Student loans have hit the headlines again following recent analysis from the Institute for Fiscal Studies (IFS). Naturally, many of you are asking us: “With interest rates so high, should we just fund university ourselves?”

Research from the IFS has found that graduates on a Plan 2 student loan need to earn around £66,000 a year before their repayments even begin to reduce the amount they owe. Below that level, interest on the loan can build faster than repayments reduce it, meaning the outstanding balance can continue to increase over time.

For parents, this has raised a very real concern – whether their child is about to start university, or whether it’s something they’re planning for years down the line. If graduates can spend years repaying loans without ever seeing the balance meaningfully fall, it’s understandable that families are asking whether relying on the student loan system alone is the right approach.

So the question many parents are now asking is a reasonable one: should we be saving to help with university costs, given how the system actually works?

Why the conversation is changing

Under the current system in England and Wales, the “maths” of university changed significantly in August 2023. It is vital to understand which plan your child will be on:

While Plan 5 removes the “ballooning interest” trap seen in the headlines, the lower threshold and 10-year extension mean the government expects significantly more graduates to pay back their loan in full. This dynamic has led some to describe student loans as a long-term “graduate tax”, rather than a conventional debt that steadily disappears.

The Current Landscape

We are seeing a notable shift in how families are choosing to navigate these costs, with many taking a more proactive stance.

According to a study from AJ Bell (conducted by Opinium):

• 46% of parents with children under 18 are now actively saving towards university costs.
• A further 21% have saved in the past, but are not currently putting money away.
• The most common savings pots sit between £5,000 and £10,000.
• Many are adopting a “little and often” approach, saving up to £25 a month or between £50 and £99 a month.

While many aim to help with costs, Aviva’s 2024 “Graduate Gap” report found that 27% of parents actually intend to pay for all their child’s costs-tuition, accommodation, and living expenses-to avoid the debt system entirely.

We find that our clients’ approaches are as varied as their personal goals. While some choose to fund university in full to provide a “clean slate” at graduation, others prefer a blended approach-perhaps saving to cover the £5,000+ annual maintenance gap while utilising the loan system for tuition. Ultimately, the “right” choice depends entirely on your wider financial plan and what you want to achieve for your family.

So should you be saving – or not?

As with many financial planning questions, there isn’t a single right answer. At Porta, we believe the starting point is always looking at your life goals and your financial plan as a whole. The essence of what we do is helping you work out where university fees fit into those wider priorities.

Money directed towards university is money not being used for retirement planning, building emergency reserves, or reducing mortgage debt. It is only once we have mapped out your overarching plan that we can determine the right strategy for education.

In that context, saving for university doesn’t have to mean covering the full cost. Even modest contributions can reduce reliance on borrowing, ease pressure during university, and help graduates feel more confident about money early in their working life.

How families are approaching university savings in practice

Regardless of whether the goal is full or partial funding, we see several common approaches to building these pots:

• Starting where possible, even if amounts are small: Families focus on building the habit during expensive childcare years, with the expectation that contributions can increase once those costs fall away.
• Saving more once other costs reduce: As children get older and childcare expenses end, it becomes easier to redirect money towards longer-term goals.
• Keeping savings flexible: Rather than earmarking money rigidly for tuition, many parents prefer savings (like ISAs) that can be repurposed-perhaps for a first flat deposit-if plans change.
• Being mindful of timing and risk: As university approaches, families often become more cautious about investment risk, recognising that market volatility matters more in the short term.

Using a Junior ISA for university savings

One option many families consider is saving through a Junior ISA. A Junior ISA allows up to £9,000 a year to be saved or invested for a child (2025/26 limit), with no tax to pay on income or capital growth.

However, remember: the money legally belongs to the child and becomes accessible to them at age 18. For some, this lack of control means they prefer to keep savings in their own name and provide support as and when needed.

Porta’s take

University funding is no longer a simple question of affordability. The system shifts much of the cost into the future and ties it to earnings, which changes how parents think about saving.

We see many families choosing to save something – not necessarily to eliminate borrowing entirely, but to reduce pressure and give their children a stronger start. However, as we have discussed, the key is ensuring the plan doesn’t derail your other long-term milestones. A thoughtful, proportionate plan – rather than an all-or-nothing decision – is usually the most effective way forward.

Important information

This article provides general information only and does not constitute personal financial advice. The information is based on our understanding of current regulations, which may change in future. Decisions about your finances should always be made based on your individual circumstances. If you’re unsure about the suitability of any course of action, you should seek regulated financial advice. The Financial Conduct Authority does not regulate tax planning, estate planning, trusts or wills. The value of your investments can go down as well as up, so you could get back less than you invested.

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