Has anyone here paid uni fees upfront, or considering doing so?

[dyllemma]

I know and understand all the Martin Lewis arguments for not paying upfront. For the majority of people those arguments will absolutely hold true, but I'm thinking that for a sizeable minority, paying upfront might be the right thing to do if:

1. they have the money to do so (obviously);
2. they think its fairly likely that their DC will be a consistently high earner after graduating (e.g. perhaps they're heading into a high earning profession, live in the south-east where wages are higher, and are reasonably likely to be the main breadwinner for whatever family they might have in the future, rather than go part-time or take a career break - none of which can be predicted with 100% certainty, but individual families can make a judgement call as to the likelihood for their own DCs).
3. they aren't at all confident that the alternative option of investing the money will grow the pot faster than RPI + 3%, especially when RPI is on an upwards trajectory due to geopolitical events.

I'm interested to hear from people who have decided to pay the fees, or are thinking of doing so (if so, what is your rationale?).

My DC will start Uni in Oct 22, so I'm considering the options. I think the decision might have been easier a year ago, but with inflation going the way it is, I'm less sure.

What if they decide its not the course for them after all and drop out after first semester🤔

You still have to pay the fees, so dropping out is irrelevant. You don’t get to or pay.

We are paying upfront as we are considered overseas, our government or the UK won’t offer loans to Uni students so parent have to regardless unless you are very low income family (combined £18K a year)

Ultimately she’s leave university debt free. She’s lucky we can afford to pay.

We absolutely will pay fees up front if we possibly can (and right now we definitely can). It feels like such a gift to me to be able to facilitate the dcs leaving uni debt free. Not everyone agrees and theirs are valid reasons. We are also likely to be able to provide a substantial deposit for a property purchase too so it isn’t one or the other. I might feel differently if it were a choice.

I’d like to pay the fees and living costs upfront for the first year - loans start accruing interest from the receipt of the first instalment, so any money borrowed for the first year accrues loads of compound interest over the duration of the course.

I was thinking about this tonight after speaking to a pensions advisor and learning a bit more about pensions.

My latest thought, after a few spreadsheets tonight, is I will pay AVCs into my pension instead to get the tax benefit and ds can get a loan.

He is doing a 5 years integrated masters, by the time he graduates I'll be 58. Hoping to retire at 60 and will pay a chunk of his loan from a tax free lump sum.

My latest thought, after a few spreadsheets tonight, is I will pay AVCs into my pension instead to get the tax benefit and ds can get a loan.

@Blanketpolicy, presumably the tax benefit only applies to avc's paid out of your pre-tax monthly income, yes? If you had a lump sum (e.g. an inheritence) and paid it into your pension, you wouldn't get the same benefit. Is that correct?

presumably the tax benefit only applies to avc's paid out of your pre-tax monthly income, yes?

Yes, I am in Scotland so higher rate tax starts at a lower level (£43k) than England (£50k). Ive had a recent salary increase that has taken me over into the higher tax band for the first time and I can (hopefully) afford to put in enough to cover his loans and it means I dont pay 41% tax on it.

If we struggle I can reduce AVCs. I might also choose to retire earlier and let him pay his own loan 🤣

Yes my DS’s father wants to pay for his degree and pay the fee’s upfront. I’ve told him what Martin Lewis says, his argument is why go into a degree if you don’t plan on earning over 27k. DS is a maths wizz, he wants to go into a finance type job and we live in the South East. My advice would be for him to save it until he gets a job, if he’s earning enough to pay it then just pay it off. But I suspect he will just pay it anyway

We pay in full for our DC. We are overseas and don’t have access to a loan scheme, but would pay if based in the U.K. I am glad to think that they will graduate with a financially clean slate.

Like a PP we can also help ours with property purchases, and I might feel differently if it was either/or.

It angered me during the pandemic to think that students were being charged interest on loans while not attending university because of lockdowns. I find it hard to swallow that loans during those periods were not wiped or reduced. Surely at the very least interest could have been suspended.

The T&Cs of the repayment schemes can be changed significantly by the government (threshold at which you pay, number of years until written off regardless) so I don't see it as a particularly future proof decision.

