How is your child covering tuition fees?

[Carrythelight]

I'm trying to calculate to what extent we (exH) can help fund DS through uni. The thread 'how much do you give your child at uni' has been extremely helpful, but nobody mentions how tuition fees are being funded. Many of DS's friends' parents are apparently covering them (and accommodation and even living expenses) - but is this really the norm?

I'm not in a position to cover fees and accommodation (he's eligible for min ML and will get a job), however I could extend my mortgage. Do people do that?

@boys3 an interesting question. Very much depends on which plan you are in. It is scandalous on Plan 2 and at RPI on Plan 5 so linked to inflation.

In my view the problem is not the interest rate per se but the way it accrues through compounding from the start of uni studies and in early years when salaries are lower and you are paying back nothing or very little.

Pay back of the loan as we know isn't linked to the size of the loan but to earnings which results in a disconnect allowing the total size of the loan to grow through compounding and then leaving large amounts to be paid off later on.

@TheSecondMrsTanqueray - I'd agree with you -As I wrote further up over 95% of undergrad students take out a loan for fees.

@Juja absolutely as that OP was it seems looking at a DC going in the future past loan interest rates seemed to have no relevance. And depending on the DCs age it may have changed again by the time they go.

@boys3 yes while interest rates are lower the 40 year pay back on Plan 5 loans mean OP's DC likely to pay off substantial amounts of the loan. I believe they expect 57% of students to now pay back all their loan and all the interest. It will be a lot of money with the debt being paid off through an extra 9% tax on earnings concurrent to paying for one's own children to go through uni.

As one might expect mumsnet posters aren't representative of society. Looking at the voting results from OP's poll if you add together parents and CTF/grandparents 20% of those who voted didn't take out tuition fee loans compared with 4% nationally.

@Juja Large amounts are not “paid off” if you don’t ever earn that much if you never earn that much? Lots of grads won’t make it to high salaries and therefore won’t pay it off or pay interest. Many will just pay the loan and it will be virtually interest free. Because payments are based on salary, not interest accrued. Some will pay more as they get higher salaries but others who start high and pay it off quickly, pay less interest than slow burn salary increases.

Not taking out a loan is not possible for the vast majority. Parents can pay up front but if they have no idea what job dc will get, or expect it to be low earning, it’s best to hedge and take the loan. Get that high paying job - pay it off PDQ.

@TizerorFizz that used to be the case but now the threshold to pay loans back is much lower and the timeframe is much longer. So many will pay it back. It is set at just above minimum wage level so it isn’t just those on high salaries that will be paying back these loans and seeing a 9% reduction in their take home pay. Of course almost nobody can afford to take a degree without the loans so it is almost irrelevant but people should be aware that it is more likely than not that they will be repaying a significant chunk of their loans.

@TizerorFizz
Total repayment is obviously person specific (& as of today is therefore assumption specific), but the IFS analysis forecasts 79% of students will repay in full Plan 5 loans. This is a significant majority.

https://ifs.org.uk/articles/student-loans-england-explained-and-options-reform

This is largely due to the extension of loan terms to 40 years.

It was 8% August 23 - August 24. I think. Delighted to be wrong!

@EveryonesTalkingRubbish and the majority of what they pay back is interest...

Reading the full ifs report, they do expect more to pay back with plan 5 but it’s because it’s cheaper. No 3% on top. So grads pay it off more quickly. They still say there’s a grad premium salary for many grads so the govt subsidising loans up front is worth it when taking tax paid by those grads into account. I think therefore it’s the lower paid who will pay for longer and are not so well served by plan 5. Hence it depends what you feel about career goals and loans for 40 years. There’s still going to be millions not paying them off!

Correct
And the group of lower paid that will keep paying for the longest has been expanded to included even lower low paid as they reduced the threshold at which repayments start to barely above the minimum wage.

Yes but as a country we were heading to £500 bn of student debt as too much was written off. Many won’t pay much more than they borrowed if they clear it quickly. Therefore getting a decent job matters in my view.

The crazy thing about student loans is the blank cheque nature of it - there isn’t consideration of value from a taxpayer perspective. If universities can attract students to a course then those students will be paid by the tax payer to do the course. We know the graduate premium does not apply to all courses and even on courses where it does seem to apply, over supply means there are many to whom it doesn’t apply. There needs to be much more justification for giving loans for specific degrees and limits on the number of each degree to reflect demand by the graduate market place.