Student debt vastly underestimated by both students and parents

New research* from the Institute for Fiscal Studies recently revealed that the average debt students will have on graduation is a staggering £50,000. In a recent survey conducted by the Association of Investment Companies (AIC) of parents and students, both groups considerably underestimated this figure. Results from the parents’ survey revealed that they expect their children to leave university with an average debt of £25,709, whilst students were nearer the mark, believing they will have an average debt of £37,396.

To help ease this financial burden, 64% of parents said they were planning to contribute or currently contribute to help their child finance university. This mirrors the students’ response, 65% of whom said it was realistic that their family would be able to help them financially whilst at university.  

First property versus university costs

Although help towards university costs is still the greatest financial priority for parents to assist their child with (43%), this is down 10% on last year’s results. Help towards buying a first property as the greatest financial priority to help their child with, on the other hand, has increased to 38% from 28%.

Interestingly, 47% of students said help towards university costs was their greatest priority if their parents were to offer financial assistance, which has also decreased from 51% in 2016. A third of students (33%) consider help towards a first property their greatest financial priority, up from 30% last year.

Furthermore, 38% of students whose family already contributes to a saving scheme for their future said they will use the money for their first property, while 32% said it would be used for university costs.

Cash is king

When asked the main way they were contributing or planning to contribute financially to help their child fund university, 55% of parents stated they would be using some of their cash savings, whilst 16% would be using all or most of their cash savings. This is in line with the percentage of parents (60%) who said they have saved specifically in a cash savings account to help towards their child’s future. 

Annabel Brodie-Smith, Communications Director, Association of Investment Companies said: “University costs remain parents’ greatest financial priority for their child but this is down on last year as more parents prioritise help towards buying a first property for their children. The research demonstrates that many parents massively underestimate the amount of student debt their children will graduate with and are willing to make considerable financial sacrifices.  

“It’s worth parents planning ahead, by saving some money for the long term in an investment company saving scheme. Investment companies spread investment risk by investing in a diversified portfolio of assets on your behalf. If you had regularly invested £25 per month in the average investment company saving scheme over the past 18 years, this would have grown to £15,987, almost a third of the cost required to help clear the average student’s debt. If parents could afford to save a bit more and contribute £50 a month, this would have grown to an impressive £31,974 and £100 a month would have grown to a staggering £63,948 - enough to clear their child’s student debt and have money left over!”

Average investment company share price total return over 18 years to 30 June 2017

Monthly saving of:


£50 £100

Sum invested


£10,800 £21,600

Overall weighted average


£31,974 £63,948

Source: AIC using Morningstar

Missing out on long-term growth?

Cash is still clearly king amongst parents wanting to save for the future. However, those parents who have a long time to save for their child’s university costs may want to consider other options. The current low interest rate environment has had a significant impact on cash savings and parents may want to consider the stock market’s potential for long-term growth for part of their savings. Interestingly, when parents were asked what they would estimate as the minimum monthly amount that could be invested in an investment company savings scheme, just 19% chose the correct answer of £25. Over a third (37%) thought the amount you could save monthly was higher than £25, with the median being much higher at £91. 43% did not know. Only 15% of parents said they have saved specifically in an investment company to help towards their child’s future.

Repaying the student loan

The AIC asked current/prospective students how long they thought it would take them to pay back their student debt once they’d graduated, with 41% saying they think it will take them more than 20 years. Of students who had graduated within the last five years, a higher percentage (64%) think it will take them more than 20 years to repay their student loan and 94% say they will be paying off their debt fully themselves.


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  1. *Institute for Fiscal Studies (July, 2017), Higher education funding in England: Past, present and options for the future
  2. Performance data is share price total return to 30 June 2017 based on the last official close price at the month end. No expenses taken into account. Source: AIC using Morningstar.
  3. The parents research was conducted by Opinium between the 28 June and 6 July 2017 amongst 1,005 individuals with children aged 13 – 18 who have/expect their child to go to university.
  4. The students research was conducted by Opinium between the 28 June and 11 July 2017 amongst 1,004 UK full time students planning on going/currently at university and 200 UK graduates who have completed their degree within the last five years.
  5. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs.  The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 349 members and the industry has total assets of approximately £167 billion.
  6. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.