Should I support our child through uni or make him take maintenance loan?

(65 Posts)
elfreda69 Tue 22-Dec-15 14:18:58

I am a single parent and have quite religiously saved every spare penny for my DD to go to university. I earn a reasonable salary and my DDs and I live quite frugally (we live in 2 bed place and I sleep in the living room, if we go on holidays they are always cheap and cheerful).
I have managed to save a considerable sum and will be able to meet the bulk of my son's accommodation and living costs whilst away at uni.

However, I began looking into Martin Lewis' advice about not paying for anything up front. I have come to the conclusion that actually allowing my DD to take the highest maintenance loan he can get and actually getting into debt may be the best option. Then, he could use the money I have saved for a deposit on a flat.

My thinking is this:
My DD will probably borrow 56k
Currently, students repay their student loan once they earn 21k. They must pay 9% of all earnings above 21k. The loan is wiped out after 30 yrs.

If my DD's average salary after working 30 years is 40k per year, then he will repay, on average, 1710 per year.
1710 x 30 years = 51300. He will in effect pay back less than he originally loaned and will not pay off the interest.

Has anyone else looked into this? With these figures, am I wrong to encourage my DD to take on board student debt? Thoughts please.

WildStallions Tue 22-Dec-15 14:23:22

I certainly wouldn't pay the fees. But take a loan for them.

Not sure about living costs or what loans you are eligible for.

VimFuego101 Tue 22-Dec-15 14:30:02

I'm inclined to agree with Martin Lewis. Do bear in mind, though, that what he can borrow to purchase a flat will probably be impacted by the amount of student loan he owes.

maybebabybee Tue 22-Dec-15 14:31:02

If the choice is you paying for her university education or paying for a deposit on a flat after she leaves, I'd go for the flat to be honest.

I'm still paying off my student debt (still got 20 grand left to go!) but DP and I have just bought our own place. I am 26 and I am much happier owning my own place than not owning my own place but having no university debt.

It gets paid off very minimally every month. IMO it's not really a big deal.

maybebabybee Tue 22-Dec-15 14:31:30

also vim you are incorrect there, student loan does not impact on what mortgage you can get.

TheDrsDocMartens Tue 22-Dec-15 14:33:04

You'll probably need to top up the loan for living costs anyway. Depending on the course they do, it might be worth doing that instead of them working alongside Uni.

longingforfun Tue 22-Dec-15 14:34:29

Let him take out a student loan. Most do. You can always pay it off for him when he graduates, before the interest kicks in, if you change your mind.

VimFuego101 Tue 22-Dec-15 14:38:20

Fair enough, maybebabybee - then I really see no downsides at all to him taking the loan out.

titchy Tue 22-Dec-15 14:54:17

Depending on your salary your child may not get the full loan and you'd have to top them up anyway. But yes, let them take out the loan and help them out with a flat deposit when the time comes.

SecretSantaSquirrels Tue 22-Dec-15 15:57:14

As others have said the loan is not always enough and you may still have to help financially. Depending where they choose to go to uni and what course they do the cost of living can easily exceed the student loan and not all students can work part time.
We have decided to keep options open and DS has taken the loans for now.
If you change your mind or they move the goal posts you can always pay off the loan later whereas you only get one chance to take that loan.

Rummikub Tue 22-Dec-15 16:01:22

Yes to agreeing with artin Lewis. Take out the tuition fee loan as well as the maintenance loan.

I also think having that loan in the student's name encourages a better committment to their education.

Rummikub Tue 22-Dec-15 16:01:42

Martin

Nonidentifyingnc Tue 22-Dec-15 16:10:16

The loan might not pay all the living expenses. The amount your child can borrow is calculated according to your earnings. Some places are very expensive and in 2nd year accomm9dation often requires a deposit, which eats a fair chink out of the maintenance loan.

I would definitely borrow the tuition fees and try to pay as much as I could upfront for living costs.

elfreda69 Tue 22-Dec-15 22:15:06

Thanks for all your input. I think that I will encourage DS to take the full maintenance loan for the cost of accommodation and I will support him with food bills etc. He will have to get a job to also support himself. I will use most of what I have saved for him for a deposit on a flat.

