Should I help pay the Uni fees

[Anxiousmum]

My DD is in year 1 at Uni and has taken out a student loan for both the tuition and maintenace fees. I have managed to save some money in the last 6 months and I can probably pay one of the loans for her, so she doesn't have to stress so much about ending up with a huge debt at the end of Uni, especially when the rising inflation and interest increasing the debt. I am just wondering though if it better for "character building" and preparationfor adult life for her to actually have that responsibility and ensure she speands her time at Uni wisely and works hard at her degree. What have other parents done/ are planning to do? I should probably add that her Dad and I are divorced and he only plans to support her by about £500/ year.

I think the general message is don’t pay it. Have a look at Martin Lewis on Money saving expert.

Save it for her first house deposit.

Keep on taking the loans. Don’t think of it as debt - but rather a graduate tax that may or may not need to be repaid (depending on her earnings).

I think I saw a Martin Lewis video on it, and the replacements aren’t hideous - around £1000 for a person on a salary of £29000 (if I recall correctly).

Our take on it is that dd is taking the loans she is eligible for even though we could pay for a free ride. Then if/when she earns enough to start repayments we will use savings to gift her (and other dcs if they’re in the same boat) the repayment cost for each year. You can give a tax free gift each year of I think £3K.

No. She may never earn enough to be required to repay the fees. Or she may earn so much that she can pay her own debts more easily than you think. Wait and see what happoens.

She (or you) may need the money for something else.

I wouldn't be paying off any of the loans as the rates are so reasonable. I would however try and help her out with her accommodation costs if possible. Or even better put money aside to help with a flat / house deposit.

I would carry on with her getting the loans and just top her up each month with what you can afford.

You need to pay the assessed parental contribution

But beyond that, it's up to you whether you give her more support now (could be handy if her costs are close to or exceed the loan amount - yes she might need to find a part-tine job if that's the case, but she's there to study and needs to put her main effort and time into that)

If you can comfortably afford it, then reducing the amount she borrows can be a good thing - as posters have said, it's a pretty good deal right now, but it's not future proof - the government has extensive power to change the T&Cs by either/both reducing earnings threshold for repayments or increasing those repayments.

But as you are saving for her, that suggests you can't comfortably afford it, and you should think instead about whether a lump sum later as a house/flat deposit might be more useful to her.

No. It isn't debt - it doesn't negatively impact upon her in any way and will not damage her credit score. Think of it as a graduate tax that will only be repayed once she starts earning enough.

IMO it would be a waste of money to pay them in full now.

@Hiyawotcha
I think £3000 a year to children is to reduce your IHT liability. Its not income tax free for a parent if it’s earned income, as I understand it.

I would try and save your money and it might grow into a house deposit. Or at least money for a car after university. Ultimately, unless she gets a mega paying job, or you are very well off, it’s not worth paying it off. However you should help with her university maintenance costs first: rent, food etc.

If she gets £4k due to your income and the full loan would be £8k for maintenance or whatever the difference is parents are expected to make up that difference. Above and beyond that it is up to you.

There is not a huge point in keeping the loan high as the amount paid back is 9% of earnings over the threshold (until it is repaid) so whether you borrow £20k or £50k the repayments are identical for people on the same salary for the period you have not paid it back. Some children have no loans at all but plenty do

I have paid all my children's university costs as it was about the same as school fees so it was just like carrying on with those (this is my last year of having students as the twins finish in the summer)

I think a lot of the decision making depends on the job the student is going to get. If they are earning £200,000 by 30, then they should look at paying it off. If they earn £30,000 they would be mad to.

Our daughters both got student loans. When they started work and began paying down the loan, we matched them pound for pound so that they paid the debt off in half the time.

Tizer, you probably know more about IHT than me but I thought £3000 was the annual gift allowance, but paying education costs were separate. (Which is why rich grannies might be tempted to pay school and university fees.) And obviously none of this is relevant should the donor live more than 7 years.

No I wouldn't pay off uni debt. She is more likely to need the money for a house or flat deposit. Save it for that.

The uni "debt" isn't really proper debt. It's just another deduction if and when she earns over a certain threshold. It won't really negatively impact her life that much. But being stuck renting forever definitely will.

