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

[Tosh496]

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?

Mine borrowed fees for first degree but we gave them a living allowance rather than them borrow the money to live on. For the Masters, we looked at a loan but have paid the fees for it and give living money as interest is higher and repayments are treated seperately so payback 2 loans together which could be18% of earnings over the threshold. I gave less money to live on to encourage working initally as timetable less onerous but the workload is tremendous, so topped it up.

Ok OP you are not just comfortably of but very wealthy.
Therefore I would pay in your shoes.
We could pay for uni or an equivalent amount for a house deposit. No IHT likely.
The mind boggles at £500k towards a house, a sum which would buy several houses in many parts of the UK.

It depends. If I could pay their fees, accomodation and living costs and would still be able extend them further help in the future (house buying etc), then yes, I would- and it sounds like you can do that, if you're talking about being able to give them half a million each for a house later on.

When I look at staff here (work) paying £75 a month on a moderate salary, I'm very glad that we helped our DC through uni without them taking out student loans. Both are earning over the level at which you have to pay back.

I do understand that if you have any borrowings, a SL is the best type to have!

I wouldn't. On threads like this I always recall someone I knew who was very well off and paid the tuition fees and accommodation costs for one of their children. Said child had an absolute ball during first year and failed all the first year exams, then failed the September retakes, then failed the second chance retakes the following summer, had to leave. £20k+ down the drain.

Have you thought about buying a property in University City for her to live in after first year? There are some really grotty places let out to students and in restrospect I wish I had bought in DS2 Uni city as he is staying there, possibly doing a PhD after working for a while. It would have guaranteed somehere decently maintained ( found a gas warning notice about a faulty heater which had not been fixed in one house) and could let a room or two to friends to give her some cash to live on. Needs careful managing but possible.

I have a good degree in a good subject from Oxford. I chose to be a teacher. Don't count on her being a high earner - she may have other priorities.

I'm in a similar position to you and we were advised definitely not to do this.

I would either do what you have considered doing, or save it and give it to her to contribute towards, or for a deposit for a property (how far it stretches will of course depend on where she has to purchase).

My DH and I both had student loans to pay back, and we just used to pay these back monthly and we just saw it as a necessary inconvenience. However, this was up until we were trying to buy our first property. We live in London, and whilst we we earning a very healthy combined salary and had a very large deposit (thanks to family and our savings), we had to still borrow the absolute maximum amount of mortgage that they could offer us.

The mortgage lender (and 2 others we contacted), refused to allow us to borrow the full amount until we had paid back EVERY PENNY of our student loans!!! We could afford the monthly repayments whilst still paying for our loans, but for those bastards it was considered too high risk. This completely obliterated the separate savings my DH had made to assist us to use for starting a family, and we also had to embarrassingly ask family to further assist us financially. We had already been set back for 2 years previously with London properties, and literally couldn’t afford to not buy when we did. The same type of property that we bought in the same area, was on average £150,000 cheaper two years previously - but there were always many people in front offering far and above the asking price.

I wish you all the best with your decision. Your Daughter is extremely lucky to have your support.

My son didn’t have to pay in first 3 years of his medical degree as did it at St Andrews but paid his £3k plus fees at Manchester for 3 years. Also paid all his living expenses for 6 years. We could afford it and din’t want his to start with a load of debt. However, had we not be in such a favourable position he would have still gone med school as earning potential dwarf the debt he would have accumulated.

I was about to say the same thing bluechameleon. I was very academic and went to Oxbridge. My earning potential has always been rubbish (I went into academia, terminal error of the highly academic!)! I bet my parents would've guessed at 18 that I would be a high earner too.

Yes, I would and did. We have funded his BA and have just paid the last instalment of fees for his MA. Ds has had no loans at all. We've picked up accommodation and living costs too.

I think the interest rates on the loans are too high; the Ts&Cs can be changed at any time (we have already seen parts of the student loan book sold off), and as an adult I wouldn't touch a loan structured like that with a barge pole.

The other big draw, especially if IHT is a consideration down the line, is that any money you give your dc for funding education isn't liable to IHT, thus no surviving 7 years from date of gift etc.

For us, it made sense to do it, and as neither of us came out of our degrees with any debt, it made sense to do it for ds. We only have the one, so could help him out. I didn't want there to be a loan hanging over his head as he started out. He would have only got the minimum maintenance loan. so we would still have had to fund accommodation and living costs, so we just bit the bullet.

Dealing with the SLC as a 35 year old when I did my PGCE (and after years dealing with finance) was a nightmare; they couldn't find their arses with both hands.

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

Lots of very academic students never become high earners! Academics are not especially high earners for example.
I'd definitely wait at least until after the degree to decide. If she is headhunted from her degree for Investment Banking, maybe Magic Circle traineeship (but a friend transferred to the Civil service for the working conditions from one) or maybe McKenzie. But otherwise its probably better to invest the money in other ways.

We'll pay our dc's tuition and accommodation costs as we're paying for their education, but in our case the private income they'll have at 21 means they'd be repaying anyway so we may as well avoid the interest. My father did the same for me, but it doesn't make sense for everyone.

Yes I'd help with costs. A debt is a debt and far too many feel it's ok to take a loan, waste the slot at uni as they intend to earn under the threashold for repayments or not even work at all.

Not sure when I'd pay it, I'd be very unhappy though if they didn't intend to pay it back themselves.

I wouldn’t pay upfront even though I can afford it
DC1 managed 4 terms of their highly regarded STEM course at a top red brick before they had to return home.
DC2 is doing fine so far.
If there comes a point when paying off the loan will be beneficial then it will be done but right now it woukd be just throwing money away that we could be investing.

I would pay if they got at least a 2:1.

Personally, I come from a fairly comfortable background. I funded my entire education myself. I worked hard and learnt the value of money.

I will probably help my children out a bit more in the future (as the cost of living is so much higher). But I'm not sure it actually helps your daughter in the long run? She knows she has very wealthy parents to fall back on so she isn't going to face the pressures that other students will. I think you are being very generous but will it motivate her? Only you will know the answer Op.

I know many Oxbridge graduates who are hugely intelligent who earn very average incomes. It sounds like this loan will also put a huge amount of pressure on her to succeed. What if she chooses a career that is not so well paid yet makes her happy?

We paid upfront for my DD and she is working in a very well paid graduate job so it was the right decision.

We made the decision because I think paying 9% extra (over the 21k threshold) is a huge chunk out of anyone’s income. People complain when faced with a 1% tax increase, never mind 9%. While it is true they may never pay off the full debt, they will be paying it for 30 years! Also mortgage companies absolutely take this monthly repayment into account when lending.

Nope. Might never get repaid and will be written off and it's only paid back at a small percentage and only when you earn over £21000 I think.