How a junior ISA can pay for university fees

Students who take out loans to pay for their university degree are being saddled with large amounts of debt at high interest rates at the very start of their adult lives. For new parents with some spare cash hoping to see their child enter university, Junior ISAs are a better alternative.

If opened early and contributed to regularly, money accumulated in a Junior ISA (JISA) can help go towards or completely pay for university fees, so children leave uni without student debt.

How much does it cost to go to university?

With tuition fees for a standard undergraduate degree in England reaching up to £9,535 per year and the maximum maintenance loan for students living independently away from home, outside London, coming in at £10,544, a three-year degree could cost more than £60,000.

This is high enough, but it isn’t the end of the story.

The affordability of getting a degree is facing fresh scrutiny. Most students have to take out loans from the Student Loan Company to pay for it, at what many are now saying are extortionate rates of interest.

How much debt do students graduate with in the UK?

The average debt among student borrowers who finished their course in 2024 was £53,000 when they first became liable to repay this debt (April 2025).

The loans are repayable once students graduate and start earning over a certain threshold – round about minimum wage – but interest starts accumulating from the day the first loan payment is made to the student or their university.

The government forecasts only around 56% of full-time undergraduates starting in 2024/25 would repay their loans in full.

How much interest do students pay on their loans?

The interest UK students pay on their loans varies depending on their student loan repayment plan. But it is often the interest that makes the loans so expensive.

For example, under the new repayment Plan 5 – if your child starts an undergraduate or postgraduate course after 1 August 2023 – the interest rate will normally be set at the Retail Prices Index, which, as of December 2025, was 4.2%. This is considerably higher than the more widely used Consumer Prices Index at 3.4% and above the Bank of England Base Rate of 3.75%.

However some students on earlier repayment plans are paying much higher levels of interest. The maximum interest rate on Plan 2 (post-2012) loans is currently a whopping 7.3%.

Two thirds of graduates who have started repaying their student loans aren’t even paying off the interest, a recent Freedom of Information request by the Times found, so the debt keeps ballooning faster than they can pay it back.

How to pay for university with a Junior ISA

Opening and contributing to a Junior ISA on behalf of your child can help them avoid getting into tens of thousands of pounds of expensive debt before they’ve even really fully entered adulthood. This is how.

Key facts about JISAs:

• Parents and guardians can open a JISA for a child under the age of 16 with as little as £1 in many cases.
• Once the JISA is open, grandparents can contribute money to it too, along with other family members and friends.
• Together loved ones can tuck away up to £9,000 a year into a Junior ISA for a child, from as soon as they are born.
• This money can be put into either cash or stock and shares. The earlier you start the longer the money has to grow.
• If the child is very young it makes sense to consider a stocks and shares JISA. Investing for the full 18 years means a stocks and shares JISA should be able to ride out any market downturns and still comfortably beat the return on cash.
• All gains, either from interest (cash JISAs) or investment (stocks and shares JISAs) are tax-free in the JISA wrapper.
• The child gets control of the JISA once they turn 18.

The power of compounding in a JISA

The key thing to keep in mind is that making even small monthly investments as soon as your children are born can compound as investment returns into a healthy lump sum when they hit 18. If you set up a direct debit to come out of your account and go directly into the Junior ISA, you’ll never forget to invest, and you’ll build up a nest egg without really noticing.

Say you open a JISA with £1 the day your child is born. Then you contribute just £50 a month, every month, until their 18th birthday. Your contributions alone will add up to £10,801.

But assume you invested those monthly contributions in a stocks and shares JISA. With average investment returns of 7% a year the JISA will be worth a total of £21,539 after 18 years. Just before they head off to university – enough to pay for a year’s tuition and a year’s living costs, without taking out expensive loans.

The more you can invest, the more help you can give your future student. Up that monthly contribution to £100 for 18 years (again at 7% growth) and you’re looking at the JISA being worth £43,075 by the time they head off to uni – enough to cover the cost of two thirds of a degree course.

If you are able to invest the full £9,000 a year in a stocks and shares JISA – equal to £750 a month – assuming the same 7% growth rate, your baby will benefit from a pot worth around £323,000 when they turn 18. A life changing sum that will not only cover their university costs but leave enough over to buy a first home in some areas, all possible due to the power of compounding over time.

The benefits of starting JISA investing early

Time is the key factor here. The earlier you start investing into a JISA for your child the better off they will be by the time the money comes into their hands at age 18. And the impact of delaying is considerable.

For example, if you wait until your child is eight years old to invest £100 a month (at 7% annual growth) after 10 years the final value of their JISA will be £17,308. This is still a healthy figure, of course. But look at it versus the £43,075 they could potentially have had if you’d started just after they were born.

Most of that extra money comes from growth, not contributions. This is why starting earlier often beats investing more later and why the real secret of building a Junior ISA is setting up regular monthly payments from day one.

You can play around with your own numbers using the Good Money Guide JISA calculator.

Cem Eyi, co-founder at The Beanstalk App, an app-based JISA, says: “For many years, families and students were told not to worry too much about student debt. Unfortunately, that’s left a lot of young adults starting working life only to find their repayments barely cover the interest accruing on their loans. It’s a shame, because many families could have taken simple positive action earlier if they’d had clearer information.

He explains: “University costs feel daunting when viewed as a single large bill at age 18, but they become far more manageable when approached early and consistently. A Junior ISA allows parents (and family members) to start investing small amounts from birth. Even modest monthly contributions can benefit significantly from long-term compounding.

“Saving regularly early on, giving it time to grow, and using it to reduce or avoid large student debt can make a meaningful difference to a young adult’s financial start in life.”

Next Step: Picking the best Junior stocks and shares ISAs

Ready to take the next step and open a JISA? Good Money Guide has tested and ranked the best Junior stocks and shares ISA providers and accounts in the UK that are regulated by the Financial Conduct Authority (FCA).