University is a major financial commitment, and for many families, student loans won’t cover the full cost. Planning ahead with investment tools like a Junior ISA can help build a useful financial buffer, offering students greater flexibility and reducing the strain on family finances when the time comes.
Many parents hope that one day their youngster will fledge the familial nest for a transformative university experience that sets them on the career path of their dreams.
But the journey in many cases is a challenging one. Motivation, hard work and academic grades are all obstacles to be surmounted on that journey, of course, but for many aspiring students and their families, money, pure and simple, is the other.
So, what does it actually cost nowadays to do a university degree, what does the system offer in terms of mainstream financial support – and how can a Junior ISA be best used to ease the shortfall?
The costs
University courses starting in the 2025/26 academic year will have a maximum annual fee of £9,535¹. Fees can vary between courses; and both fees and available finance also depend on which country a student comes from - England, Wales, Scotland or Northern Ireland – and where they’re studying. For brevity’s sake we’ll focus on England here.
Fees therefore currently amount to almost £30,000 over the typical three-year period. But when living costs are factored in as well, the figures head skywards.
Estimates vary, unsurprisingly. According to the latest (2024) National Student Money Survey (NSMS) conducted by Save the Student, a three-year degree course costs around £68,300 all in².
A recent report³ from the Higher Education Policy Institute (HEPI) makes more alarming reading. It finds that “to have a minimum socially acceptable standard of living, a student needs £61,000 over the course of a three-year degree, or £77,000 if studying in London” – but those figures exclude tuition fees.
Funding
In practice, most students choose to borrow at least some of what they need. Student loans are divided into two main types. Tuition fee loans cover the full cost of each year’s course fees and are paid directly to the university.
Students can also apply for means-tested maintenance loans to help fund their living costs. For most students under the age of 25 the amount will be dependent on their parents’ income, with the largest sums going to those from households with incomes of £25,000 or less⁴.
For those studying outside of London the maximum available annually is around £10,500; for students based in the capital it’s almost £13,800⁴. However, studies show that students still face a substantial shortfall.
The HEPI study³ concludes that for those domiciled and studying in England, “the maximum maintenance loan … covers just half (50%) of a first-year student’s true costs”. Those who don’t qualify for the maximum will have to find more from other sources.
The NSMS report², meanwhile, calculates that average maintenance loans leave students around £504 a month short in terms of living costs.
The basis on which maintenance loans are awarded assumes that parents who can afford to help will shoulder some costs. But the NSMS report reveals a wide range of alternative routes taken by students to make ends meet, from bursaries and part-time jobs to overdrafts and credit cards.
However, a stocks and shares Junior ISA set up in early childhood could help to ease the financial strains on student and parents alike.
Junior ISA power
To give some idea of how this might work, let’s assume that working parents Dave and Amanda set up a Junior ISA for baby Iona when she is born.
Between them they can spare £100 a month, so they arrange a standing order to go out from their joint account and select a broad-based investment trust that pays a hypothetical rate of return averaging 5% a year after costs (note that in practice it could be more or less than this).
When Iona comes of age, the Junior ISA automatically rolls over into an adult account in her name, and she can access the nest egg that her parents have been building over the past 18 years. She is delighted to find she has accrued a fund worth £35,000⁵.
Iona is about to head off to university, and recognises that this is an ideal opportunity to put her lump sum to good use. She does not qualify for the maximum maintenance loan, and therefore decides to supplement her income to the tune of £700 a month from her investment.
Being a canny young woman, she knows that it makes sense to leave as much as possible of the fund invested (and hopefully growing), so she sets up a regular monthly withdrawal from her ISA.
The combination of capital withdrawal and continuing investment growth at 5% means that although she takes out a total of £25,200 (£700 a month x 36 months) to cover living costs during her three years at university, the ISA fund is still worth a handy £13,500 by the time she graduates⁶.
Of course, inflation will nibble away at the real value of her fund both as it builds up and once Iona is taking withdrawals (to keep things simple we have not shown its impact on buying power in these calculations).
It’s also the case that because Iona is drawing down capital during this three-year period, there is a risk that any prolonged market volatility could impact the fund relatively hard and leave it struggling to recover value.
One option Iona could consider to mitigate this is to switch into an investment with less equity exposure when she starts to draw on the money.
Clearly, though, long-term investing through a Junior ISA could make all the difference to a young person’s lifestyle and options at university - and take the short-term pressure off the Bank of Mum and Dad into the bargain.
When it comes to choosing an appropriate broad-based and reliable investment for your youngster’s nest egg, J.P. Morgan Asset Management’s stable of investment trusts is a fine place to start and could make an ideal choice for a child’s Junior ISA.