Paying university fees with a credit card

[PrunellaModularis]

Anyone done this?

DD is going to be living at home for her final year so won't be taking out the maintenance loan.

I'm thinking of paying the tuition fee with a 0% credit card then repaying it over the interest free period of 3 years. Can this be done? Is it a good idea?

I would take out the student loan for this. We saved up for our children’s university expenses but they decided to take out a student loan for tuition fees. They put the money in the bank and later used towards a deposit for their mortgage.
Please don’t put yourself it debt.

It will simply be the point at which she stops paying which would be sooner or later, as she already has 3 years of SF.

what about the masters? is that on the cards?

Isn’t the starting salary on plan 5 £25k, not £40k?

Can you explain your rationale as I don’t fully get this. The loan repayments over 40 years end up being far more than the original sum borrowed because of the interest.

The actual maths is not something I am prepared to spend a morning doing because it would imvolve deep research into exactly what interest rates have been applied over the last 3 years. However, I can do ballpark figures to show you roughly what they will d. If interest rates were just at 5% throughout her debt would already be just under £38k and if it was 2% throughout it would be around £36k so it will be somewhere between these two.

If you pay her year3 fees & maintenance without increasing the loan, it will go up by another 500-600 ish. If she gets a further year of fees and maintenance loan it will end up between £51k-£54k.

If she gets a job in autumn 2026 paying around £30k her loan repayments will be around £450 per year, no matter how much she borrowed

If she didn't get the final year loans, interest will be acruing at some amount between £700 and £1700 per year so lets take an average and call it £1200 in annual interest. So her loan debt will be going up not down. If she has a 'normal' rather than highly-paid career she will just experience the repayments as a tax. She would need her graduate first job to be paying at least £38,500pa just for payments to equal interest, and would need to rapidly rise to earning at least £50-£70k to have a hope of ever having paid it off, but that might be feasible.

If she takes the additional year of fees, gets a £30k initial job and has a perfectly respectable but never particularly high-paying career, she will be no worse off than if she didn't take the additional loan. Her repayments will be the same. She will be no richer, but you will be poorer. She would in this scenario need her first job after graduation to be paying at least £46,000pa for her repayments to exceed the interest being accrued.

In summary - if you are really confident that she will step straight into a high paying job after graduation and will quickly rise to higher-rate-tax-band levels of salary within 5 years and will never take a lengthy maternity career break or go part-time for childcare reasons, then yes it might save a small amount of money for you to take the hit. If you can't be certain of that then it's not worth it, you will probably not save her anything.

So the question becomes - why does your (theoretical) extremely wealthy and successful highly paid offspring with the meteoric career trajectory need your help? Given that you can't guarantee that she won't end up on one of the other less-well-paid life paths, maybe you should hang on to your money to help those potential-future-versions of your DD rather than spending it now on the potential-version who doesn't really need your help?

The interest rates change regularly. When one of ours took the loan (tuition plus minimum maintenance) there was almost £900 interest on it by the end of the summer holidays in the first year. So from second year onwards we changed how we fund.

God no!

Yes but I'm using £40k for illustration purposes 😊

Hard to think of a more mathematically inefficient way to proceed than this.

What on earth were you/they thinking? I’m literally speechless!

is she not intending to do a masters?

It would be the best thing you can do for your child, if you can pay it without difficulty. All these sheep signing up their kids to 9% extra tax for 40 years when they haven’t even considered if they can pay for their kids have switched off the financially literate parts of their brain.

And invested money earns money in the bank.
My children paid their student loans off really quickly as they had/have well paying jobs.
Paying off any debt, including student loans, gives you a good credit rating.

But in your example, your children put the loan into the bank for tuition fees. How did they pay for their tuition fees?

That's not the same scenario for OP who I presume needs to use the loan to pay for tuition fees. So she's asking whether it's better to take out a 0% credit card instead.

I can't understand people saying it's not when interest on student loans accumulates from day 1.

But savings interest is taxed once you go over the exempt amount and inflation also erodes the sum.

I'm all for saving but the maths doesn't stack up for taking a student loan for potentially £45-£60k for a three year course (depending on how much maintenance loan is given) and then keeping it in the bank. It is of course a way to gain access to a deposit sum that would otherwise take a fair while to save up. However it doesn't make sense from a financial perspective.

Except it's a bit misleading when people are saying as long as your job isn't high-paying you won't be liable for the repayments straight away. It's eminently possible that a graduate could get a job paying £25k straight out of uni and be liable immediately. That's very different to a job paying £40k.

