Making a million – a question of degrees?

This concern is borne out by one of the UK’s top head teachers. Dr Terry Fish is the head of Twynham School, a large comprehensive in Christchurch, Dorset that has recently achieved Academy status. He is a National Leader in Education, a National Challenge Advisor and has also just taken on an expanded role as executive head for another large comprehensive in the area.

'The new student loan structure is not well understood by students or parents and this is having a negative impact on students’ attitudes to further education,' says Dr Fish.

'It’s particularly difficult for students at AS level, as this is the time when they need to be applying to UCAS to attend university next year. From speaking to colleagues from a number of schools, it’s clear that some bright students who are expected to get good results are deciding that university isn’t an option due to the level of debt they perceive they will have to take on and this is a real concern.'

Martin Lewis, from MoneySavingExpert.com, agrees that not enough is understood about the new student loan. He is heading up the Independent Taskforce on Student Finance Information, which aims to ensure that students know about the true cost of university education under the new 2012 system.

Martin says, 'We shouldn’t soft soap it. The new fees are far bigger and you’ll be repaying them for longer. Yet that’s where the easy assumptions stop. Under the new system, people who don’t benefit from their university education will pay less than they do now – as monthly repayments are lower and stop after thirty years.

'Currently you repay 9% of everything earned above £15,000. Under the new system this will rise to £21,000 - which means more disposable income each month. Bigger earners, who do well after university, will pay a lot more than right now, but if university is right for you, then the gain from it should offset that.'

'The truth is that the language of loans and debt doesn’t really fit this system. You repay it via the payroll like a tax, its proportionate to income like tax, there are no debt collectors like tax, if you lose your job you stop repaying like tax and like tax many will repay it for all of their working lives. Like it or loath it the new system is here, so we need to start cracking the myths about it.'

The key message to students and parents is ‘do your homework’ and, for parents who want to help their children through university, seek financial advice and explore the best ways to do this.

Once the new loan structure is understood, it may be the case that paying for your child’s degree isn’t the best option and that helping them with other debts or helping them get on the housing ladder could make more financial sense.