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Higher education

Talk to other parents whose children are preparing for university on our Higher Education forum.

Original poster

Parents paying university fees

97 replies

Fairydustandsparklylights · 07/01/2023 21:12

I’m posting following a conversation with my aunt and uncle as my cousin is starting uni in September. My dc are still young but it got me thinking so I’m curious as to what other people think.

They have a decent amount saved and were planning on paying for university and giving money each month and then giving money towards a house deposit when the day comes. However, the advice from Martin Lewis etc. is to not pay upfront so they have now decided for my cousin to
take the loan she is entitled to and top her up. Then, when she starts working, they said they will pay her student loan for her out of income / pension. This way they can give her more towards a house deposit.

Their plan is for my cousin just to tell them the amount and even though it will come out of her salary, they will just transfer the amount back to her each month.

As they say only the super rich should pay up front, I think their idea is a great one. They can afford the repayment easily and their daughter gets more for a house deposit. Are there any down sides they haven’t thought of? Does anyone else do this?

OP posts:
MandyMotherOfBrian · 07/01/2023 21:14

I agree. I think the only downside could be that future governments could conceivably change the rules again - lower earning threshold, increase interest etc

TizerorFizz · 07/01/2023 21:47

If the payment of fees scuppers a house deposit, it’s not sensible. Loans are a tax. Of course if you’ve got £50,000 lying around plus the house deposit, fair enough. Otherwise take out the loan. Plenty never pay it off. It’s good to reduce inheritance tax liability but not if parents cannot really afford it. They could just gift £3000 pa to reduce their estate. Or just give what they need for a deposit. As long as you don’t die within 7 years it’s fine. We kept complicated student tax payments separate from house deposit.

BigBangSmallBang · 07/01/2023 21:57

As pp says gifting 3k per year is a tax efficient way to transfer the money to their child. If they have a certain amount saved for her to either pay a house deposit or for fees, would they trust her to spend it on these two things?

Africa2go · 07/01/2023 22:22

I think the advice has changed slightly since the repayment rules changed. It depends on everyone's circumstances but the interest is worth bearing in mind - it's very high. This year it was 9%, currently 6.5%.

titchy · 08/01/2023 00:09

Well it'll cost them a fortune if she's a middle earner - they could end up paying double what they were originally going to pay upfront! Better surely to give her a larger deposit.

piedbeauty · 08/01/2023 00:15

We are just funding our DD's Uni fees. We can afford it and she won't end up with debt.

BeaBachinasec · 08/01/2023 03:15

Leaving aside the maintenance loan. Would it be better in the long run to pay the fees upfront or give them £27,750 towards a house deposit?

PettsWoodParadise · 08/01/2023 07:59

We paid in some money each month to an account from when DD was a baby and that will cover her fees and her grandma left her some
money that will pay for living expenses, it was her grandmas wish to use for university so we are honouring that and with the interest rates and money in the bank not earning much it makes more sense to us to put towards education now.

DD has started saving already for a deposit as she saves most of her Saturday job money and will do the same with any summer job. We only have the one DC so it is easier for us.

sendsummer · 08/01/2023 09:45

Well it'll cost them a fortune if she's a middle earner - they could end up paying double what they were originally going to pay upfront!. They should also be aware that the repayable interest on the loan accumulates from year 1 of the degree.

Certainly be very wary of entering into a longer term monthly commitment to pay the loan tax off for their DD.

Moominmammacat · 08/01/2023 10:01

I did and sorely regret it as mine have chose careers where they don't earn enough to pay back.

TizerorFizz · 08/01/2023 10:02

If she’s a lower earner, the tax is fairly low though. It’s a gamble. DD has pad hers off after 7 years. She’s a very high earner. Where you study, what you study and career all make a difference.

The loans don’t stop anyone going to university. Applications are high. They never will and we will still have grads never paying off the loans. They are not a bank loan and not a debt that must be paid off. I’m sure working on a Saturday will produce a house deposit! Not in London or most areas around London.

No one just hands over £27,750 without ensuring it’s paying the fees surely! Of course she could drop out and never get a degree!

MarchingFrogs · 09/01/2023 06:56

No one just hands over £27,750 without ensuring it’s paying the fees surely! Of course she could drop out and never get a degree!

Paying the fees direct to the university each year ensures that the money is used for the intended purpose; however, that is no guarantee that the student won't drop out, for whatever reason.

