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?

It’ll be like a monthly gift to them from their grandmother every month for the whole of their working life

And get frittered away without them noticing it. Buy somewhere for them to live while they’re at uni and sell it for a deposit on a house when they graduate.

They might well assume they’re going to get very highly paid jobs but it might well not turn out that way. You plan and God laughs.

@jeanne16 the main point is that she can probably get a better return investing somewhere else - and in particular using it got get them a property if that’s a feasible option

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?!

Because you wouldn’t get those jobs without a degree. It’s pretty much a minimum requirement to get just about any job these days. Particularly if you work in the public sector, the starting salary for nurses and paramedics is well below the threshold but you need a degree for those jobs.

You’re also assuming that everyone is motivated by money. They’re not.

@Blossomtoes

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?!

Because you wouldn’t get those jobs without a degree. It’s pretty much a minimum requirement to get just about any job these days. Particularly if you work in the public sector, the starting salary for nurses and paramedics is well below the threshold but you need a degree for those jobs.

You’re also assuming that everyone is motivated by money. They’re not.

You're missing the point. Some people on here are cheerily announcing how their adult DC is in a basic bog standard job that they would never have needed a degree for. And they are happy with that.

So they have borrowed £50,000 of public/taxpayers money, for fuck-all, and they will never pay any of it back, (or very little anyway!) It's almost like some people only went for the 'university experience,' for the fun and games of being at uni, and 3 extra years of not having to live in the real world.

And if people are not 'motivated by money' then why not get a basic, minimum pay job? Why spend 3 years at university, accruing, masses of debt, if you aren't arsed about earning much? Yeah, some jobs require degrees, but not the basic bog standard jobs some posters are on about. We're not talking paramedics/nurses/police etc.

But you probably knew that.

And you don't need a degree for just about ANY job these days. That's nonsense!

And if people are not 'motivated by money' then why not get a basic, minimum pay job? Why spend 3 years at university, accruing, masses of debt, if you aren't arsed about earning much?

Because you want to expand your mind, learn interesting stuff, be a well educated rounded person. You may want to do a badly paid job for which a degree is essential - most academics are poorly paid.

Absolutely not. Student debt is the 'best' debt you can get. Lots of wealthy people get their kids to take out a student loan and then invest it for them as a way to make some money. Also you never know what might happen, they might hate university or want to transfer to another one, just so much better not to commit it all up front.

I think you're seriously overestimating how low-paid you have to be to not pay off your student loan, @MurmuratingStarling - the current estimate is that 81% won't. Lots of those will be working in graduate professions (nursing, teaching, social workers - are these people that lack ambition and should never have gone to university?). It's not like you have to get a job scrubbing toilets to not pay back your student loan as you seem to assume.

The only issue would be tax @jb7445. You pay tax on rental income. Whereas buying a student house would mean they could live rent free and let a room to another student for £7k tax free.

£7k a year, obviously!

@LittleGwyneth, debt is debt there is no "good" debt.
it is still on the books and hanging over your head.
wealthy individuals access accountants and take advantage of laws and regulations in such a way that benefits them but they also pay their bills. and a student loan is a bill.

I don’t think it’s the best use of your money OP.

Do they know you are thinking about this?

I would invest the money, probably in property, depends how much it is. I might split it over 2 properties so you could sell at different times, or half into a property & half into stocks & shares.

You keep saying it might not (if it drops in value) bounce back in time - in time for what? It won't hurt them to wait & save up part of the deposit themselves or whatever.

I wouldn't pay fees upfront because you just don't know which way things will go re them changing what their ambitions are. Better not to have paid upfront. Also, no matter how 'mature' you think they are, they're still young & having a student loan like everyone else is no bad thing and might make them more responsible about their choices.

I am from a 9k tuition fee cohort. It absolutely sucks. I'm from a low income family and took out max tuition fee and maintenance loan. I left uni in about 45k of debt and because THE INTEREST RATES ARE SO RIDICULOUS I've paid around 10k towards my debt over the years and my outstanding debt is HIGHER than when I left.

I'm a high earner now and have hundreds coming out my payslip every month for this bullshit and my outstanding debt is barely being affected because of the interest rates. I'm just covering the interest I get on my debt every year.

Can you contribute some towards it and invest the rest elsewhere(not sure how big this lump sum is)? I'm going to be paying off far more than I ever borrowed over the 30 years because God forbid you come from a poor background and end up with a high salary. Even if they just have tution fees as loan and maintenance costs covered by you that would be a great benefit because they wouldn't have the giant blow of big loan + HUGE interest rate.

