Is it worth using savings to pay my child's university fees and student living costs

[cassieanne]

I inherited £100,000 from my Dad. I won't inherit any more money. I'm in my mid 50s. I'm on average income and work full time. Son going to Uni in September. Is it worth paying fees and living costs ( he anticipates earning £5,000 per year) up front rather than him applying for student finance? He isn't getting a degree that is likely to bring in big money but it's a subject he's passionate about.

Think carefully if you have a son.
Most people that never pay all their loan back are female due to childrearing, reduced working hours and a lower salary over the lifetime.
ML never makes that distinction.

I paid for our 5 to graduate debt free but it was less or about the same as school fees so I am in a different position. In your case he should get the loan. You might need the £100k for old age care in due course for example.

ABSOLUTELY NOT! He will likely not pay much back and it gets cancelled after a few decades anyway. You would be out of your mind to do that. It's not secured debt, it won't show on his credit or stop him buying a home.

I'm on the older type 1 loan, but in the 15 years since graduation, I've paid back a total of £90 and it's unlikely I'll pay much more (if any) before it's written off in 10 years. I'd let him take out the loan, then if you want gift some of the money for a house deposit instead.

Yes i know that and i've seen my frinds payslips who are paying over £100 a month to student finance.

At the start it will be zero/minimal due to lowoer salary but once salary inccreases to 40/50/60k then the repayments jump up. So everytime ops son gets a payrise, he won't ever get all of it as repayments will take a bigger chunk. Same for bonuses.

I just think why pay that when you don't have to.

And banks and building societies do look at your repayment amount when doing your affordability now

Well of course that is the case and yes that is how the system is designed. They are lucky to be earning such amounts so it is payback time. I agree - don't pay upfront.

Going from ‘no one pays hundreds of pounds’ to ‘of course they pay hundreds of pounds, that’s how it’s meant to work’ is a bit of a shift in position!

No, especially as you don't have other sources of money coming in. I'd be looking to pay down mortgage/invest in high interest bonds and use that money in the future for yourself or a house deposit for him.

If he earns the average wage in the UK, he won't pay back much if anything, which is something to be considered if he's not going to be in a high earning career.

Not really @TeatimeBiscuits earning 50k puts you allegedly in the top 15% of earners in the UK so not your average person.

I'd put it down as a house deposit. I think this makes sense for most students unless they are on a career track where higher earnings are highly likely.

£100k mortgaged at 4.5% is going to cost about £550 a month.

To pay that in student loans each month, he'd need to be earning £100k/year.

Also, if he is ever on a low income, or has to take sick leave or something, the student loan payment reduces or stops until his income increases. The mortgage (or rent) doesn't.

Thank you all for replies. My mortgage is paid off but my house needs substantial renovations and this is a worry to me. I'll have a small occy pension if I work til I'm 67 but on retirement I will be on less than the full time living wage.

If you can than yes pay it. I research this because I'm in similar situation.
First of all, this "loans" is a biggest gov. running scam. They introduced it and then changed the terms. and they also can change the terms retrospectively. So now students pay it not for 30 years but for 40 years. The interest rate is huge (now ~8-9%). And the catch is in the salary threshold (now ~£23000), which will probably stay the same, eroded by inflation over years. So after £23K they will pay 9% of gross income, until 60 years old! It is easy to open excell and calculate how much they will pay out within 40 years - over £100K at least if on the postgraduate salary!
And the gov. will sell the loans to private firms (as they did with loans from 90s), which will find the way to collect them.
As I said it is the biggest scum and disgrace. And what they do not tell, while actively advertising this "loans" - without fixed terms and conditions, is that actually only ~20% students take them! - the info from the stat. website - well hidden by the way. So the free education is basically for those children of Tory voting parents.
And those unfortunate who can not afford it will pay the 9% loans, 6% private pension contributions, national insurance and tax ~30%, mortgage (if they can afford them, because US students already can not)- this is the way to poverty.

No. If you want to help your son, keep back £25k for a house deposit for him (should grow a bit in the meantime), and make sure you’re all set for a comfortable old age. He’s got his life to lead (and pay for), and you’ve got yours. I think one of the best things we can give our children is no worrying about us financially when we’re old.

They say put your own oxygen mask on first. So have enough for those renovations and add to your pension.

I don't know what degree your son is headed to or his future prospects but Martin Lewis does give good advice on student loans. I think the main thing is they reduce or stop if you earn less or are ill which is very useful.

I don't think it's worth it. As above, the student loan will only be a proportion of his earnings and the impact on his day-to-day life will be minimal.

Based on what you describe, I would spend the money on your house renovations and eliminate that worry from your life. It will be a weight off your mind.

Once the renovations are finished I would put the rest of the money in a stocks and shares ISA (if necessary drip feed over a couple of years). In the future you can use the ISA money to give DS a house deposit or to give yourself more retirement options.

The interest rate on student loans is high. Most student’s going to uni will surely be aiming to earn over 50k a year within 10yrs or little point going. The repayments can be a struggle once earnings go up, especially if you live in an expensive area with a high mortgage and childcare. You have to pay them back for 40yrs now, and start paying in the mid 20’s and whilst its a low payment when on 20-30k it does get to be a lot higher when earnings go up.

My DC’s dad is paying outright for both DC. He will also help them with a house deposit in the future, or pay off some of their mortgage as he will get a large inheritance in the future. He was adamant he didn’t want them to be in debt, he said he got the benefit of a free education and he wants our DC to have the same. Both are high achievers and DS already has a graduate role lined up and is going into finance, so he would 100% end up repaying it all, and with a lot of extra interest on top. I’m sure DD will do the same. People seem to think its low interest and kids wont earn enough to pay it back, which i find a strange assumption when these kids are going to uni.

You could earn 4.5-5% interest on that so a pre tax amount of £5000 per year.

if you wanted to help out - but you really don’t need to, you could pay £4000 to him each year to assist with his student costs

then when the 3 years is up, you’ve still got the £100k

its not what I would do, you need to help yourself, put your own oxygen mask on so your future is more secure

A lot of people go to university to do degrees in subjects that aren't graduate finance roles. Things like nursing, occupational therapy, teaching etc. Of course the hope is salaries progress rapidly to the point where it is a big bit of salary but I think you have overestimated the median salary of graduates after 10 years.

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The interest is compounded and very quickly adds up! The rules do change retrospectively.

if I can avoid my child having a massive loan before even starting their independent adult life I think it’s worthed.

No - I mean, if you were rich, then sure. So look after yourself first and think of your future - get the renovations done, therefore making your biggest asset more valuable (and to your son if you choose to bequeath it to him). With the rest dump as much as you can in a SIPP and a S&S ISA.

I really struggle to understand parents on average incomes and average pensions considering funding their kids optional higher education costs to the tune of five or six figures.

I’m paying living costs and half the tuition fees. DC travels from home so I just continue to pay for them like I did pre uni. I can afford to pay half of the tuition fees each year and bought them a car/keep it on the road and buy their train tickets.

They have a p/t job for spending money.

Just throwing that out there in case you hadn’t considered reducing tuition debt rather than paying the whole amount.

I would look into buying a flat for him whilst he is studying and seeing whether that makes financial sense so he saves on that outgoings and selling it afterwards then invest the money for his future house deposit / your own pension.