DSS debt free after uni or lum sum towards house deposit?

[Friyay27]

DSS is in his last 2 years of school, wants to
go to university. We want to give him
The best possible start in life, and we are in the position to either pay his fees for uni or pay the same amount into a bank account and give him around 40-50k towards his house deposit when he graduates.
His tuition debit is some of the 'lowest rate' debt he'll ever have and it's deducted at source. If you had the choice for your child - what would you do?

I’d do the house deposit.

What's would everyone think the benefit are of either?

House as he may never
Earn enough to pay
Back student loan and houses will keep
Going up

I’d say do student loans for fees and save the house deposit for him.

Unless, curveball - you use the deposit now to buy a flat/house for him at uni, and rent out the other bedrooms while he’s there. Then once he graduates either sell and he’s got the equity towards his own house, or he stays there once working and takes over the mortgage?

Albeit it was 20 years ago and the terms of the student loan were more favourable, but I was lucky enough that my parents were able to do the same for me. We agreed to go for the house deposit option and it made such a difference. DH and I were able to get on the housing ladder that few years earlier and it really helped get us going as young adults.

I agree with this

House deposit because property rises in value. Plus whatever happens in his life it's a roof over his head.

Student debt gets paid off once you start earning a certain amount and they don't take so much the person is left too poor, so there's no benefit to wiping that out early IMO if the money can be spent on something else useful in life.

I’d buy him a house in the town he wants to go to uni in personally & have him live there & pay towards his fees using rental income.

Why do you need to decide now if he is 5 years away from finishing university? The whole economic climate could be completely different then. Don't worry about it, and once he has left university, ask him.

House.

Paying rent, paying back the student loan and saving for the deposit will be much harder than paying a mortgage and paying back the loan.

Because the money could be spent on uni fees instead of the house deposit, that’s the question being asked.

But you don't start repaying a student loan until you have finished university, so the decision doesn't have to be made until then.

If the OP spends the money on tuition fees there will be no loan to repay. You can’t decide to take the loans or pay the fees in retrospect.

I've just seen the current interest rate is 8%, higher than I thought. I still don't think its wise to make a decision this far out from the actual events though, even with a deposit, it could be over ten years until he is in a position to buy a property.

Read moneysavingexpert.com on this. It’ll help you to decide.

You can pay off the loans completely after you finished university if you want to. When I went to university lots of the wealthy students did this as they could earn more in interest with the money in investments than the interest rate on loans at the time, so they borrowed for 3 years and then when rates changed they paid loans off as a lump sum. However like I said, the rate is higher now so it may not be a good choice. Without knowing his future earning potential and if he will have a partner or friend he wants to buy a property with after university I don't think it's possible to say what's best this far in advance.

In the same situation at about age 21 I did use money I was gifted as a house deposit and haven't repaid my student loans, however that was before the government started selling them off, not sure what I would do now that they have set the precedent that they don't have to stick to their t&cs.

Put the money in a high interest savings account for him.

Student loan repayments are essentially a graduate tax. It is not like a real loan.

House deposit 100%

Debt free. Assuming he has a work ethic and good job prospects he will be saving around £300 a month in student loan repayments by not having student debt to repay.

We had similar dilemma and weren't sure either but paid the uni fees in the end as we didn't want them saddled with the huge amount of debt if they didn't need to be - overall though it will be more like £60,000 with fees and accommodation etc all in so that may be a factor

And student loan starts accumulating interest from when it starts.

Agree as above - read MSE about student loans. It depends so much on earnings. Some never pay it off. V v high earners pay it off quickly and thus incur less interest. There is a middle swathe of good earners who will pay it off eventually but over a much longer period so accumulate a lot of interest.

We chose house deposit.

They are 8% now. Doctors / architects are leaving 100k+ in debt. Tbh I def think it’s worth trying to see if you can manage without them.

I’m paying their fees and accommodation costs because the Plan 5 student loans are a raw deal. High interest rate, lower & currently frozen repayment threshold and 40yrs of payments. It’s been jiggled with so that average earners pay at least double what they borrowed, while high earners pay back a lot less. The repayment thresholds are also currently frozen, so as time goes by, even low earners on UC will still have student loan payments.

Btw it is just over £20k/yr so £40k won’t pay for a full 3yr degree course, unless zero accommodation & live at home. £50k might if a Uni with cheap accommodation or cheap flat shares. And that is today.

Plus Labour is probably going to increase the fees because they’ve been frozen since 2017, so in 2yrs time I would expect £50k to cover 2 of 3 years.

We are going out of historic low interest into more average interest and so it will be easier to save a house deposit than to pay off debt at high RPI.

In the current financial climate, house deposit, no question, Although the buying and renting a Uni accommodation is an interesting idea, and one my step brother’s DF did for him. Worked out well for them but that was a good few years ago so might not be so financially viable vs house deposit these days. You need proper financial advice.