It just seems counterintuitive to take on board debt, but it actually makes more financial sense to prioritising support for helping your child get on the property ladder rather than funding them through university. By this I mean, allow them to take out the biggest loan they can get and, if you can, supplement the rest.

Ta1kinPeece Sun 27-Dec-15 16:00:10

Student loan does impact on what mortgage you can get ONLY in that it reduces your net income by 9%

but YYY you'd be mad to pay it all up front : get your child to take the loans and then help them in the bits that the State does not - like housing and career

HocusCrocus Sun 27-Dec-15 19:32:11

Ta1kin,
Are there, as far as you know, any circumstances under which paying the fees/ living expenses rather than a loan would make sense ? (discussion over Christmas) .

Ta1kinPeece Sun 27-Dec-15 21:09:34

Hocus
Nope.
Even if you took the loan and paid the lot off the day of graduation
you'd be utterly mad not to take the loan

I have friends who are offensively rich and have used their own money to buy houses for their children to rent to classmates
or to buy them graduation houses
or whatever

but if there is £55k coming with no strings attached, only a muppet would not take it for the three / 4 years at least

JeanSeberg Sun 27-Dec-15 21:15:59

Presumably you're also encouraging him to work and save towards his uni costs?

jeanne16 Sun 10-Jan-16 19:51:19

But there are strings attached to the loan. Interest of RPI plus 3% starts clocking up from the minute you take any money. I think this is huge. You may not pay any back until you earn 21k pa but that makes matters worse as interest is clocking up the whole time. I don't understand why more people aren't concerned about this.

Decorhate Mon 11-Jan-16 06:17:13

Jeanne - I suppose most people don't have any choice but take the loan so there is not too much point in fretting about it. Plus, the higher rate tuition fees only started in 2012 so those students are just starting to graduate & get jobs.

As various analysts have said, it's not how much you borrow, it's hue much you will repay that counts. And personally I think it's better to think of it as a graduate tax. Where I live, house prices are so high that the student loan pales into insignificance. If my dcs go to uni in a different part of the country (where housing is cheaper) and get to like it there & settle there, it may be for the best in terms of affording a home!

I am not entirely sure where the OP got their figure of £56k from, unless they are assuming their dc will study in London and qualify for the highest loan (unlikely as they say they earn a decent salary?)

I just know that everyone I know has to let their dc take out the loan (and I live in a reasonably affluent area). Most people don't have that sort of money sitting around - especially if they have more than one child.

frikadela01 Mon 11-Jan-16 06:33:38

Take out the loan.
I missed the new loans by 1 year so only hd a 13k loam in the end but my repayments kicked in at 17k and I pay more of my Salary back. My loan will not be written off until it's either repaid or I retire. So whilst the current crop of students owe more, the conditions are slightly better. I've never known anyone to not take the loan.

minnymoobear Mon 11-Jan-16 06:41:21

Take the loan and make sure you're ok in terms of your own financial future and have money to invest in your own future/retirement xx

roguedad Tue 12-Jan-16 21:21:37

Take the loan and keep your options open for the time being. You can always pay it off later if that suits.

NewLife4Me Tue 12-Jan-16 21:26:27

The loan, definitely.
You never know, fees may go down and more become free like they used to be, then all loans would be scrapped anyway.

homebythesea Thu 14-Jan-16 12:56:06

We are having the same discussions. Currently paying close to thr the annual tuition fee per term for DS so it will feel very cheap (!) to pay the fees upfront. No interest will accrue and he will graduate debt free. On the other hand monthly mortgage repayments are likely to be more than monthly student loan repayments so the argument is there to use the money so he can be mortgage free or a small mortgage on graduation (depending on where in the country). Having a loan I think will be a constant reminder that he has a stake in his own education. DH just thinks we should pay for everything (because we can) but I worry that this will not send the right message of responsibility etc to DS.

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