Spent some of his hall fees already

(93 Posts)
Moominmammacat Thu 05-Sep-13 17:38:22

I put £2,000 in my son's bank account to pay his hall fees for his first term at uni later this month. Warned him not to touch a penny of it ... he's already spent £600 of it on nothing in particular, meals out, travel, coffee ... what would you do?

titchy Wed 11-Sep-13 13:13:49

Presumably he wouldn't get the full maintenance loan though so wouldn't pay back that much. Even so, using that calculator assumes his salary in year 25 is about £120k a year - easily enough to afford £1k a month!

titchy Wed 11-Sep-13 13:14:22

VERY impressed at his busking though grin

Madratlady Wed 11-Sep-13 13:25:38

There are threads nearly every day at the moment whee people are giving their student children enormous handouts and not expecting them to work or take out loans. Clearly all of these parents love their children and are being very generous but there will be a whole bunch of adults in 3 years time finishing uni with no idea how to budget and manage rent, bills, food money etc in the real world. It's one thing to contribute, another to pay everything.

I finished uni 2 years ago. My parents very kindly paid £200 a month towards my rent (approximately half of my share of the rent) which I felt terrible having to accept, I also had a loan and worked one night a week around a very full on course which included full time shift work placements. Money was always tight but I managed fine. Now I'm married with a dc due soon and money is very tight due to losing a job and general living costs but, having learnt to budget, we're getting by.

medhandthekiddiesvtheworld Wed 11-Sep-13 13:27:30

the loan interest isnt that bad and I have worked out DS is better off taking loans and us using the money we saved as
a house deposit

Moominmammacat Wed 11-Sep-13 13:34:38

Titchy, that was putting in the minimum loan which is all he'd get. I'd love to be proved wrong on this ...

titchy Wed 11-Sep-13 14:12:34

That calculator gave me that he'd pay £120k back - a a huge amount I agree. But the point was that the calculator assumes someone on an average graduate salary (or at least what they think is an average graduate salary - starting salaries for 21 year old graduates are actually much lower then £25k a year) will 20 years later be on a salary of £120,000 a year, which is somewhat optimistic I think....

Moominmammacat Wed 11-Sep-13 14:16:08

Well, it's inflation I suppose ... if inflation is supposed to make the amount repayable more bearable, it follows that the salary must go up with inflation. But it's all so unknown ...

I am just about decided that I don't mind giving him the money but what I do mind is the idea that he doesn't earn anything. He's proved he can in the past week but I think only by keeping him short of spending money will he continue to earn.

Moominmammacat Wed 11-Sep-13 14:20:46

And another thing ... (really should be working, not procrastinating here ...) as a graduate , earning £21,000 you pay tax at 41%. So on £11,000 of your income you'll be paying around £4510 tax ... which doesn't give you much to have fun with.

Bonsoir Wed 11-Sep-13 14:21:52

Pay fees directly! That's what we are going to do with notoriously spendthrift DSS1. Everything we can pay directly we shall and he will get a small amount of money in his account every Monday for food.

titchy Wed 11-Sep-13 14:29:20

How do you work out that a graduate on £21k pays 41% tax confused?

They pay 20% tax on roughly £11k of it and 11% NI on roughly the same which is 31% deductions. No loan to repay. And with a higher salary someone would still have to pay NI and income tax, so it's a bit disingenuous to say graduate tax is 40%. It isn't, and the loan repayment part, even with a very high salary, say £100k, is only about 7% of total salary.

YeahWhat Wed 11-Sep-13 14:36:53

I don't get the argument tht if you give your kid money then they are not going to be able to manage their money and are going to end up 'spoilt'. It depends on the people involved.

We give our DCs enough money to live without getting a job whilst they are at Uni. Our kids are all extremely grateful and are very careful with the money. During the summer they either get paid work or unpaid work that relates to their degrees. They are not in the least bit 'spoilt' and I think they are even more careful with the money as we have given it to them.

They don't drink, walk everywhere, shop in Primark, buy their train tickets months in advance to benefit from supper cheap tickets and live in typical grotty student houses.

However, the fact they dont have to worry about money means they can focus on their studies and really make the most of their lives. I think it's fantastic that they are so happy.

Obviously, if they were 'wasters' we wouldn't be funding them in such a generous manner.

GreatNorthRoad Wed 11-Sep-13 14:41:24

I kind of get what you're saying Yeah, but this is what my parents would have said of my sister. She lived very frugally, didn't socialise much, (really you have 2 students away at Uni who never drink? ) If you do have two children who are more careful with your money than they would be with their own, then well done, but I can't imagine it's common.

In actual fact my sister was managing/living really well because she was spending the money my DPs gave her to avoid her taking loans, plus the loans she's taken without them knowing and a bank student overdraft.

Moominmammacat Wed 11-Sep-13 14:44:00

Thank you YeahWhat ... that's how I hope mine will work out.

