In this scenario, does it make sense to pay uni fees upfront?

[enseehammer]

DC1 is heading to uni later this year, and DC2 will go in 2 years. I know the prevailing wisdom is that it's unwise to pay uni fees upfront - I've read the Martin Lewis advice on this. However, my mum died recently and I'm about to inherit a lump sum from the sale of her house. There is enough to pay off our own mortgage (when my current low fixed rate ends), and also cover uni fees for both DC's, rather than them taking out student finance and paying the above-inflation interest rate (at a time of rising inflation).

The alternative is to invest the money, either in a rental property or the stock market, in the hope that it grows. But rental yields are being squeezed, and the stock market could be a dangerous bet in these uncertain times - so I'm not sure that either option can be relied on to make a good enough return. (Yes, I know the stock market is generally a good bet in the long term, but if ww3 is about to begin, all bets are off!).

Another argument against paying upfront is that DCs may not have to pay back the full amount if they have a low income, but we live in London where wages are a lot higher than average, and the DC's are both wanting to go into high earning jobs after graduating, so I think its most likely they will both pay back the full amount and a lot more besides.

Aibu to think paying the fees upfront might be a good bet in this scenario?

I would absolutely save it for deposits - even if that means it loses a little of its value because you can't find a way to invest that beats inflation. Looking at my friends the student loans repayments have had a fairly minor impact (you just get used to it from the off so it's not money you miss) but whether or not they had parental help with buying a property has made an enormous difference, in that it's pretty much the determining fact in whether or not they own - even the high earners. If you had the money to do both then I can see the argument for paying the fees but if it's either/or I'd go for the deposit every time.

@enseehammer

I think investment ISA's and LISA's are great for regular investing (which spreads the risk) or small lump sums, but to put a large one-off lump sum at risk in very uncertain economic times is a more difficult prospect. Only a relatively small part of it can be invested tax free, which means gains would need to beat inflation + x% after tax.

Where x depends on income, but is 3% from £49k, again, not a high wage in London.

You can only put £4k a year into a LISA, so its good for regular savings, and worth doing, but only scratches the surface.

@bakebeans

Definitely not! have you looked how much they would need to pay back monthly? It’s relatively low amount and is not taken into account when obtaining a mortgage or financial agreement .

This. Plus you have absolutely no idea what jobs they will get. Once they get to university they may feel it is not for them. If they actually graduate they may go off travelling for years. They may decide to go into a job that is worthy but low paying ,in which case they will never pay any of it back. My NDN did the whole private school,Oxford route. He got a first. He now works at a care farm up the road, teaching children with school attendance difficulties and emotional problems. His parents and sister are London lawyers. He was supposed to be one. Once he got to University and met people with different views and different lives he went down a different path.

@mocktail

Get them to go to the same uni. Buy a house that they can live in and be in charge of renting the other rooms to pay for upkeep, bills, cash.

Does anyone really "get" their adult children to go to the same uni?! And share a house together? 😆

Ridiculous idea

I did pay most upfront but deliberately made sure my DC took out some loan as I wanted them to be properly aware of the value of money, and knowing they had to pay it back was an important litmus test for their decision to spend or not spend. It’s all too easy to waste money if they feel it’s free. But my DC did expect they would be earning enough to pay it back anyway, so it definitely made sense.

We had this exact position, but in our case the inheritance had gone straight to children from a distant relative, just under 100k.

We never contemplated DS using it for his fees/loan, but instead he has drip fed it monthly into a S&S ISA and LISA, across a number of funds to lessen the risk.

Over the 6 yrs since he got it (at 18, now 24) his investments had gone up 50% to start of this year. Yes they have dropped in the last few weeks, but still gained 35% plus.

He is in yr 2 of a grad job, earning a few K over the starting salary for repayments. He currently pays a few pounds monthly to his student loan. He has another job offer that will pay ~10k more, so that will rise but…. he is also relocating (based at home currently) and knows that he will be able to buy a house, with his invested inheritance providing a large deposit. Yes, that deposit will be lower than it was a few weeks ago, but still allow him onto housing market with a low mortgage, and save him paying out rent for years.

Do you invest at all yourself currently? We have been investing for 25+yrs, so have seen a number of peaks and troughs over that time, but we have still made huge gains overall.

I think the general advise from Martin Lewis is - if you can afford to pay both fees and a house deposit, then do it. Otherwise, save your money for house deposit.

We were in this position and chose not to. Mainly because it encourages dc to work for their degree as they see it as their own investment which I think is really important. It’s very easy to not take it so seriously when it’s someone else’s money you’re spending (and yes I know it’s still someone else’s money if it’s a government loan etc but you pay it back rather than inherit it).

Do you invest at all yourself currently? We have been investing for 25+yrs, so have seen a number of peaks and troughs over that time, but we have still made huge gains overall.

Only small amounts. I know that rises happen over time, but investing a lump sum in uncertain economic times is a different beast to drip-feeding into an isa over time. If Nato enters the conflict a lump sum could easily make a big loss that would take many years to recover, and may not recover in time for when it is needed. Your current losses are only bearable because you've got several years of growth behind you.

@Bagelsandbrie

We were in this position and chose not to. Mainly because it encourages dc to work for their degree as they see it as their own investment which I think is really important. It’s very easy to not take it so seriously when it’s someone else’s money you’re spending (and yes I know it’s still someone else’s money if it’s a government loan etc but you pay it back rather than inherit it).

Yes, this is a persuasive argument.

The thing is Op, as a pp pointed out, you have no idea what careers your DC will do, or where! They may hate uni and drop out, may decide on lower paid roles, there is a lot of water under bridge between now and when they start their careers.