@Needmoresleep
Grandparents pay school fees to reduce liability for IHT. They must pay regular fees snd not just make a one off payment. So that doesn’t apply to the op as far as we know. Anyone can give money away to reduce IHT but whether it’s the best use of it to pay a tax is another matter if the DC cannot save for a house deposit, for example.

I just want to address the OP question as to whether paying Uni fees would demotivate her DD and cause her to work less hard. My experience with my DD is that this was not the case with them. We paid uni fees plus maintenance costs so shed graduate with a bachelors debt free, graduate degrees we expect them to take out loans though and self-fund.

She’s currently getting a first at her Uni and has upgraded to a joint degree. I think it depends largely on your DD? Mine is very hard working and responsible.

I agree that most students don’t give a second thought as to who is paying their tuition fees and accept that once working and earning enough they will have a small deduction from wages to pay it back. It’s maintenance costs that cause so many families an issue because the calculation of entitlement uses family income with no consideration of outgoings. This means many middle earners find their kids get minimum loan but can’t afford to top up to the recommended maximum.

We’ve always paid all fees but as Xenia says only because it was a continuation of paying school fees (actually cheaper!). The only people I know who do this are v high earners who can well afford it and who will eventually be in a position to help kids with house deposits etc

OP in your situation I’d save the money in an ISA as housing costs will be far abd away the most difficult thing for our students to deal with on graduating. This is the biggest help you can give rather than helping your child avoid a deduction from wages that amounts to the cost of a few coffees each week.

We could easily have paid fees but chose not to. Both of ours went to boarding schools. We thought they should be responsible post 18. One had paid it all off at 29 and the other has paid £0 because she doesn’t earn enough and is now retraining. They both have significant funds we have invested for them.

OP in answer to your question is your DD receives the minimum Maintenance Loan because of your earnings then you should top this up to the maximum amount of Loan. If she is receiving the maximum loan then save the money towards a house deposit for her.

Unlike some privileged posters on here in real life whose DC didn’t go to a fee paying school most students have a tuition fee loan and a maintenance loan.

Either way it shouldn’t demotivate your daughter.

If what you have is sufficient to top up her maintenance as needed then, as PPs have said, I would prioritise helping her to save for a first home deposit first. One way of helping to do that is through a lifetime ISA in her name as then she gets the extra 25% from the government on top of the max 4000 put in per year.

I believe Martin Lewis recommends taking the loan. My DC’s father has been working overseas for a few years and has saved up for their Uni and is adamant they shouldn’t take the loan. I think the repayment is around £300 a month (I might have made that up but sure I saw it somewhere) which is a fair chunk of their salary if they have a family / other costs by then

repayment on about £50k of student loan on a salary of £30k a year is 9% x 50k x the £25k to £30k where £25k is when you start repaying which is £37.50 a month. If the repayment went back to the £17k salary I believe it startefd with in the early days of student loans - 10k - 17k = £13k and x 9% is £1170 a year or £97.50 a month assuming a £50k student loan and £30k a year gross salary.

I understand richer parents' different points of view - nothing wrong with a view that at 18 you support yourself and neither in my view I and my parents paid for our education (my parents made a tiny minimum grant up to a maximum grant and not just for 3 years but I did law and my sibling medicine so very long courses and I just wanted to do do the same for my own children and then other than my help with their first property they are indeed on their own - one was my trainee solicitor for 2 years but that was still all over by about age 24). I think by age 25 I do think even if they pursue a longish professional career with lots of training they should be pretty much self sufficient. The only reason my older son lived at home a little bit longer as he was in effect an au pair to his much younger siblings and also worked for me part time so there was a kind of mutual interest and him being here until his later 20s.

@Darbs76 I think that figure is WAY out. You pay back 9% of anything you earn over £27,000. (That's rounded off a tiny bit)
So if you were earning £50k then annually you would pay 9% of £23k, which is just over £2k per year. That's about £166 a month.
To be repaying £300 a month, I reckon you'd have to earn about £70k. Is that what you and your DC's dad think your kids will be earning after uni??