PettsWoodParadise · 09/01/2023 12:16

DD has the advantage of one of those CTFs where the government gave £250 and then encouraged parents and grandparents to pay in so it is legally her money when she turns 18 and she has chosen to pay her fees with that and I respect her decision, we could try and persuade her out of it but she has done her own research and has her own comfort levels with debt so I know she going into this with knowledge. So I am not handing it over, just like with most things parental it is trusting her to be a responsible adult.

Janieread · 09/01/2023 12:44

piedbeauty · 08/01/2023 00:15

We are just funding our DD's Uni fees. We can afford it and she won't end up with debt.

I don't understand this attitude at all. What a waste of money!

Scoobyblue · 09/01/2023 12:51

@Janieread why is it a waste of money?

Janieread · 09/01/2023 12:56

Scoobyblue · 09/01/2023 12:51

@Janieread why is it a waste of money?

Because the graduate tax is not huge and only repayable when they earn above a certain amount. 30 grand would be a deposit on a flat.

SueVineer · 09/01/2023 13:03

I’m swithering on whether to pay dds fees. The interest rate is high and the repayment levels have been reduced in the past and can be in the future. It’s a big thing for young people to be saddled with a 9% extra tax. Seems like a weight around her neck and that she will pay back far far more than she ever borrowed.

PeopleAreToads · 09/01/2023 13:12

Definitely worth considering what she'll earn in future and interest rates. I graduated 5 years ago and now owe about 15k more than I borrowed. This the first year my repayments have exceeded the interest accrued in the year, earning c£65k

Its definitely not true its a cheap loan for middle earners! The Martin Lewis advice is a blanket thing but definitely depends on circumstances

meditrina · 09/01/2023 13:23

The Government has quite sweeping powers to change the T&Cs of student loans, and if there is a period of wage inflation, many more will end up making repayments. Which will also be higher because of inflation.

It can reduce the amount you can borrow in future - not because it counts like a real loan, but because your income will be assessed net of repayments.

It's up to each family to decide what to do, based on their overall financial position and what sort of job sector their DC is likely to go in to. And where you live - London salaries are often higher than the rest of the country

TizerorFizz · 09/01/2023 13:27

Actually I spoke to Martin Lewis on a radio programme years ago about paying the fees and paying off the loan. For very high earners - pay the fees. For high earning young people, pay off the loan. But, this is for very high earners only. Pre university who knows about earnings? It’s difficult to judge. I spoke to a parent on holiday who paid DDs fees and DD was married and pregnant at 23. Never worked much so money for fees virtually tossed away. They were “loan” averse but it cost them so much money. You can always take the loan and quickly pay it off if that great paying job is yours.

gogohmm · 09/01/2023 13:30

Interest is very high on student loans. If they are earning decent money after graduation (so will be paying back loans in full) reducing the amount they owed is useful. We paid living expenses so only tuition loan

lljkk · 09/01/2023 15:57

We had cash sitting in bank losing value fast against inflation: we paid DS's accommodation & tuition instead. It was the best thing we could do with that money.

snowsilver · 09/01/2023 16:12

We did this.
Both DC took the maximum loans which were available.
We gifted them a house deposit and pay them a monthly amount towards their loan. This can be done in addition to the £3000 if it's regular and out of income.
One DC is a teacher and unlikely to ever pay off the loan.
The other has a well paid job and would probably be better off paying it off sooner.

Xenia · 09/01/2023 18:30

I have paid all the fees for 5 of them, 4 of whom are lawyers so higher earners and thus it makes sense. It is just we are that sort of family on the whole - fairly high paid lawyers and doctors (and in my case it was not a choice between paying the fees or helping them with housing - they all own a property too with my help)

However if you have a daughter and are in a family where women serve men, earn pin money and give up work to have babies or a culture where that is so then it certainly makes no sense other than to help the poor and relieve the state if you pay the fees or if your child never will earn over the threshold etc.

TizerorFizz · 09/01/2023 18:30

@lljkk
As long as he can afford housing in the future. Of course if Dc are just going to live at home, that’s a different matter. We never have large sums of money in bank accounts! Financial advice is also important when making decisions.

Many rich parents are ok being bank of mum and dad forever! But if parents must make a choice be careful to weigh up the options. No student loan, but no prospect of saving for a house either, might not be an attractive proposition. If you live in London, that house/flat deposit may well be huge. Easy if you are in a cheap area but where does Dc want to be?

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