Parents paying university fees

[Fairydustandsparklylights]

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?

Eh? Fashion PR can be extremely well paid - fun too.

It’s not just middle earners that pay for the shortfall. I was always shocked at how much PAYE I had deduct from my mother’s carer’s wage packet.

We paid. Or more accurately my mother paid for DD until she passed away. Paying for grandchildren’s education is something that is allowed under IHT gift rules.

For us it makes sense.

1. We avoided judgements. What do people do if they announce they will contribute to deposits then one child turns out to be a lazy ungrateful slob?
2. A deposit of £30,000 does not get you very far in our bit of London. There was, and remains, a good chance that one or both would return to London or work overseas.
3. As it has turned out neither DC will be earning before the age of 25, and neither are likely to be settled before the age of 30. (Prospective academic and medic.) Those loans would have compounded a lot.
4. Our experience has been that it has been good for DC to know where the money comes from. They are grateful, as they realise they are lucky leaving university debt free, and they have been careful about their spending. They often found themselves spending less than those relying on loans and parental top ups.

@Greatly sure it is for some but you don't need that specific degree to do it. Being articulate and writing well and good work experience are what really count. Many people work in that type of job with a whole range of different degrees, many of which could be flexed to a whole range of areas should the fashion PR boat not float.

I still remember Tony Blair giving his ‘aspirational’ speech where he said he aimed for 50% of school leavers to become graduates. The old system where more people learnt on the job and only those needing a degree for their job got to go to university, was much easier for the tax payer to fund. Of course most 18 year olds want to go to university, that doesn’t mean it is best for the country. If less people had degrees recruiters wouldn’t expect them.

We don’t have 50% of 18 year olds going to university. Lots of people doing degrees are older via apprenticeships. As DD did a Fashion degree, I was happy to support her choice. Clearly her talents were not engineering like her dad!

Plenty of people do degrees that don’t lead directly to jobs. My local garage owner who is very business driven was dismayed to learn DD1 was doing MFL. He thought it was useless. She’s now a barrister and undoubtedly earns way more than him. He was very pleased to hear she had converted to law though! DD2 has also moved industries and found her niche. She didn’t know what it was at 18!

We do need to look at whether all courses should be degrees but we need to be very careful about labelling people as worthless.

Not having a degree doesn’t make people worthless. My plumber and electrician are very valuable to be though neither has a degree. People need to find their niche.

@TizerorFizz you say you were happy to support your DD doing a fashion degree and then change sector afterwards. Did that support extend to full financial support or did your DD take the government funding? If the latter, has she been able to pay it back while ‘finding her niche’? Just interested to know how it pans out in RL situations.

Is there not a risk that the need to repay a loan becomes a disincentive to earn more.

It might not be worth taking a promotion as the marginal extra pay is insufficient if that extra pay has caused loan repayments to kick in. Or not worth moving for a better job. Or not worth returning to work full time?

The issue as much as anything in taking loans is that so much is unknown. I am pleased we kept things simple and DC left, or will leave, without debt.

@Needmoresleep i don’t think that is an issue as it only a percentage.

My understanding is that marginal tax rates can have a big impact, especially for the less well off. (Which will include those transitioning to starting to repay their loans.) Throw in other disincentives for, say, women thinking of returning to work like childcare and transport as well as other taxes or loss of benefits and loan repayments could be exacerbating an existing problem that sucessive governments have grappled with.

They need to be aware of the rates possibly changing and government introducing new rules . I’m putting some aside for my girls , but we are in Scotland so won’t need as much as folk down south .

@IngridIceberg
She had a student loan for her degree. We paid for her second course. She’s paid nothing back az degree tax as she didn’t earn enough. She is now. However I don’t believe the fashion degrees are not worthwhile for some. However, as I said, it’s not always clear what you should do at 18. She thought fashion was it and it’s been very hard to break into the sector. Others do better and that’s fair enough. Some years later she’s totally employable, happy and doing well. So I’m happy with that. She also won one of the top prizes on her course and I’m delighted she did. It vindicates the decision to change. She worked exceptionally hard on a one year intensive course and found where her talents really lie.

I've set up an ISA for DS to pay his fees. I had an inheritance and thought it would make sense
He can pay his fees or use it for a deposit.

Im glad it all worked out for your DD @TizerorFizz and it is hard to know at 18 what you want to do. My friend studied fashion at Central St Martins and is now a household name designer but I think it is a particularly hard sector to break into. My friend says they are talented but they also got a few major lucky breaks.

30k is only £10k per annum. Accommodation, food, etc bring it up to nearer £20k per annum

The original chat was just about fees.

(I paid £9250 fees, the rent which varied but was about £6500 and £150 a week alowance - 7800 a year for each of the twins which if we add on their shared car is about £25k each a year.)

How would it feel to pay your child annually, out of your pension, only to see them owe more at the end of the year than at the beginning? Gutted is the word that comes to my mind.

At the current interest rates, I know from our graduate engineers at work that even with a decent graduate salary the rate at which the interests pile on top is way more than what the repay. This is easy to see with a simple spreadsheet.

Yes. But they won’t pay the interest if they don’t earn the salary to warrant that. Interest means nothing. It’s not a standard loan. It’s a grad tax. The new system isn’t favourable but it still means poorer Dc can get to university. If the higher earning members of society with degrees don’t pay, the shop worker does. It’s still the case that degree holders earn more. Not when compared against some skilled jobs, but overall they do. They also don’t need to be self employed to make money. So many trades people are self employed and have that worry all the time.

I see. So the aunt and uncle are hoping their child won't earn very much. They will persuade him/her not to go for the promotion? Or will suggest they become a SAHP?

MrsJ I know families from some cultures where the sons are paid minimum wage and the family owns the house and car provided by the family so that the wife gets nothing on the divorce and I suppose the other "advantage" is that child despite being provided with loads of benefits from the parents and even free holidays in Dubai and that kind of thing has a very low income so never has to pay back student loan.

For those saying you can gift £3000 per year.

It's £3000 per parent, so you can gift £6000.