My DC had a career in mind at 17, completely changed his mind to a niche role at 18, at its top it pays well over £100k, but money wasn’t his driver, the role is. He had a Yr In industry job in the company providing that service in UK. He went back to uni planning to apply for the role the following summer, after he graduated.

6 mths into final year, along came COVID and decimated that industry. He took a job in a different industry. The new job he has just been offered will be within his preferred industry but still not the niche role that he has aimed for since 18, as it is not yet recruiting again.

It is interesting looking at his school cohort at 24. Some, whom I thought would be high fliers, have done nothing, others have done more than expected.

@enseehammer

You can only put £4k a year into a LISA, so its good for regular savings, and worth doing, but only scratches the surface.

No, you can get up £4000 a year from the government (25%) if you put the money into a LISA, as far as I remember you can put up to £20,000 a year which is a good starting point, you then can wait to the end of the year (or later) before investing if you are wary about the markets at this time.

“You can only put £4k a year into a LISA, so its good for regular savings, and worth doing, but only scratches the surface.”

But you can have a Lisa and an isa. I’d put £4k in now and another £4k in April and open a S&S isa in parallel and transfer into a Lisa each year.

I would consider paying it off after they graduate. We did pay up front, dd dropped out and she couldn't get a loan for her second degree despite not claiming student finance. Once they graduate and aren't doing a masters or PhD that needs funding you can clear their debts

I would and did avoid student loans,and my colleagues when i started work all moan about having to pay their student loan back every month, not seeing all of theit bonus/payrises etc. I have no student debt, and its great!

If Nato enters the conflict a lump sum could easily make a big loss that would take many years to recover

But you don’t need to invest a lump sum? We have always drip fed monthly, both our money (including inheritances and windfalls) and the kids inheritances. We have usually kept the current years ISA allowance in an instant access ac, with remainder of lump sum invested in the highest paying savings ac available, usually notice accounts, so 1/2/3 yr notice ac.

Many people advise Premium Bonds to hold cash too.

@TheBigDilemma

You have your figures wrong, 20k is total for S&S ISA and LISA, but the LISA is 4K max, plus another 1k from govt, so 5k total. The other 16k can go into a normal ISA, but with no govt top-up.

@Lazypuppy

I would and did avoid student loans,and my colleagues when i started work all moan about having to pay their student loan back every month, not seeing all of theit bonus/payrises etc. I have no student debt, and its great!

I honestly have never heard anyone moan specifically about their student loan - it comes out of your paycheck alongside tax and NI and they're both much bigger chunks. I've never heard people single out the student loan as why they're not getting to keep all 'their' money.

@Bagelsandbrie 100% agree with you. This x 100

@TrippinEdBalls ok, well the people i know do moan about it. I think they kind of forgot about student loan, thought it would be a really small amount, when in reality it isn't,and they just look at is as something else they have to pay back, which if they had done it differently they wouldn't have to. Everyone knows you have to pay tax and NI, but paying another thing out just reduces your take home pay even more.

I just think why take out a loan at high interest rate that OPs children don't need to?

I also find it astonishing when people say it’s just a graduate tax so it doesn’t matter. I don’t know anyone who would be happy to pay an extra 9% tax.

I agree that if you never intend to work or earn much, then take the loan. However to pay an extra 9% over the 27k threshold for 30 years (increasing to 40), is a massive millstone. It will affect your take home money particularly in your 30s when mortgages and childcare costs will be onerous too.

@jeanne16

I also find it astonishing when people say it’s just a graduate tax so it doesn’t matter. I don’t know anyone who would be happy to pay an extra 9% tax.

I agree that if you never intend to work or earn much, then take the loan. However to pay an extra 9% over the 27k threshold for 30 years (increasing to 40), is a massive millstone. It will affect your take home money particularly in your 30s when mortgages and childcare costs will be onerous too.

This ^

@jeanne16

I also find it astonishing when people say it’s just a graduate tax so it doesn’t matter. I don’t know anyone who would be happy to pay an extra 9% tax.

I agree that if you never intend to work or earn much, then take the loan. However to pay an extra 9% over the 27k threshold for 30 years (increasing to 40), is a massive millstone. It will affect your take home money particularly in your 30s when mortgages and childcare costs will be onerous too.

This. ^

Oops posted twice!

@AngelinaFibres

You have absolutely no idea what jobs they will get. Once they get to university they may feel it is not for them. If they actually graduate they may go off travelling for years.

They may decide to go into a job that is worthy but low paying ,in which case they will never pay any of it back. My NDN did the whole private school, Oxford route. He got a first.

He now works at a care farm up the road, teaching children with school attendance difficulties and emotional problems. His parents and sister are London lawyers. He was supposed to be one. Once he got to University and met people with different views and different lives he went down a different path.

What a HIDEOUS waste of time and public money.

Why are some people on here celebrating the fact that after completing a University degree, their adult DC (or some adult DC they know,) are on such low salaries, with such basic, bog standard jobs, (that you probably only need GSCEs for,) that they will pay hardly anything back? That's nothing to be celebrating!

It's like a race to the bottom. WTF is the point in borrowing potentially £50,000 of public, taxpayers money, to get a University degree, just to go get a job that you could do with no higher education?!

Like a few pps, I absolutely WOULD be paying off my DC's student/uni debt. Who wants a life with £50,000 hanging around your neck, that you know you will have til you retire, and will be paying for til you retire. Unless of course, you pick some bog standard low-tier job so you don't have to pay anything back! In which case, what the fuck was the point of doing a University degree in the first place?!