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Higher education

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

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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:

PettsWoodParadise · 11/01/2023 17:34

You can gift whatever you like to a child or adult offspring, the issue is if you die within 7 years there may be tax implications but those taper with each passing year.

Generosity to state and fellow humans when you can afford it should be encouraged IMO. I am finding the talk of avoiding paying one’s own way distasteful. just the way I was brought up. I appreciate there are other schools of thought. The more who dodge payment when they can afford it means it takes away from those who have no other means. The schemes of support can’t be so generous to the most in need etc.

The mindset of not working due to tax bands or costs also baffles me and reminds me of a friend who needed to go back to work due to cost of living after having retired early. They had tons of offers at lucrative salaries but kept turning down jobs as they wanted to start at 10.30 am so they could use their freedom pass but the employer needed them for a 9 or 9.30 start. So they lost out on £50k a year for the sake of £20 a week. They eventually twigged the maths and did take a role but not after losing some of the better offers. Yes a tax that takes a graduate temporarily into earning less isn’t brilliant and could be improved but the blip will pass as they go up the ladder. See the longer term picture (as much as you can in this uncertain world!).

Original poster

Fairydustandsparklylights · 11/01/2023 18:58

Wow, thanks for all of the replies and viewpoints.

I do find the insinuations that they would encourage their child to earn or progress less due to committing to paying her loan frankly, quite insulting. They just want to do what’s best for her future. They have a certain amount of savings so they would give the lot as a house deposit as opposed to splitting between uni support and deposit. They will have generous pensions so are thinking this is an option. I will definitely speak to them about interest rate changes / government being able to do what they want in regards to the thresholds/ repayment timescales / interest. Many families are in the same situation - trying to figure out how to distribute a pot in the most financially savvy way for the future.

Fundamentally, everyone wants what’s best for their child. Thank you to everyone for the responses.

OP posts:

TizerorFizz · 11/01/2023 19:08

They could just set up a trust fund and leave it at that. Dc decided with trustees what it should be spent on. Most people need money on top of pensions. Is this their lump sum (or part of?). Our DDs live in London. Big fat flat deposits needed!

MrsJoyless · 11/01/2023 21:25

Apologies, I am sure no one would behave like that, I was just trying to put myself in the position of someone who saw chunks of their pension thrown into what appeared to be a money pit. FWIW, we did the spreadsheet, realised that DD would finally pay off her student loan in year 30, having paid back around double what she had initially borrowed, and decided to pay upfront. N.B. Given the prevalence of divorce, I think there's a bit of a gamble attached to gifting the house deposit, too.

Teriyakieverything · 11/01/2023 22:15

@MrsJoyless , yes we came to the same conclusions.

I presume the terms of the loan can only change at the time they take out the loans each year, I.e. it is not the case that the terms can change 20 years into the loan, so we are talking about potential changes in 3 years while they are a student. And the latest change kicks in this year, the big one being it is 40 years instead of 30 years before the loan is written off , that’s nearly the whole of their working life.

Now house deposits and the legal implications of living together and marrying, that’s a whole different thread.

Whalesong · 12/01/2023 00:13

We're lucky enough to be in a position to pay fees and maintenance as well as contribute to a deposit for a flat. DS is likely to be a high earner, so it makes sense to us. He did win a considerable scholarship and is working as well during his studies.

TizerorFizz · 12/01/2023 08:32

DD1 is a family barrister. Get a pre nup. Agree how money is going to be split before Dc live with/marry anyone. It’s not difficult. It’s a no brainer though. We gave multiples of any student loan!

Xenia · 12/01/2023 08:49

That is good advice although pre nups are only of indicative force in English law, both sides need their own lawyers, they have to be entered into well before the marriage, each side must make full disclosure and the terms must be reasonable and even with all that the court has discretion to tear them up. I have thought of the divorce issue and indeed two of my children are now married but I did not want a complicated or even a simple trust and just wanted to make the gift for a property and leave it at that as that is the end anyway - I pay for their education including university fees and that same amount of money per child for a first property and then they are on their own as it were. Every family is completely different in terms of what it wants to do and most have no choices about any of this anyway.