I've set up an ISA for DS which will hopefully cover the debt once he's finished university. The money came from an inheritance.

One thing I would factor in when thinking about this would be the differences in rental prices to mortgage costs (although noone can predict the future).

I have a student loan from one year at university (I dropped out because I hated my course - I then did an open university degree which I self funded by working full time at the same time) and I consider it a small amount that I pay back on a monthly basis (I'm on the old rules of £15k and over I pay and I earn considerably more than that - in a field I did not do my degree in and instead have done further studying). For me, especially in the area where I live, my parents giving me some money towards a house deposit was far more beneficial, in terms of my starter home I would have been looking at an increase of 50% of my monthly mortgage payment to rent a house like that, in terms of my current house the rental cost would be 150% higher than my mortgage. I "save" a lot more on a monthly basis by being a homeowner than if I were "debt-free" but had to rent because I didn't have the funds for a deposit.

[quote fallfallfall]@LittleGwyneth, debt is debt there is no "good" debt.
it is still on the books and hanging over your head.
wealthy individuals access accountants and take advantage of laws and regulations in such a way that benefits them but they also pay their bills. and a student loan is a bill.[/quote]
This. There is no such thing as GOOD debt. As I said, who the F wants £50,000 of DEBT hanging over them for 40 years/virtually until they retire? And you pay back more than you owe - because of interest! So you will end up paying back way more than you borrowed!

And a new government could bring in new rules at any time (or the existing government even.) They have changed the rules enough before, and done dozens of U-turns. They could change the % you pay after £27,000 (or whatever they decide,) from 9% to 12% or 15%, or more, any time they wish. They make the rules.

The fact that someone would have a 6 figure sum to spare, and would not pay off their adult DC's £50,000 student debt out of it, boggles my mind. I would do it in a heartbeat if I came into a six figure sum. Or even just 70 or 80 grand.

I feel massively for the younger generation who have these monstrous debts, and Martin Lewis can say whatever he F he wants, I would absolutely be paying my DD's uni debts.

Me and DH have ZERO debt, apart from £45 on a catalogue, £125 on a credit card, and £80 on an Argos card. We also have some savings, so it's not debt really, as we could pay it off tomorrow. We are mortgage free too.

We have been in debt before (some years ago,) quite a high amount actually, and it's HORRIBLE being in debt. (I mean like, thousands!) You never really sleep properly at night, and you never fully relax. Never been happier since we have been totally debt free.

And you pay back more than you owe - because of interest! So you will end up paying back way more than you borrowed!

Like when you buy a house.

I would do it in a heartbeat if I came into a six figure sum. Or even just 70 or 80 grand

Even though they’d gain far more financially by having it as a house deposit?

I inherited 100k a year ago and it didn’t even cross my mind to clear my DC’s uni debts. I’ve put money in stocks and shares isa’s for a deposit on a property for each of them.

@Blossomtoes

And you pay back more than you owe - because of interest! So you will end up paying back way more than you borrowed!

Like when you buy a house.

I would do it in a heartbeat if I came into a six figure sum. Or even just 70 or 80 grand

Even though they’d gain far more financially by having it as a house deposit?

murmuratingstarling

And you pay back more than you owe - because of interest! So you will end up paying back way more than you borrowed!

@blossomtoes

Like when you buy a house.

It's not even REMOTELY the same. WTF are you on about?

@Blossomtoes

Even though they’d gain far more financially by having it as a house deposit?

Says who? You don't know that. You're just assuming.

You're just being deliberately obtuse now.

Pretty telling that you would let your DC wallow in debt though, whilst you galivanted around with your 10s of 1000s of £££.

@NeedleNoodle3

I inherited 100k a year ago and it didn’t even cross my mind to clear my DC’s uni debts. I’ve put money in stocks and shares isa’s for a deposit on a property for each of them.

Oh dear.

Are you just talking about the tuition fee loan or also about the maintenance loan/parental contribution.

And you pay back more than you owe - because of interest! So you will end up paying back way more than you borrowed!

Like when you buy a house.

It's not even REMOTELY the same. WTF are you on about?

It’s precisely the same. You borrow £x and you pay interest on it in both cases. If you’re seriously unable to see that, there’s no hope for you and nobody with any sense would accept your financial advice.

Cripes there are people on here who don’t understand the basics of leverage