You don’t need a Maths degree to know that going to university is an expensive business - and student debts are only set to grow under new rules. The government has announced that university tuition fees in England will increase every year in line with inflation from 2026 onwards.
This means that the current £9,535 tuition fee cap could increase by hundreds of pounds a year, while student living costs continue to climb too. As a result, many families will be looking to save and invest early to help their children avoid leaving university with excessive debt.
How much will tuition fees rise by?
Communications Director at Save the Student, Tom Allingham says: “90% of eligible students take out a loan. But, whereas a tuition fee loan covers the cost of tuition in full, a Maintenance Loan won’t cover, in most cases, your living costs in full.“
The government’s yet to confirm which measure of inflation will be used to calculate the tuition fee increases, but it’s likely to be the RPI All Items Index Excluding Mortgage Interest (RPIX). If so, the maximum tuition fee could rise by around £420 a year to around £9,955.
When fees rise each year with inflation, the cost of university doesn’t just increase once - it compounds over time. For example, if inflation averages 3% annually, a £9,500 university course today could cost nearly £11,000 a year in five years’ time. Parents planning to help with tuition costs may find the total bill far higher by the time their child turns 18 years old, especially for those with young children.
Maximum Maintenance Loans will also increase yearly in line with inflation - although critics have warned that this isn’t enough. Maintenance Loans are designed to pay for students’ living costs, so higher loans help students keep up with the cost of living. But tuition fees are paid directly to the university, so any fee increase simply makes higher education more expensive.
What can parents do to help with rising university costs?
Founder of Pennies to Pounds, Kia Commodore says: “I think I’m close to £90,000 [in debt]. Because I did a four-year degree and I had a lot in Maintenance Loan. It’s a big chunk of money.“
According to Save the Student, in 2025 parents typically give each child an average of £146 a month while they are at university, the lowest figure since 2021. For parents, it often makes more financial sense to focus on reducing the amount of debt their children take on rather than trying to help repay it later.
Once a student graduates from university, their loan repayments are linked to their income, not the size of the debt. This often means that parental lump sum gifts after graduation rarely make a meaningful difference to their child’s monthly outgoings (unless the total debt is wiped out).
Under current rules student debt is written off by the government 40 years post-graduation (previously 30 years). This means a narrow majority (52%) of new graduates are predicted to repay their full student loan, plus any accrued interest, during their working lives.
Many parents are increasingly concerned about their children leaving university saddled with debt before their career has even started. If parents contribute earlier - for example, by helping with living costs during university - this can directly lower the amount borrowed and reduce the long-term interest that builds up.
1. Start when your kids are young
Engineering Manager at PensionBee, Stewart Tywnham says: “We saved for both our eldest, basically from when they were born. We were putting something like £25 a month into an Individual Savings Account (ISA), the price of a takeaway pizza.“
Finding spare cash out of your income once your child, or children, goes to university can be difficult. You might be overpaying on your mortgage to become debt-free faster, or catching up on pension contributions ahead of your planned retirement. So, if you want to help them, the key is to start investing when your child is younger - preferably soon after they’re born.
One of the most effective ways is investing through a Junior Stocks and Shares ISA (JISA). Parents (and other family members) can save up to £9,000 a year per child and the growth is completely tax-free (2025/26). The account belongs to the child and becomes accessible to them when they turn 18 years old - just when they might need money for living costs at university.
If you were to contribute £750 a month (which equals £9,000 a year) from your child’s birth until they turned 18 years old, the total contributions would amount to £162,000. Assuming an annual growth rate of 5%, and paying 1% annual charges, the pot could grow to £235,211 over 18 years. Such a sum could potentially cover both university and a house deposit for your child.
Even if you managed to contribute a more modest £100 a month, the pot could grow to £31,362 over 18 years (assuming a growth rate of 5% and 1% annual charges). That’s enough to give your child over £10,000 a year for the duration of a three-year university course.
2. Take advantage of Premium Bonds
Premium Bonds can be a useful way for parents to save for their children’s university costs. Instead of earning interest, each bond is entered into a monthly prize draw for tax-free prizes of up to £1 million. This offers savers the chance of higher returns than a typical savings account while protecting the capital.
Each individual in the UK - both adults and children - can hold up to £50,000 in Premium Bonds. You can buy Premium Bonds in your child’s name, but you’ll need to oversee the bonds until your child reaches the age of 16, when ownership of the account’s transferred to them.
One key advantage of Premium Bonds is flexibility. Money can be withdrawn at any time, making them handy for covering university expenses such as accommodation, travel, or course study materials.
While the initial deposit is backed by HM Treasury and the prizes are tax-free, Premium Bonds don’t guarantee growth. Any returns depend entirely on winning prizes and it’s possible to win nothing. For this reason, they’re best used alongside other savings or investment options, such as ISAs, to balance capital preservation, accessibility, and potential growth.
3. Consider other tax efficient investments
Beyond Junior ISAs and Premium Bonds, parents can consider several other investment options to save for their child’s university costs. A Stocks and Shares ISA allows you to invest £20,000 a year and any growth in the account’s tax-free (2025/26). Through this account you can invest directly in:
- company shares;
- exchange traded funds (ETFs);
- government bonds;
- index funds; and
- many other types of investments.
One advantage of using an ISA in a parent’s name is that the parent retains full control of the account, even after the child turns 18. Unlike a Junior ISA, which automatically transfers ownership to the child at adulthood, an adult ISA allows parents to decide when and how to withdraw funds to pay for university costs.
Investing doesn’t have to be expensive or complicated. Parents can make contributions into a low-cost global index fund and benefit from diversification across a spread of countries and industries. Through the power of compound interest, even a lump sum contribution when they’re first born could snowball into a sizable gift by the time they reach university age.
General investment accounts (GIA) are another option, especially if you’ve already used up your ISA allowance and have money spare to invest. Parents can invest in the same range of assets as commonly available in ISAs. The key difference is that investment gains above your allowance are subject to Capital Gains Tax (CGT).
Summary
With tuition fees and the cost of living continuing to rise, planning ahead isn’t just sensible - it’s essential. But saving for your child’s education doesn’t have to come at the expense of your own financial goals. By getting started early and making the most of government allowances, even small, regular contributions can grow into a substantial fund over time.
Listen to episode 42 of The Pension Confident Podcast where our expert guests debate whether parents should pay for their children to go to university. You can also watch on YouTube or read the full transcript.
Emma Lunn is a multi-award winning Freelance Journalist. She’s written about personal finance for 20 years, with a career spanning several recessions and their consequences. Her work has appeared in The Guardian, The Mirror, The Telegraph and MoneyWeek. Emma enjoys helping people learn to manage their money well, in both the short and long term.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
