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A university education could help your children or grandchildren expand their employment opportunities and increase their earning potential in the future. However, it comes at a considerable cost.
It is important to decide on the most suitable way to cover university tuition costs and how much support you will offer.
There are two main options for funding a child or grandchild’s university education:
- You could pay the tuition fees yourself.
- Your child or grandchild could borrow funds from the Student Loan Company.
Read on to learn more.
Tuition fees increased to £9,535 a year on 1 August 2025
The government increased the upper limit for tuition fees on 1 August 2025. In England and Wales, the maximum amount universities can now charge for an undergraduate degree is £9,535 a year.
Students in Scotland and Northern Ireland have their tuition fees subsidised, provided they study in their own country, so may not need to pay. However, students from outside these countries are likely to be charged the maximum of £9,535 in Scotland and Northern Ireland.
Most universities charge the full amount, meaning a standard three-year course could cost your child or grandchild up to £28,605.
Additionally, they will have to cover their general living costs while at university.
Read more: The hidden costs of a university education
You may need to consider how to cover the cost of university so your child or grandchild can benefit from an education while also securing their financial future.
Your child or grandchild could take out a loan to pay their tuition fees and living costs
The Student Loans Company offers financing options to help your child or grandchild pay for their university education.
There are two separate loans available.
- Tuition fee loans – This loan is typically paid directly to the university to cover the fees.
- Maintenance loans – This loan is paid to your child or grandchild to cover the cost of accommodation and other living expenses. The amount they receive normally depends on their parents’ or guardians’ household income.
While loans may be a useful option, your child or grandchild could graduate from university with significant debt. Consequently, the loan repayments may diminish their monthly income in the future.
Paying for their university fees yourself could help to prevent this.
That said, they may not necessarily need to pay back the full amount borrowed, so paying upfront may not always be the “correct” choice.
Graduates start repaying student loans when their earnings exceed £25,000
Your child or grandchild may be eligible to start repaying their student loan from the April after they graduate, provided they meet the earnings threshold. They will also accrue interest on the loan.
Any students who started university after September 2012 will be charged 7.3% interest while they are still studying. From the April after they graduate, the interest rate is:
- 4.3% for those earning up to £28,470
- 4.3% plus up to an additional 3% for those earning £28,471 to £51,245
- 7.3% for those earning more than £51,245. [1]
Under existing legislation, graduates will pay 9% of any earnings that exceed £25,000. The repayments are taken automatically through Pay As You Earn (PAYE) or need to be paid through self-assessment if they are self-employed.
Additionally, for students who started university after 1 August 2023, the remainder of the loan is written off after 30 years.
This means that, depending on their earnings after they graduate, your child or grandchild may not pay off the entire debt. In fact, the UK government estimates that only 56% of students starting university in 2024/25 will repay their loans in full [2].
As a result, while you might be concerned about your child or grandchild taking on a significant debt, the effect on their finances may not be as pronounced as you assumed.
Bearing this in mind, covering the fees yourself may not always be the most suitable option. In some cases, you could spend significantly more than what your child or grandchild would have paid back had they taken out loans, even considering the interest they may have accrued.
Paying for a child’s university education yourself could affect your wealth plan
Even if they do not pay off the full amount, student loan repayments could affect your child or grandchild’s financial position in the future.
To prevent this, you might consider paying some or all the tuition fees and living costs yourself.
You may use funds from your:
- Regular income
- Cash savings
- Investments
It is important to assess your financial situation and consider the most suitable ways to fund your child or grandchild’s university education. When making these decisions, you will need to take your long-term financial goals into account.
For example, you may plan to rely on your investments to partially fund your lifestyle in retirement. As such, if you use a significant portion of your portfolio to pay for a child’s education, it could be more difficult to achieve your desired lifestyle in retirement.
Similarly, if you pay university costs from your regular income, you may have to determine how this might affect your lifestyle, particularly if you have several children or grandchildren who want to attend university in a short space of time.
You will need to consider these effects on the family finances when deciding whether to fund a child’s university education yourself or recommend they take out student loans.
It is also important to consider how gifting wealth to pay tuition fees could affect the size of your estate for Inheritance Tax (IHT) purposes.
Get in touch
We can work with you to assess your situation and find ways to support your child or grandchild with their education while also achieving your own financial goals.
Additionally, our investment management, consultancy, and wealth planning teams are here to answer any queries.
Please email info@ipscap.com for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
[1] https://www.gov.uk/repaying-your-student-loan/what-you-pay
[2] https://commonslibrary.parliament.uk/research-briefings/sn01079/
