or with children or adult dependants. But what other planning is available that can make a tangible difference particularly where there is time and cash to invest over the longer term?

Firstly choose the right tax wrapper. It seems nonsensical to pay unnecessary amounts of tax when simple but effective options are available.

Individual Savings Accounts (ISAs)

These vehicles can deliver tax-free longer term capital growth and income. All or part of an ISA can be accessed tax-efficiently to help support the cost of higher education. For under-18s a Junior ISA is a “must-have” savings vehicle.

Friendly Society Plans

Not the most exciting savings vehicle but worthy of investigation and they are tax-efficient.

It is worth remembering that our kids in further education also have their own personal allowance, a dividend allowance as well as a personal savings allowance which can mean that they can receive income of up to £17,000 per annum and not pay income tax. They also have a Capital Gains Tax Annual Exemption (currently £11,100) which means that any investment gains falling within this amount can be taken tax-free. I would not pretend it is always easy to access these allowances/exemptions without taking some professional guidance.

I guess the point is that there is only one way the cost of higher education is going and if our kids are to make the best use of their time, it makes sense, where possible, to make best use of the “system” whether that be a loan and/or grant but also the various tax allowances/exemptions that are available. Simple but effective tax planning can make a huge difference as can saving and investing in the most tax-efficient way possible.

By David Lane, Partner and Technical Director LGT Vestra

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For more information please contact:

William Townrow, Partner LGT Vestra.

william.townrow@lgtvestra.com   020 3207 8384

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