If you can pay uni fees.. Wwyd

But OP, if you don't pay their uni fees then presumably you will be in a position to give them deposits?

I think this strategy made sense for the old student loans which were low interest. I think it's about 1.6%? It doesn't make sense for new ones that are 6% interest, unless you have access to accounts higher interest than that !

It all depends on your view of whether it's a debt or a graduate tax.

A large number of your children will eventually have a mortgage. That's a proper debt - no allowances are made there if your earnings drop, so you can't put a student loan in the same bracket.

Yes, I am sure mine are seeing that contrast too. My car came from my father when he died 10 years ago so must be at least 13 years old.

We dont like debt either.

I get more pleasure in having DC start their adult lives debt free than I would from a new car (ours is a 12 year old family handmedown) having a flash holiday, or doing up my house. My decision.

DC seem to appreciate this and have been content to get less money for living expenses than a lot of their peers, and are generally happy cooking from scratch and taking in packed lunches. Eyebrows are raised at students with loans and overdrafts and family top ups who are able to regularly drop £100 on nights out clubbing. Money which is being borrowed at 6%.

I am funding two at university (fully) at present. The reasons are my parents did it for me (minimum grant I got was £50 and they made it up to £900 full grant at some hardship - their view was they paid our education and then it was up to us which is a good principle).

Second reason I don't like debt.

Third the children are likely to have higher paid jobs (older ones pay 40% tax in 20s etc) so will be paying a loan back anyway.

Fourth, they keep changing the student loan rules so why court that complication.

Fifth I can fund some of their house deposit too so it is not an either or.

Sixth, student loan gets things wrong all the time - what you have paid back or not so why get involved in all that if you can avoid it.

Seventh, why burden the state and other tax payers if you can afford to pay ?

I am doing it on the basis of an agreement we have that I fund them and in return they take on no debt.

Op, just do it. Why be saddled with a loan? It must eventually feel like a millstone round your neck, something that’s always there in the background rearing it’s head every so often.

We fully supported the children financially and never regretted it or felt we had to justify it to anyone. But then most people we know do that if the children are studying abroad so for us doing it this way is all very normal. Some families will educate one child then they come back and help educate the next one but that’s becoming rarer now that we have good uni’s here for those who need to or want to stay put.

I don’t understand why it’s better to have debt rather than use your capital. Debt is never good regardless of how it’s dressed up.

We paid for all of our children, not that we’d have been entitled to free further education anyway. However, we could have got them scholarships at home for further education abroad but we chose not to. We just didn’t want to be tied into anything or anyone because they had scholarships or a loan. We preferred the independence of paying it ourselves, and paying up front.

On the other hand suppose you don't take the loan and a future government decides to write them off, or write them off in part? Unlikely I know (the cost would be hefty) but who knows these days?

As for mortgages, i think (again, don't know!) that some lenders have said they don't treat it as a debt but do take into account the repayments when assessing affordability. Maybe recent borrowers can confirm/deny? Though again, a lot can change in 10-15 yrs in lending criteria. Without that crystal ball, if you can afford it it may really just be a matter of personal preference!

"anything they still owe after 30 years is wiped off. "

At the moment. One point to think about is govts in 29 yrs time may change their minds about that - I haven't worked out whether that is one of the terms of the existing loans that can be changed, but if it is.... At the moment the political climate is in the direction of improving not worsening the terms of student loans - but things can change a lot over 30 yrs.

I don't think it is an easy decision. As pp say, future earnings will influence whether it's better to have the loan or not. Incidentally if dd is doing medicine she won't necessarily pay it off, because the loan will be pretty large, especially once you add the maintenance loan - if she decides to do p-t for instance she might not? (haven't worked it out though - i'm not sure what p-t earnings would be). It is difficult to know what the most financially advantageous route is. But don't assume the loans are! Even if you decide to take them and then review the situation and pay them off on graduation, by then you have clocked up interest at RPI + 3 % points per year.

Is it compounded?

