Student Loan question and idea

[ClarasZoo]

I have several children, all of whom hope to go to University and all of whom will qualify for a tuition fee loan. Due to fluctuations in earnings, some are likely to get the minimum (£4,000) living expenses loan and others may get the £9,000 or so. Some may do 3 year and some 4 year courses. Even if we stretched ourselves to pay for university "up front" I have read enough to know that this is not a good idea because:

1. Not everyone pays it back.
2. Child may not work for whatever reason, hence will not pay it back.
3. Child may have career breaks, leading to not paying it back.

I think £20,000 spent on a house deposit would be a better thing to do, if indeed that is ever possible.

I had thought about putting money into an ISA for each kid and they could use that to pay off the loan if it ever seemed to be a good idea at that time. The problem with that is that this would be unnecessary for any kid who actually never works or who has a low paying job.

So I have a further idea which is to say to each kid- take out the max loan you can and I will always (for the next 30 years) pay the interest so they never have to worry about it. I can take a view whether to pay off the loan in full or not. They effectively get a loan free education. This makes it fair between those kids that get a £9000 loan and those that get £4000. Everyone get a "free" degree...
Can anyone see any flaws in my logic or problems? Other than that I need to make sure I can pay it, of course....

So let's say your child earns £27.5K. You start paying back the loan at 9% over £26.5K threshold (£1000). So are you going to pay your children back 9% of the £1K (£90 a year) or 5.6% of the whole loan every year which is the amount the loan will increase by (Let's say £40K x 5.6% =£2240 per year)?

5.6% is the current interest rate of student loans: RPI (2.6%) plus 3%

Thank you- good point. £90 is what I thought in that example. They might never need to pay it off...

Paying back the interest on the loan for each child each year sounds fairest so they are all in the same position.

So say £500 a year if they become teachers on £30k or £7600 if they are lawyers on £100k etc.

Yes Xenia- that’s what I was thinking...can anyone spot any problems with this approach?

How old are your kids? The way student are financed changes every couple of years as far as I can tell. I’m not sure I’d spend too much time planning anything.🙃

As long as you're aware that when they apply for mortgages their repayments will be taken off the amount they can borrow, even though you'd be paying them.

Would you not also want to give them a choice? A lower earning child may well prefer your contribution to come in the form of a bigger house deposit.

Finally one who's a nurse earning £29k a year who gets £450 a year off you may well resent the one earning £100k who gets almost £7k a year from you.

Finally one who's a nurse earning £29k a year who gets £450 a year off you may well resent the one earning £100k who gets almost £7k a year from you

Completely agree with that. Dh went to uni as did I in the days before tuition fees, he went on to get a graduate job. His younger sister dropped out of A levels and does a administration job on less than £20k per year.

She never took courses to increase her skill level or applied for any promotions over the years and seems very happy doing what she has for over 20 years. Still lives in the same house she bought 20 years ago. She is over 40. PIL helped her out more financially because she needed it more than we did. They paid a lump sum to help her buy out her ex-husband from the property etc. I am glad that we have never needed to ask them for financial assistance.

Surely this should be about helping them out as and when they need it if you can afford it rather than a fixed I'll give you X every year? One may choose to live in London, one may live in a much cheaper area and so the amount they pay for their mortgage or rent will be vastly different.

In case that wasn't clear my SIL would be very pissed off if her parents had given us tens of thousands to equal up any payments made to her by her parents.

Our family - my parents and then I - have taken the view we make it equal based on their choices. Eg I did law - 4 years and my siblng medicine - longer than law but I didn't feel I should be entitled to the difference. Same with my 5 - one daughter had 2 years post grad fees/maintenance paid by her law firm and second did not (and I therefore paid for it) and the same with the boys - older son did a 3 year degree. His brothers have also had that funded plus law post grad (but had the older one chosen that I would have funded it but I will not make up the difference and the same with everything else - they all have an equal sum towards a first property regardless of what they earn).

I think if lenders take account of the expense of a loan repayment then those with the bigger loan because the parents were richer that year should have that difference made up too.

In our case daughters had £1k student fees, son 1 £3k and the twins £9250 each per year. I have paid the fees whether they be £1m or £9250 and no child has said it's unfair as I am just putting them all in the same position.

Personally we agreed to fund both our dcs (both get minimum maintenance) for the length of their course plus one more year. It's then their choice whether they do 3 years or longer. Or repeat a year or whatever.

I'd do something like that, and make sure you can give each the difference between minimum maintenance loan and maximum.

Interesting all - thank you. Half are likely to get full loan and half just the 4000 and I am struggling to make it fair. I don’t want the ones who get the 9000 to only take the 4000. .. I want them to take the 9000, as they may never pay it back...