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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

...to ask whether you'd pay your dc's tuition fees up front, if you could afford to?

47 replies

Tosh496 · 29/01/2018 15:52

Our oldest dc will (hopefully) be starting university next autumn, and we're starting to think about how we will pay for it.

We are hugely fortunate to be in the position that we could afford to pay their tuition fees, accommodation costs and living expenses up front, if we choose to, and are currently trying to decide whether that's the best course of action.

The way we see it...

Pros

  • avoid the ridiculous interest rates on repayments
  • means that when she starts earning, she gets to keep far more of her wages
  • avoid having to deal with the chaotic SLC

Cons

  • less independence than if she's responsible for the money herself and it is hers

So far, the scales are weighing in favour of paying up front.

Are there any more advantages to taking a student loan/disadvantages to paying up front?

OP posts:
RandomMess · 29/01/2018 15:54

Whole section on money saving expert on this. General rule of thumb is don't!

RandomMess · 29/01/2018 15:56

She may never earn enough to have to repay!!!

RockPaperCut · 29/01/2018 15:59

No way. Better off applying for the student loan and using your cash as a deposit for a house for dc. That’s what I would do.

Wex · 29/01/2018 16:02

Loads of threads on this on Higher Education.
In short. If you are reasonably certain your DC will be very high earners it may be worthwhile.
If not I would at least take the loans for three years and then reconsider if they land a stratospheric career.
Vast majority will never pay them off and the interest rate is totally irrelevant as they pay back according to what they earn not like a normal loan. A nurse or teacher for example won't earn enough to pay anything at all back in the first few years and will never repay the whole lot.

peachgreen · 29/01/2018 16:07

As a former student and with a DH that works in higher education - don't, don't, don't, don't. Put the same amount of money in an ISA for her and give it to her as a house deposit. Nobody will ever break her door down insisting she pays back her student loan. The repayments are annoying but not punitive and you genuinely don't pay unless you can afford it. Whereas saving for a deposit and securing an affordable mortgage can be impossible.

cuttingcarbonemissions · 29/01/2018 16:08

I think it depends on what your DC are studying.

So if they are off to study law or medicine at an RG university they will be high earners and will have to pay the whole lot back -plus interest- during their working career. Of course they may be run over by a bus in which case you have wasted your money - but that may be the least of your worries.

If however they are going to become nurses, or primary school teachers or musicians they may never have to pay anything back. So makes sense to take out the loan.

I read the money saving expert advice and thought it interesting - but it does not factor in the psychological impact of having a big debt hanging over you. Nor could I see any mention of issues like inheritance tax etc. If you decide to hang on to the cash you might be run over by a bus and the Exchequer might well end up with 40% of the cash anyway.

If you are really wealthy it probably makes the most sense to invest the money. Are you in a position to buy a house for your DC which they could rent put while at University and use the income to fund themselves through college?

Wex · 29/01/2018 16:11

Cons- less independence than if she's responsible for the money herself and it is hers
She would be unlikely to get a loan for living expenses that was enough to cover them, especially if you are well off. Expect to be paying over several thousands even if she takes a loan.
Also on the question of independence, even if you funded it all presumably you would give her a budget and she would have to learn to manage it.

EggsonHeads · 29/01/2018 16:11

My university gives me a discount for paying the full year up front (international student). But if I could I would invest the money. Interest rates are very low and many safe stocks can give you a return of 7% per annum. If you were willing to put some effort in you could make a lot more. Opportunity cost. You loose the opportunity to make a good return in order to avoid paying interest at a very low rate.

trixymalixy · 29/01/2018 16:13

It's almost never worth paying upfront. Have a look at Martin Lewis's articles on this topic.

Christmascardqueen · 29/01/2018 16:14

We paid for 3. We believe a debt is a debt and best not to have any sooo we did it.

One of ours was horrible with money, not at all mature about it till 25 honestly, we are very happy to have managed it till she outgrew that phase.

bananagrabber · 29/01/2018 16:15

No, don't. It might be that they never need to pay the full amount back.

www.moneysavingexpert.com/students/student-loans-tuition-fees-changes

bananagrabber · 29/01/2018 16:17

(Specifically point 15 "Beware paying tuition fees upfront, it could leave you £10,000s worse off")

MollyHuaCha · 29/01/2018 16:17

There's another side too - some students may value their courses more if they know they personally will be repaying the fees?

Original poster
Tosh496 · 29/01/2018 16:21

Dd1 is very academic and going to a top university to I would hope she'll be a high earner.