The earning threshold isn’t that high any more, and once you hit it, you pay 10% in tax towards the repayment of the loan. That’s a hefty whack, just as you hit child-rearing years, say.

But you can’t escape that anyway, unless you have paid all their living expenses too.

But it may be better if once that 10% tax hits, they have already had a deposit for a mortgage etc.

I wonder How will it affect graduates ability to get a mortgage? Will banks look at 40k student debt and just put it as something everyone has or will it make it harder to get a ,mortgage? The repayments are significant amounts, especially as you start to earn more.

Of course any Financial advisor will tell you not to pay fees upfront. They want you to invest any money you have.

You really need to try to work out what sort of job your DC will get. We paid for our DD and it was the right decision as she has a well paid job in finance. She would be paying a lot back every month while incurring 6.1% interest on the rest of the loan. Instead she is putting this money away toward a mortgage deposit. She is earning a measly 1% on cash deposits!

Also everyone keeps saying they will never pay off the full loan. While that may be true, most people will still be paying 9% over the 21k threshold for THIRTY years. How is that ok? Wait until inflation erodes the 21k.

Oh no don't do that.

Speak to any decent financial advisor and they'll advise you against it.

@theredjellybean yes we contribute vast amounts to the “pot” but feel
This should be used to help those that are less fortunate /maintain infrastructure etc rather than seeing it as a personal bank account. We don’t need to access public funds for educating our children so we don’t.

@eve you twist my words. What I meant was state funded higher education. I benefited from that 30 plus years ago and am very grateful. However today things are different and I think a graduate tax aka loan system is the best way to ensure sustainable high quality higher education for all those doctors and bridge engineers. I choose not to take the funds available for my DC’s for reasons previously stated. But for the vast majority of others who cannot, the loan system seems best in the absence of sufficient public funds to cover the cost.

Hope that makes it clear!

In an ideal world I’d agree but pragmatically funding higher education is in my view a “nice to have” item that simply isn’t affordable

.. how would you like your doctors, dentists trained then? Nurses ? teachers?

would you like to fly in a plane or drive over a bridge that has been designed by a GCSE student ... or a degree qualified engineer?

Irrespective of whether or not you can pay them upfront (and it sounds like there may be good financial reason not to), its probably not a bad message to the dc that their education carries a cost (to them) as this may help to focus their attention on their studies?

I'm all for helping them out with deposits and first house purchases and bunging them some cash for living expenses as and when needed, so that they don't have to spend too many of their undergraduate years working alongside studying.

The advice is always not to. I'm not in the enviable position to have been able to do it but I still wouldn't. You are basically just giving the government thousands. Student debt will be wiped eventually if you haven't paid it off. I'm sure you pay lots in tax, I wouldn't feel guilty. My old boss was very wealthy and his three children had huge student loans!

You'd have to be mad. Primarily, because
a) many people will never finish paying off the capital; anything they still owe after 30 years is wiped off. If my quick sums are correct, assuming a £50,000 loan, they would have to average a £43,518 salary per year for 30 years. The UK median salary is £23,500, and as there are almost no graduate jobs that start on £43k, they're going to have to earn substantially more than that by the end. Note I haven't actually accounted for interest in this figure; if the earnings are any lower than this level they'll never even start paying off the interest, so it's irrelevant.
b) they'd be better off having the money as a lump sum nest egg / rainy day fund / money towards house deposit. Better to have the money liquid and available.

www.moneysavingexpert.com/students/should-i-get-student-loan
www.moneysavingexpert.com/students/student-loans-tuition-fees-changes
www.moneysavingexpert.com/students/repay-post-2012-student-loan

@jeanne16 - until a few years ago the interest rate was pegged to inflation (not inflation + x%) so it was pretty much interest free. Many people haven't noticed that it's changed, and because it's (a) so complicated, (b) irrelevant to all but the highest earners, it's not publicised as part of the basic package of info on student loans

Bella. Do you realise that student loans incur a 6.1% interest rate at the moment. Why do so many people think they are interest free?