As for 41% tax ... as Merryn Somerset Webb said in earlier post.
Nothing on first c. £10,000, then basic rate 20% + 11% NI + 9% loan repayment ... well, that makes 40% so I don't know ...

The worst case scenario is if you don't earn very much and are paying 9% forever and getting nowhere. Look at this ... again from MSW ...

"If you are earning under £21,000 you are only charged RPI. If you earn between £21,000 and £41,000 you are charged on a sliding scale of an extra 0.15% for every £1,000 more you earn up to RPI plus 3%. Over £41,000 everyone’s on RPI plus 3%.

So the more you earn, the higher the rate of interest. The Telegraph points to two examples. A and B both have a debt of £40,000. A earns £42,000, so he has to pay £1,890 towards his debt in year one. But thanks to the interest rate he is stuck with, his debt actually grows by over £2,600. B earns £22,000. He has to pay only £90 towards his debt and, because he is charged a lower rate of interest, his debt only grows by £1,438.

We can look at this another way too. Add up A’s income tax payments, his NI and his repayments and you find he has paid a total of 30% of his income in state mandated reductions. B will have paid 19%. Before taking account of the repayments, those numbers are 25% and 19%. If you view the rises in the debt as effective reductions the difference is even wider."

And then add the 11% NI and you'll be living on beans for life.

titchy Wed 11-Sep-13 14:55:47

I don't think paying 9% of your salary over £21k a year is exactly living off beans! Put it another way, 91% of your salary over £21k is taxed and NI'd exactly the same as any other employee without a loan.

Yes the interest may well wipe out what you pay back, but ignore the total amounts owed, the repayment is the same irrespective of whether you owe £10k, or £150k. Frankly so what if you don't get anywhere paying it off. It gets wiped out after 30 years anyway.

It really should be regarded as another tax, not a loan where interest rates are taken into consideration.

I'm all in favour of the old system, believe me, but bandying about quotes about graduates living off beans paying back £150k worth of loans and 41% tax forever is just scare-mongering.

Moominmammacat Wed 11-Sep-13 15:01:59

Factually correct, not scare-mongering ...

EverybodysStressyEyed Wed 11-Sep-13 15:17:31

No

If he earns £20k he will be paying 40% on half of that so his effective tax rate is 20%

Moominmammacat Wed 11-Sep-13 15:57:10

I believe it's called the marginal rate ... whatever that means ...

titchy Wed 11-Sep-13 16:08:33

Marginal smarginal..... By that token no-one should be looking to get a job that pays more than £42,000 cos the rate of tax is 51%.... Except most people realise that 40% tax on earnings over £42k plus 11% NI DOESN'T mean they lose over half their salary to the exchequer. Spouting number like students will pay 42% tax IS misleading. And puts off applicants from lower socio-economic backgrounds more than other groups because they don't understand the system.

MABS Wed 11-Sep-13 16:10:38

did he tell you suddenly or did you guess ? I would be livid!!

Moominmammacat Wed 11-Sep-13 16:24:02

I asked to see his bank account. I was very livid ... but now that he has proved how much he can earn quickly I'm quite cheered up.

FiftyShadesofGreyMatter Thu 12-Sep-13 10:44:38

OP by your reckoning you won't want your son to take out a mortgage either, as he'll have to pay all that interest on it confused

JGBMum Thu 12-Sep-13 12:25:57

Moi in, god to see that your son has been able to earn a lot of money very quickly.
Perhaps it's something to consider when you are deciding a monthly allowance for him.

Also, if you can pay his costs so he leaves uni with no debt, then good for you. I agree that saddling graduates with a massive debt, or 9% extra in income tax, is worth avoiding if you are able.

JGBMum Thu 12-Sep-13 12:27:58

Moi in god?? Please read as
Moomin,, good......... Etc

YeahWhat Thu 12-Sep-13 12:32:37

GreatNorthRoad. .. Lol, yes I know its odd that my DCs don't drink. It's not for any reaon other than they don't like it. One still goes clubbing but only drinks soft drinks. My DH and I both drink a normal amount so its not as though its come from us. hmm
I will be interested to see if my younger two drink when they get to Uni.

I guess the point I was trying to make in my earlier post is that just because a child comes from a more wealthy background doesn't mean they will end up spoilt and lazy. It doesn't work like that. We are easily able to help our DCs and we are happy to do so. My DH and I have earned all our own money and have worked hard over the years and we are happy to spend our money on our kids as they leave home. They are all nice kids and its a pleasure to see them grow up. I just resent the fact that some people seem to think by helping them we are going to 'ruin' them.

Moominmammacat Thu 12-Sep-13 15:39:27

Quite agree with yeah what. They may as well enjoy it when they need it rather than when we are dead and half of it has gone in inheritance tax. And I'm not giving him any extra, we have decided. He got £90 busking this morning so he can keep doing that til it's too cold.

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