Donít risk letting your childís degree get you in debt

Getting into debt is as much a part of university life as lectures and drinking games ñ which means that, behind the scenes, parents may also have to stretch their budgets to help see their children through college.

Student living costs have risen by almost twice the rate of inflation over the past six years, according to research conducted for The Sunday Times. LV= concurs, reporting that parents can now expect to spend a staggering £43,094, or £14,365 a year, on their offspring between the ages of 18 and 21 ñ and even more when tuition fees are hiked to £9,000 next year.

Many parents are likely to use their savings to fund their childrenís further education ñ but a study by HSBC found that more than half of parents of children under 18 had not started saving for their childís university costs, with 21 per cent relying on overtime to foot the bill, eight per cent planning to downsize their property and five per cent saying they would ask grandparents to chip in.

If you arenít fully prepared, youíre going to need a financial education yourself ñ and fast. Here are some ideas to keep costs down (you might want to share them with the kids).

Get to grips with budgeting

Go through your regular bills and card statements so you know exactly where the moneyís going. Then work out where you can cut back and set yourself a budget ñ it should include the occasional treat, or youíll fall off the wagon.

Read up on your subject

If youíre using credit to fund some of your offspringís running costs, your credit report needs to be top of the class. It contains the history of your cards, loans, mortgage and other credit accounts, along with your repayment record. Lenders look at it before they make you an offer, so everything should be accurate and up to date. Contact the relevant lender if you want to query anything or rectify mistakes. Itís free to see your Experian credit report with a 30-day trial of CreditExpert.

Register (to vote) as soon as possible

Make sure youíre on the electoral roll at your current address. Lenders check it to verify that you live where you say you do and it may improve your credit score.

Try not to take on too much

Accommodation is one of the biggest student living costs, which is why seven per cent of parents told HSBC that they planned to invest in a buy-let property3. If this appeals, donít overstretch yourself. Missed and late payments stay on your credit report for at least three years, sending a warning sign to lenders. A court action or bankruptcy hangs around for at least six years, meaning you could be refused credit or charged high interest for years to come.

Do your research

Each application for credit triggers a search of your credit report that leaves a trace known as a footprint. If lenders see lots of these, they may think youíre desperate or even suspect a fraud. So itís best to research first, and only to apply when youíre sure youíve found a deal that suits you. If youíre just testing the water, ask for a quote.

Ask for help if you need it

If your circumstances change or youíre struggling to cover costs, talk to your lenders ñ they may be able to adjust your payment schedule to make it more affordable. Encourage your offspring to be open about finances as well, so youíre not landed with any unwelcome surprises.

Know the (credit) score

To calculate the risk that you wonít repay what you borrow, lenders generate a score based on your application and information from your credit report ñ the higher, the better. You can see your Experian Credit Score for free with a trial of CreditExpert4 . If it doesnít add up, you may have to work on your own finances before helping your children.

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