They received the tuition fee loan. They put the money we had saved for tuition fees in the bank.
We then paid for their accommodation and living expenses.
Yes I agree they may had paid more in interest on the loan than they received on their money in the bank but they had a substantial amount towards a mortgage. Swings and roundabouts.

@GameWheelsAlarm
That's a good analysis and backs the theory of taking all the loans available.
Most graduates working full time will earn at least £25k as that is less than 40 hours per week at minimum wage.

Except it's a bit misleading when people are saying as long as your job isn't high-paying you won't be liable for the repayments straight away. It's eminently possible that a graduate could get a job paying £25k straight out of uni and be liable immediately. That's very different to a job paying £40k.

It's not misleading at all. I was asking about the stage where they start to earn a decent salary - which I would hope a graduate would do eventually.

Depends where your child is going. When Spurgeon's closed very unexpectedly last month, students were advised to investigate doing a chargeback/section 75 if they'd paid by card. Otherwise they join the queue of creditors, and the chances of them seeing their money again is small.

So definitely worth doing if they're going somewhere whose future is questionable....

I don’t see the point as she already has the debt. If she didn’t then yes I would. Irrespective of the amount owed she pays the same every month based on salary. For example I’m on plan 2 and pay £120 a month (obviously her plan numbers will be different) but it wouldn’t matter if I owed £10k or £20k I’m paying £120 it just extends the time she is paying it off.

Why are you paying it. It shouldn't be your debt. If she want to go it's on her to pay it.

The critical question is how long that "at some point" takes to arrive. Without the extra year of added debt the £37k (ish) already taken will be accruing about £1350ish per year in additional interest anyway (with the amount being higher each year if the contributions have been less than that) so if it takes her 5 years to get to that £40k salary the debt will have grown substantially and the target number for repayments to exceed interest will be higher. Your sacrifice of ready funds that you have right now will only actually save her any money at all if she gets to £40k within 18 months of graduation and climbs the career ladder very rapidly, starting to earn about twice that amount a few years later. In that scenario of her getting pretty wealthy pretty quickly, she'll get to the point of having paid off her debt significantly before she reaches retirement and her 50 year old self will be thankful that you made that sacrifice 30 years previously, allowing her to keep more of her (by then) enormous income over the next 10 years.

In the scenario where she has the same high-paying career, but you don't sacrifice your current wealth and she takes the extra loan, her payments until age 50ish will be exactly the same, she will not pay a penny more. At the point when she might in the previous scenario have finished paying, she will instead keep paying for another 10 years before the debt reaches the 40 year limit and payments stop.

Therefore if you pay the fees and your daughter does have a highly successful well-paid career, she will not benefit at all until she is that pretty wealthy person in her 50s.

The alternative future is the one where your daughter does not have such a rapidly accelerating career, and stays in the £35-45kpa income bracket for 10 years or so, then potentially has a couple of years off for having babies and returns to work part time for another 10 years, then gradually once kids are in secondary starts to build up again, perhaps getting the equivalent of £50-60kpa (in today's money) by the time she is in her mid 50s if she is successful at rebuilding her career post-kids. In that scenario you will definitely have wasted your money if you pay her fees this year yourself, and she will never see a single penny of benefit from your sacrifice, her payments would be exactly the same whether or not she borrows the money for this year's fees.

If you can find an interest free credit card for 3 years, and If you can 💯 pay it off within that 3 years (or by the end), it sounds good to me.

You’ll get eg. Air miles on your credit card (or whatever the benefits are of that card), and you can use cash you would’ve paid to the student co. yourself, and put into high interest savings or short term (3yrs) investments.

My sister was the first year to have the £9k fees and my parents considered paying a year of them for her, to lower the debt.

My dad (who is a very thorough man) put together multiple scenarios of different salary predictions and interest rates in excel, and found that for most scenarios, it wasn’t worth it, it wouldn’t save her anything. She’d end up not paying it off either way, so the repayments would be the same.

That was for her loan and her repayment plan. I think the repayment thresholds have changed now. Plus my sister wasn’t doing a degree that is associated with becoming a high earner, so that was factored in to his calculations.
But the maths isn’t difficult, a few formula in excel and then change the variables to get some possible outcomes for her with a starting debt if you pay some, and if you don’t. Obviously you won’t know interest rates etc, but you can put in a few different scenarios and see what comes out.

If she’s on the newest plan, which has the lowest repayment threshold and the longest period before it’s written off, I believe the predictions are that more students will pay that off in the end than won’t. So it might be worth it for her. It’s only worth it if she’ll pay off the debt before it gets written off.