So if I could comfortably afford it, I'd pay

@Darbs76

Yes my DS’s father wants to pay for his degree and pay the fee’s upfront. I’ve told him what Martin Lewis says, his argument is why go into a degree if you don’t plan on earning over 27k. DS is a maths wizz, he wants to go into a finance type job and we live in the South East. My advice would be for him to save it until he gets a job, if he’s earning enough to pay it then just pay it off. But I suspect he will just pay it anyway

£27k is not a high graduate starting salary in London - a new teacher's salary in London is just below that, and rising, while the threshold itself isn't going to rise any time soon.

Meanwhile, the debt will grow RPI + 3% while studying, and RPI + 'up to' 3% after graduation, depending on circumstances. RPI is currently 1.5% but looks likely to rise sharply over the next year.

Martin Lewis's argument is aimed at the majority of graduates who won't pay off the debt within 30 years, but that still leaves around 25% (according to the recent government review) who will, and many more who will pay most of it. I haven't seen much advice aimed at people who think their DC's are highly likely to fall into this group.

RPI is currently 1.5% but looks likely to rise sharply over the next year

ONS on RPI

www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

It says 8.2% for Feb 22, and BBC is this morning reporting inflation of 6.2%

@RoseAndRose

RPI is currently 1.5% but looks likely to rise sharply over the next year

ONS on RPI

www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

It says 8.2% for Feb 22, and BBC is this morning reporting inflation of 6.2%

Exactly.

Wages will rise too, pushing more graduates over the £27k threshold. The threshold itself probably won't rise because the Government wants to increase the proportion of graduates who pay back their debt.

We did for DT’s as both already had dividend income from a family business. As it has turned out both (they are now 22) are working in mainland Europe and earning above the repayment threshold.

I know it’s not a high starting salary in London, I was just referencing 27k is the salary you start repaying the loan on.

The balance of the argument has changed significantly with the new terms. A much higher proportion will end up paying off the loans in full than in the past.

From 2023 cohort:

ifs.org.uk/publications/15953

I think it's an outrageous charge on the not-so-high-earning young.

But it does mean it's less advantageous to pay off for higher earning graduates.

If you're older parents, you have full pension contributions, and your child is likely to inherit from you above the inheritance threshold long before 30 years is up (family history of dying before 70 say) , and your child is likely to always earn above the repayment threshold then you might as well pay the fees up front if you can afford it. But if you have a daughter you may wish to consider she may take 10-12 years out of earning full time above the repayment threshold....but then what iof the threshold is lowered?.

The threshold doesn't need to be lowered. It just need to stay put Inflation will mean that in practice it starts to take in lower paid occupations.

I'm sure that wage restraint will be urged (and in the public sector might be enforced) but there will be some wage inflation during a period of general inflation and that will erode things, including the value of this threshold

On the basis that every little helps, look at the payment methods available. The LSE used to allow payment via credit card, which back then used to earn us Nectar points.

For some it is also worth considering whether a grandparent can pay.

Paying for a grandchild’s education can be in addition to the annual gift allowance. Paying University fees upfront can thus be much more tax efficient that leaving the grandchild the equivalent amount in a Will.

If we can we will pay. Fees are a noose. I also think Martin Lewis is wrong for the majority of middle class families. I wouldn't encourage my child to uni if they were only planning on earning (in today's money) sub £30k.

Also plenty of professional women have children and remain higher rate taxpayers for the whole of their working life. I have 5 children and have paid higher rate tax every year since 2004 (when I was about 26). Including the 5 full years I took as maternity leave. My peers are all similar (not 5 children!!). I'm not a high flyer in the city either just a standard professional job in the provinces. Loans would have been a terrible choice for me.

Pervious discussion on whether to pay fees has tended to show a division between those in London and those in less expensive parts of the country. If they have a choice, Londoners tend to prefer to pay the fees and allow their DC to leave University without debt, rather than, as others seem to prefer, save for a deposit for them. Many DC will then live at home to save money and for a deposit, and then, when their salaries are sufficient, seek as high a mortgage as possible, the affordability helped by the fact that they don't have loan repayments.

The problem with Martin Lewis is that he considers things on a purely financial basis, where as individuals will include other factors such as risk of loan terms changing, aversion to debt, even the potential for loan repayments to deter borrowers from seeking higher paid employment.

Please remember too that the length of term is going to 40 years which menas a far higher percentage will pay off in full. Indeed high earners pay off quicker and mid earners pay off over a longer period and thus pay back more.

Before we even discuss the fact that Martin Lewis never really addresses the fact that affordability is still taken into account for mortgages and were the chancellor to announce a 9% tax increase tomorrow for everyone earning over £27k he would have something to say about that.