Is it a good idea to pay university tuition fees off upfront?

[SunnyDays01]

Apologies if this has already been done to death but if anybody has any advice regarding tuition fees in particular I'd be grateful. Just about to embark on the student loan route and it occurred to me that there has been a lot in the press regarding the pros and cons of paying university fees upfront. Anyone have any advice/answers? Thank you.

[titchy]

Well as you don't have to start repayments for at least fours years if you have the cash spare you'd be better off putting it in an ISA or something and getting a bit of interest!

[bereal7]

I'ma first year student and i say if you have the money then pay it upfront. Will be a relief for your child/self to know that you are not going to have debt when you graduate. Did you know interest starts being charged from day 1 ....but if funds are limited, then MUCH better to help out with maintenance - trust me .

[jeanne16]

In the mean time your loan is clocking up interest at the rate of RPI plus 3%. Where can you possibly find an ISA that pays you that?

[lunar1]

If we can afford it at the time we will pay our children's fees. I'd rather they started out without debts if we can manage it. They are only 6&3 now, I dread to think how much it will all cost when they are 18.

[SecretSquirrels]

Surprisingly it hasn't been done to death. Not on this board anyway. I'd like to hear what others think. I know it pre-supposes that parents can afford it, but if you can, and you have a choice between paying upfront or helping out with a house deposit a few years down the line, which should it be?

This article made me wonder.

titchyThe interest on any ISA is way less than the interest charged to the student loan from the day they get it.

[titchy]

Yes true I'd forgotten interest accrued immediately. As you were ....

[amothersplaceisinthewrong]

We paid our kids tuition up front and paid their accommodation as the maintenance loan does does not cover all living expenses by a long way.

Am considering paying off the balalnce on their maintenance loans now they have jobs.

[jeanne16]

We are paying my daughter's Uni fees because we are very unhappy with the terms of the student loans. Interest of RPI plus 3% is quite scandalous and will add thousands to the cost of the loan. Since mortgage rates are currently around 1.6%, it would be far better to borrow money on your house than embark on a student loan. I am astounded that there has not been more about this. It is actually even worse than the increase of fees to 9k.

[AllMimsyWereTheBorogoves]

On the other hand, the terms of the student loan scheme mean that many students will never pay it all back. Also, if your child drops out and you paid the tuition fees up front, that money is gone.

[Pico2]

I thought that most people won't end up paying it back. I'd think about what type of job they are aiming for, how likely they are to take career breaks or work PT.

I'd save it for a deposit for a house instead.

[jeanne16]

How depressing to think your DC won't earn above 21k per year and therefore won't pay back the loan. If that is your view, what is the point of going to Uni at all? It is supposed to lead to a better paid job.

[SunnyDays01]

We were going to try and pay the fees upfront but friends have said no don't, the chances of paying back the loan in full will be very unlikely and like Pico2 has said, better to put it towards a house/savings etc.

I suppose if they came out of university and were on a fast track to a high flying career it might make sense to pay it up front but otherwise I am beginning to think it would be better put to other uses.

Am really undecided and in a total quandry!

[Velvetbee]

Robert Peston on R4 (so it must be true) said not to. Don't know why though, missed that bit.

[titchy]

THIS is probably worth a look before deciding.

[SilverHawk]

How depressing to think that going to university is not about education.
You must go to university for a better paid job, Ha! Some degrees are now the equivalent of 'A' levels thirty years ago and does not mean a 'better' job.

OP are your DCs hoping to study for the sake of it or out of necessity, ie medicine, engineering, science?

[AllMimsyWereTheBorogoves]

It's not that unusual to earn less than £21k for quite longish periods, e.g. because of periods of ill health, maternity leave, career break, working part-time, taking time off to go travelling.

I agree with SilverHawk. One should not go to university simply to be able to move on afterwards into a well-paid job.

[LornMowa]

This is such a difficult decision to make. The thing that I think that I think that will be difficult for our children in future is if they get a reasonably job when they become parents themselves.

For example I have been told that if someone were earning £45000.00 gross then they would be paying £180 per month loan repayments. As a single person that may be easy to afford but if having to feed, clothe and house a young family, £180pcm is a large amount of of the net salary.

I am still wondering whether it is best to pay up front, particularly as the terms which our children are signing up to may well change in the future.

[Pico2]

Jeanne16 - it isn't that they won't earn £21k, but that it is based on a % of pay above £21k and wiped out after 30 years, so it may well not be paid off within the 30 years.

I had an excellent university education. I won't earn more than £21k this year as I am on maternity leave and my career choices - PT, close to home - limit my earnings. My parents don't find that depressing, on the contrary, they are delighted that I have a great work-life balance.

[Mindgone]

I'm finding it all a bit difficult to get my head round too! Our DSs should, in theory, get well paid jobs, if and when they graduate from their chosen courses. However, this would mean that they are likely to have to repay multiples of what they will have borrowed!

As a side note though, if I were able to and planning on paying my DC's fees, I would do my best not to let them know it! I believe they think about things differently, choose courses more wisely, and work harder if they believe that their money is paying for it!

[sablepoot]

statistically (but unpalletably) it is quite a lot more likely to be advantageous to pay a ds's costs upfront but let a dd take the loans due to the lower salaries of women and the higher likelihood of career breaks, maternity leave and part time working. I think the subject studied would also make a difference, fine artists and musicians for example are more likely to have low paying careers and should take the loans.

[nameuschangeus]

Have a read through the student loans section on money saving expert to find out why you shouldn't pay them up front.

[lastnightiwenttomanderley]

I think it's worth differentiating between Student loans taken out around ten years ago and the new ones. If rates are really as high as reported, it's a very different ball game.

Older loans had interest rates which were typically lower than any ISA or mortgage rate. You were therefore much better off putting any money in a savings account or using it as a house deposit rather than paying it off your loan, particularly given the favourable income linked terms of a student loan. Mortgage companies want paying whether you're working or not!

If new interest rates are higher then it comes back to the old idea of paying off the highest rate first.

[sablepoot]

the interest rate is irrelevant if you are never likely to pay the loan off and most people won't. The loans are deliberately large and with high interest rates to ensure that most people will have to keep paying throughout the thirty year loan term when its written off. People who earn little will pay little, people who earn moderately will pay moderately, people who earn a lot are the ones that will pay well over the odds (subsidising the lower earners), and only those who earn massively, or those who earn a lot but don't take out the loans, will beat the system. The difficulty is knowing in advance what your DC are likely to earn as well as knowing where the break even point is which is (different economic assumptions give very different answers).

[Moominmammacat]

You may not pay off the loan but you are jolly well chucking a lot of your salary at it for your entire life and in particular at a time when you would like to be getting a mortgage (yes, I know it doesn't affect getting it ... it's paying it that concerns me) and having a nice life. I do not know the answer ... The interest is horrible and from day one of your first term.