For us, we're very fortunate that we don't have the trade off between paying fees and helping her buy a house - touch wood, we should be able to do both. So I'm not overly concerned about that.

I suppose I'm thinking that hundreds of thousands of pounds will be taken in IHT when we die, so we might as well spend it now on her education.

OP posts:
Ethelswith · 29/01/2018 16:22

I would.

Because this is not a loan in any ordinary sense,and the scope for the government to change the T&Cs in quite sweeping ways has already been seen.

I think it will sct ever more like a graduate tax, and the current earnings thresholds and repayment rates may be no guide for future ones.

bananagrabber · 29/01/2018 16:24

Would you pay your income tax upfront then? Surely there are better ways of using the money?
Agree that they shouldn't be able to change the Ts&Cs - it's disgraceful.

Ethelswith · 29/01/2018 16:30

Paying upfront? Yes, that can be a good way right und.

If I could afford the down payment, and knew there would then be an exemption from that (variable) 'tax' forever, then yes. It's trading a known bill against uncertainty. Not quite the same, but also not dissimilar from having a fixed rate for anything.

It's about attitude to risk, tempered by affordability. And the risk here is the scope for changes to repayment terms.

AppleAndBlackberry · 29/01/2018 16:35

Personally, I was very academic, went to a top uni and then into a STEM career and my current FT salary would be around 50k (so fairly good). However because I have had 2 children, a year maternity leave for each and now I work part time I still haven't paid off a £15k student loan from 2004 and there were some years when I was paying nothing. I have 2 DDs who have some investments, I will be encouraging them to put it towards a house, not student fees as I think the money would be more useful upfront.

MissDuke · 29/01/2018 16:38

Hmm normally I would say yes as I am so against dept. But really would she notice the small amount of repayment leaving her account each month - would a lump sum gift from you down the line be more beneficial? I suspect so! I think if I was in that position I would possibly swing towards the 2nd option. That same amount of money could give her a real leg up on to the property ladder I should think!

Original poster
Tosh496 · 29/01/2018 16:43

If we downsize when we retire and the dc have moved out, then we should be able to give them each a lump payment of about £500k to go towards a house, even if we pay tuition fees. We've been paying school fees since they were 2, so university shouldn't be much more expensive.

I suppose I'm worried about all these stories you hear about the chaos that is the Students Loan company, especially when people live abroad for a few years and then come back.

OP posts:
LIZS · 29/01/2018 16:46

I'm not sure where your con comes in as tuition fees are paid direct by Student Finance to the uni, not to the student. Maintenance loans which contribute towards living costs , accommodation, books and materials etc are paid to the student in installments. They are means tested but there is a universal minimum amount available. We pay ds accommodation by dd to his account, which is then transferred to his ll. His maintenance loan is his to pay bills etc from. So your dc could still manage their own money.

Nomad86 · 29/01/2018 16:48

I was very academic, went to a top uni, great degree and career. Gave it all up after 5 years to be a stay at home parent. My loan balance is now more than when I graduated, I doubt I'll ever pay another penny off it. You never know where your dd's life will lead. Depending on her choice of career, she may need financial help with post graduate exams and training.

lalalalyra · 29/01/2018 16:51

I wouldn't pay it up front. I would pay it off after they leave if I could.

That's what is happening for DS1. His grandmother put aside what she was left by her DD, (DH's first wife died very young, DS1 is technically my step-son) and has always planned to pay off any student debt after he finishes uni as long as he's worked hard and not just messed about (his uncle was a messer about it, admits it himself now - knowing his parents were well off meant he didn't worry about debt).

It means that he should go forward with no debt, but it's not guaranteed so he'll still have to take responsibility for himself as well.

blaaake · 29/01/2018 16:57

I won't be paying my kids up front. I never got mine paid up front, and I think it helped with the transition to adulthood. However, I will be buying or paying the rent for a nice house or apartment for them to live in whilst at uni, as my accommodation was dire and I wouldn't wish that on anyone.

AllPowerfulLizardPerson · 29/01/2018 17:02

One final point from Martin Lewis website

"There's a second issue here. Some may feel it's a point of principle too. When I write "it's money you may never repay", if you don't repay, of course, someone else has to. That someone else is the UK's Treasury - taxpayers. How that sits with you is a question of your own ethics."

Interesting to read this thread, alongside the thread about paying NHS prescription charges, even if exempt, if you can do so on the grounds it is morally right to be self-supporting.