Wealthy grandparents are opting to fund their grandchildren's university education, a decision influenced by upcoming changes to the inheritance tax system. This approach is seen as a way to avoid a larger inheritance tax bill.
The role of grandparents in financially supporting families has grown, particularly as parents face increasing costs. Soaring higher education expenses and subsequent student debt have made students more reliant on financial help from family members.
Data from Rathbones, a wealth manager, indicates that nearly two-thirds of students say their grandparents contribute or plan to contribute to their education. One in five grandparents confirmed they cover most or all university costs, while 59 per cent combine family support with student borrowing.
More than two-thirds of grandparents acknowledged that inheritance tax considerations played a role in their decision to provide financial assistance. From April 2027, unused pension wealth will become subject to inheritance tax, prompting many families to review their estate planning. Nearly 70 per cent stated that these impending changes increased their desire to fund university costs during their lifetime.
The Department for Education has also confirmed student loan interest rates for the 2026/27 academic year, with some borrowers continuing to face interest charges of up to six per cent. This has led to concerns about student debt, with some parents considering alternative ways to fund education, including repaying loans upon graduation or funding education themselves.