Tuition Fees

[fivecandles]

Is it possible to pay tuition fees up front each year when your dcs are at university (to avoid them having to take out loans and pay interest)? I asked this question a while back but the raise in tuition fees was a v new idea then and I don't think anybody knew the answer.

I'm really glad you've asked this question. There's information about repaying tuition fee loans on the government's student finance page here but it doesn't say anything about paying upfront or repaying the loan faster. There was a Department for Business Innovation and Skills consultation which was supposed to finish on 20 September 2011 but there's no information about the results. I think the government may have made yet another giant cock-up, as there's no way you can force people into debt if they can afford to pay for something up front, but if people do pay up front it will (a) mess up the government's calculations about how much they will make on the repayments and (b) give students from affluent families yet another huge advantage, as they'll graduate with no debts to pay.

Yes, you can.

What you can't do is take out the full loan each year for tuition fees, then (mummy and daddy) pay it all back in one big whack when you finish ... Wel, you can do that, but financially it's not a good move as they've stuck big penalties on to discourage this.

roisin where are these penalties listed because I have been looking (not that we are going to pay our DCs fees off at the end.) and couldn't find anything other than newspaper reports.

Thanks for that. All very interesting. Thought it might be something my parents would consider (there may be inheritance tax issues) and it would save a huge amount for the dcs in the long-term. Surely there would be some advantages to the Government because at least they get the money repaid right away as opposed to waiting for years and years (and, of course, a large number of people will never repay this money)??

Is there anywhere where it says this in black and white though?

I will certainly have only picked that up from press reports.

The logic is the govt already is worried about the quantity of loans to be offered and if they can pay it back immed, then they don't need it, do they?

"Is it possible to pay tuition fees up front each year when your dcs are at university (to avoid them having to take out loans and pay interest)?"

Quite frankly, I don't see why not . . . that's what foreign students do. Nobody forces you to take up a loan. If you want a loan then you apply for it and that's assuming you are entitled to apply. Tuition fees are paid to the uni/college directly at the beginning of each term - that's how the Student Loan Company does it if you happen to have a loan, i.e. 3 payments per year until you finish your course. I assume it's the same if you pay privately but non home/EU students may be required to pay upfront as a pre condition in their initial offer of acceptance.

It's not always a good idea though. Unless you are certain your dc will end up in a high paid job and not take any career breaks then they may well be financially better off taking the biggest loan they can and letting you help out in other ways (eg deposit on first house).

See Money Saving Expert Guide Don't pay your loan up front

Interesting link gelatinous. Thanks.

I'm not sure how much sense that makes gelatinous because it misses the fundamental point that the PARENTS paying the loan upfront saves the CHILDREN a lifetime of debt. So whatever happens it benefits the children (who would otherwise be responsible for repayments). But also if its the grandparents their may be an advantage as regards avoiding inheritance tax.

Well certainly it saves the children 30 years (not a lifetime, unless their lives are unusually short) of debt, but at that point it's written off, so they may well be much better off if the grandparents gifted the cash to them at the outset instead. You really do have to think of it more like a tax than a loan.

Dare I say it, if they are female then what with average earnings being lower and part-time work/career breaks being more common then it's even more likely that they will be better off with the loan plus extra cash up front.

And the worst possible scenario is that grandparents pay half the loan, but it still takes the dc 30 years to repay the other half. Then they have spent exactly the same as they would have done with the larger loan and the grandparents gift was worth nothing (much better for them to have paid 40% inheritance tax).

Hmm.. that is interesting. Although 30 years assuming they graduate at 21 and then take at least a couple of years before they're earning the minimum salary takes them to 53. That's a significant chunk of their working lives and really you'd like their only debt from 30-50 to be their morgage and them to paying into pension funds as well.

For parents who are on the ball and able to afford it it might be better to pay all the fees and give their kids an allowance and then encourage their kids to take all the loans but invest that money in a property instead.

Even when I was a student I had some canny friends who did something like this and then bought a house that they then rented out to other students.

Can't see it makes sense to put the money in an ISA instead unless things have changed significantly by the time the kids get to university (it's still a long way off for mine).

I think it's not just as simple as weighing up the total amount paid in repayments so much as thinking about the impact on the lives of the dcs.

But I now see their may be other ways of lookign at it and whatever happens it's probably worth taking out those loans since they're the cheapest loans that will ever be available to anyone let alone to those with minus incomes.

Oops, there may be other ways of looking at it.