Question for those who are paying fees upfront (or considering it)

[studfin]

I've namechanged for this, as I know that threads about money can be sensitive. And I want to say from the start that I know how incredibly lucky we are to be in this position. This isn't a stealth boast thread - I'm genuinely unsure what to do and interested to hear from any others in the same position.

Basically, due to a combination of fairly high earnings and inheritance, we have the option of paying the DCs' tuition fees and maintenance costs without loans. This won't have an impact on our daily life, and we would still be able to help DC with a house deposit when the time comes. We've already basically decided to fund their uni accommodation and living costs without them taking maintenance loans (they both have pretty low key lifestyles, so we wont be bankrolling high end living), but can't decide re tuition fee loans. Partly it's a financial question re interest etc. Martin Lewis says it's usually better to put the money in a high interest account and pay off the loan later once your child needs to start paying it off, but I don't know whether that factors in tax on savings interest (we're both HR taxpayers, and use ISA allowances already for our own savings). Partly it's a financial responsibility question - in that, do I risk my DC placing less value on their education because there's no financial investment on their part?

If I pay it for them upfront, part of me feels guilty for perpetuating inherited privilege, the other part thinks that, given the state of the jobs market and the uncertainty of the future, I should be making their lives easier in every way I can. I went to uni back when it was free, and my parents paid for my accommodation, so I'm also very aware that I had this privilege myself (I did take out maintenance loans, but they were pretty small really).

Haa anyone else made this decision?

I have heard of widening access. This is something continually spouted by the left in the UK so it would have been difficult to avoid hearing about it. It is also part of the infantilising of the poor - another favorite of the left.

Nobody is suggesting that everyone can save the full amount. And nobody is talking about finding £10000 all at once. But with a bit of forward planning most people can save some. As a pp said fees have been around since 2004 so hardly sprung on todays students. And the wonders of compound interest and tax free savings for children are such that putting money usually spent on cheap tat into long term savings means that a substantial nest egg is easily within the reach of many. Most young people living in a city can also get a job in the long holiday between school ending and University starting. How do you think Americans manage this?

If people are choosing to prioritise spending on holidays, toys, sweets etc over their children‘s education that is a choice they make. To claim they have no agency in this is ridiculous.

There is a vanishingly small group of people for whom none of this is possible. But they are few and far between - and rarely are their children in a position to access third level education. Where they are, they can take out the loans. Nobody is denied access.

I think my decision might have been harder if I'd had a daughter rather than two sons, because they might be more inclined to not work for a few years or work part time for many years, as I did.

Of course, if I'd had one of each (DD & DS), I'd have made the same decision for both.

My youngest (dd3) will get her fees etc paid by us, when the time comes, the same as her brothers. I couldn’t treat them differently. That would be a difficult thing for the child to deal with emotionally (similar to the thread on here a few days ago about whether it is right to give more to a particular child in your will, rather than split equally). Also - you never know what life will hold for your dc.. any of them may have a stellar, permanent, full-time career, with or without career break, or alternatively any of them may have long term health issues which curtails their ability to work, or may choose to focus on family rather than career..

It is that hard if you're on a low income.

@KruelladeVille23

There are a lot of things going on that make the UK different

One is that the poorest families in the US often don't have to find the money as they get scholarships, in particular some state universities will offer very sweet deals to bright kids.

Another is that the labour market is much less regulated in the US so it is a lot easier for American teens to get work

There are many more options outside university - apprenticeships in particular

Culturally British people are risk averse about stocks and shares

Student loans are different here - if you don't earn anything or not much, you won't pay them back, so it's a different situation

Biggest thing is that the changes to the system are taking a long time for people to understand and prepare for

We're in a complicated situation.

DD graduated last year on plan 2. Is likely to be a mid earner (public sector) and wants a family and will probably take time off/work part time.

She'll get a big pay jump this year which will push her well above the repayment threshold. But she has further training to do and her pay could drop again in the short term.

DS is still at uni on plan 5. Wants to go into finance and is likely to be a high earner.

It seems to make sense to pay off DS loan provided he gets a well paid job straight out of university.

But with AI and recession coming down the line I think job prospects are uncertain for most graduates.

So I'm reluctant to give SFE £100k between DD and DS which we can never get back.

At this point we're just maxing out ISAs. My instinct says to either keep the money invested in global trackers in their ISAs or add it to their house deposits. Once SFE gets hold of it you can't ask for it back.

We paid fees and an amount equivalent to the maintenance loan. For fancier extras like holidays with friends they were expected to use either small amounts money of birthday/ Christmas money we had saved for them since birth or work in holidays or both. That was to try and ensure they did not become an entitled little shit and were not significantly better off than their friends at uni. We could afford to give a house deposit on top and did so, just have to survive a little longer for that to be completely free of IHT. If we had paid off the loan post graduation I dont believe it would be free from IHT.

We were not confident we could invest at more than student loan interest, were considering IHT, believed their degree gave them a good chance of a reasonably well paid job. . They have a reasonably well paid job. In the early years with high inflation loan interest did exceed our investment returns, now its the other way around. Since the threshold for repayments was frozen paying fees upfront seems like a better decision than we realised at the time.

Since the threshold for repayments was frozen paying fees upfront seems like a better decision than we realised at the time.

This is one of the many problems with student loans: the loss of agency as the govt tinkers with the terms.