I was happy to take the risk on future marriages breaking up. In a sense I also take the risk they might turn to gambling or alcohol addiction sell the house and use the money to fund an addiction of course or give all of it to the church or a cause. That is their choice. I would be disappointed if they lost the security of owning a property, never mind the potentially higher earnings coming from a good education but again my view is you give them that start and then it is up to them. I stop supporting the youngest - the twins - in 2024 which is 40 years from when their first sibilng was born in 1984 so it has been a very long haul of full time childcare costs in 1984 to now, but my choice to have so many children over such a long time.

TizerorFizz · 12/01/2023 13:01

@Xenia
Yes I do know pre nups are indicative but where there is a difference between incomes and wealth they are a steer if dc split up. Some people are risk averse and don’t like the idea of family money going to others. I’m leaving all this up to DD though!

Teriyakieverything · 12/01/2023 13:55

For me, it's not really about the idea of 'family money going to others', it's that we saved and sacrificed hard to try and provide a level of security for DD, whatever happens in life, being very much aware that being female, she is potentially more vulnerable to life's ups and downs - although I know that, she doesn't - and I don't expect her to, as I didn't appreciate this at her age. Of course, I am hopeful that she will find a partner for life, and build and share their lives together using their incomes, and have a happy family, similar to what DH and myself have done.

MrsJoyless · 12/01/2023 14:15

This thread was originally about the choice between paying the student fees vs. providing a house deposit. Posters upthread were suggesting that, worst case, if you pay the fees you risk losing the lot if the child would never have triggered loan repayments. I just think, for balance, we need to consider that, worst case, they could lose half the deposit instead.

Teriyakieverything · 12/01/2023 15:33

Never triggering loan repayment over 40 years is unlikely though, the bar is very low at £27 k (?) threshold. Meanwhile interests at RPI get piled on top. The other scenario is that you lose 40% to HMRC anyway. There are too many twists and turns and scenarios and uncertainties...

justasking111 · 12/01/2023 16:13

They're talking about lowering the bar to 23k and raising interest rates again. There's a huge block of offices in our town. Collecting money off ex students. It's privately run now

TizerorFizz · 12/01/2023 17:58

The bar is lowering for 2023 students. Plenty of women and men work part time. Or retire early. They won’t necessarily work full time for 40 years.

Teriyakieverything · 12/01/2023 18:04

I presume you would need to be wealthy to start with to afford to only work part time, or retire (i.e. not have to work for a living). I guess you could in theory, keep that wealth, but keep income low...for 40 years though... sorry my brain can't quite process this...

BigBangSmallBang · 12/01/2023 20:14

@Teriyakieverything i think you are getting confused between paying some off and paying it all off.

Teriyakieverything · 12/01/2023 20:18

I don’t believe so. What you back is 9% of your earnings above the threshold over 40 years. The outcome and how much you end up paying off - some or all- depends on your income.

Teriyakieverything · 12/01/2023 20:19

‘What you pay back….’

Xenia · 12/01/2023 21:28

Plenty of people mnay never pay any of it back so in a sense the university education is a gift from tax payers to those people. However I agree that these days most women will work at over that threshold for some years of their adult lives even if they go part time for a few years when they have babies.

TizerorFizz · 12/01/2023 21:31

Yes but lots of people with Dc work part time for a quite a few years. It’s very normal. Loads of people don’t work full time for nearly 40 years either. Do you think all families have two full time earners? It’s quite usual to reduce hours to fit in with family commitments.

Original poster

Fairydustandsparklylights · 12/01/2023 21:32

Are there any official statistics yet on the % of men vs women who pay back or would be on track to pay back the full loan? My dc are still young but I have two boys. Men generally tend to take less career breaks / part time work than women. I do hope that there is more equality by they time they have children but I have my doubts.

OP posts:

TizerorFizz · 12/01/2023 21:37

That’s why I said “people”. We don’t know what child care might look like in the future. That’s the usual reason for working part time but who knows whether men will step up. I think most people assume the higher earner will work full time. That could be male or female. Stats? Not sure!

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