Someone mentioned upthread the US which is quite a different system, but there are considerable tax benefits for savings for college fees so that is an incentive for parents.

Also those raising the issue of parents not having the spare cash to save in advance, the irony is that on really quite low incomes students are expected to start repaying their loans - probably at the low incomes that their own parents thgt they didn’t have the spare cash to set aside! The repayment threshold for plan 5 loans is almost the same as a full time minimum wage job.

Surely there's no point doing this by halves. If you are going to pay for rent and maintenance upfront and don't also pay fees upfront, your child will pay 9% of their earning above the threshold in loan repayments. If you don't pay either fees or rent&maintenance and your DC takes the maintenance loan, your child will pay 9% of their earning above the threshold in loan repayments. Paying just part of it means you are giving the government free money and not improving you child's finances at all. If you are going to pay for anything upfront then do all of it not just some.

There has to be a balance. Pay too generously and it may be counted as a gift and come under IHT rules. Payments have to be "reasonable" - clearly if you pay an amount equal to the amount the government allows students to borrow for living costs they can not argue its unreasonable. The agreement with our child was they didnt take a maintenance loan and we'd pay their fees. They may have moaned a bit (a lot) but they didnt take the loans.

@CandyEnclosingInvisible completely agree and I made this point further up the thread but not nearly as effectively as you!

I think many parents just don't get the impact of compound interest on debt on student loans that aren't paid off at a constant regular amount. Student loans aren't like a mortgage.

We will be paying for all of it. The clock starts ticking on interest on the first day of term and the government has already demonstrated it will play fast and loose with the repayment terms.

Plan 5 repayments (at 9% interest) kick in you have have a full time job earning just over minimum wage - £25k - which is the lowest income threshold since student loans were introduced. It’s no longer true that you will only have to pay it off if you’re earning decent money.

That isn't the whole picture though. You might pay the same fixed percentage each month but if you borrow more then you will pay back for far longer.

If you borrow a smaller sum then you will pay it off more quickly. Obviously in some situations you won't ever pay it all off if you are on a very low wage - although now the term is longer then far more people will pay it all off.

It’s not quite as clear cut as @CandyEnclosingInvisible says because there is the factor of whether or not your child will pay back all the loan + interest. Yes from a cash flow point of view, the amount you borrow doesn’t have an impact because you have to pay 9% of your earnings whatever the loan size is. But the number of years you make the payments depends on how much you borrowed (& how quickly you’re paying it back and how much interest is being added). If you still have a debt outstanding after 30 years (Plan 2) or 40 years (Plan 5), then the analysis is correct: you should have borrowed as much as you can (ie tuition fees + maintenance). But if you are a higher earner, then the amount you borrowed is relevant as you will pay it back sooner and stop paying the 9% sooner, if you borrowed less.

The loans are very odd beasts and have so many variables peculiar to an individual’s circumstances.

With the repayment period extended to 40 years, many more graduates will be paying 9% for well over 30 years. In the govt calculations the % of students goes from something like 30% to 60%, so an extra 30% of students will be making loan repayments when they’re in their mid 50s.

Re. Whether the govt will accept that payments of £25k per year to your student child is outside IHT is only really relevant if you die within 7 years as otherwise you can reply on the 7 year rule. I expect it hasn’t yet been tested in court, but if £25k is the annual cost of going to uni, it will be hard for HMRC to argue. You can give £3k of it as an annual gift.

Ah I see @SH2644 got there before me and more succinctly!

It’s not 9% interest! I think that was probably just a slip on your part, but in case anyone is reading this that doesn’t know: Interest is RPI flat, but the repayment amount is 9% of your income over the £25k threshold.

Yes it was! Apologies. Too late to edit. Thank you for the correction. The main point I was trying to (badly) make is that repayments kick in much earlier than they have previously and it’s not longer true that grads have to be earning well before they have to start repaying. And it’s also worth reiterating the piece about the length of the term extending from 30 to 40 years.

So even if you never earn more than minimum wage your entire working life, you will be paying 9% of any income you earn over it to pay off your loan.

Argh that last line is nonsense! Swap ‘it’ for £25,000.

Considering medium risk investment ISAs for DC instead of paying off the tuition and maintenance loans.

Hopefully the investments will
outstrip the debt in the long run.

We’re plan 4

This is a very interesting blog with lots of links to alternative loan systems - and why they are all unfair in their own ways. The main point is that lots of people complain about the current system but no one has put forward a viable alternative model. It perhaps also implies that there won’t be a radical change from the current model and so if there is any additional govt support it is more likely to come in the form of bursaries for low income families rather than general support.

www.hepi.ac.uk/2026/02/14/if-everyone-hates-todays-student-loans-where-are-the-big-alternative-ideas/

So long as you are aware that if you die with in 7 years (which hopefully won’t happen) your gift will be liable for inheritance tax, it is a very good option.

The Government have already said they plan to give more help for low income students studying specific pathways - that caveat about pathways is key, because more graduates are only good for the economy if they have degrees in subjects that are needed by employers.

Do you mean you're setting up an ISA in your own name, with a viewing to withdrawing the money down the line and giving it to your DC? Or you're setting up an ISA in their name?

We paid up front with DD having a choice in it. She has been far more responsible about the money than most of those taking out loans

How do people make sweeping statements like this? We paid our kids’ fees upfront and they were careful. But I have no idea how responsible other students with loans were. Most students seem to live pretty frugally out of necessity from what I can see.