If you pay for private school fees will you pay uni fees?

[Allotment123]

As the title says, if you pay private school fees will you pay for uni fees, tuition and maintenance for your kids? On a combined income of about £90K and wondering if it was feasible? People say they'd rather save for a house deposit, but do they actually save it? Really hate the idea of my kids starting life in debt

Agree with you both. I don't think people realise this, I've encountered loads of people who are still under the impression it's a "cheap loan". It really isn't.

And if your child has a decent paying job then they will be paying back a lot of money for 40 years. And they won't be able to pay it off because it will have accumulated so much interest.

I do agree with that. And if you have plenty of money to support yhem with a house deposit too I can see the reasoning for doing both.

However, if there is only money for one or the other, which is the case for us, it's different.

DS1 and I decided if his 60k was used for paying for university, he would then have to rent, possibly for years, while working and saving for a deposit. That too would be costly and in the balance it seemed better to try and keep as much of the 60k as possible for a house deposit.

£52k may seem like a high salary now, but it won't in 10/20/30 years. The calculator on Martin Lewis's website has default assumptions built into it that are no longer credible - e.g. that salary will increase by 2% per year (even before the recent high wage inflation, this was unambitious for anyone who might be interested in getting occasional promotions or moving employer to increase their salary) and that the minimum salary threshold would rise in line with wage inflation (the government froze it this year, and are likely to freeze it again if they don't think they'll get enough repayments back).

I've worked part time for two thirds of my working life, and had 2 years of career breaks, yet when I checked my average wage inflation since my first grad job back in 1993 it was way more than 2% a year.I started on about £13k, which seemed massive then, and now I'm on £60k which I wouldn't have imagined achieving back then, but is now just a senior technical, non-managerial, family friendly, higher education sector job in London.

p.s. To save you working it out £13k to £60k over 31 years is an average annual rise of about 5%.

If my salary had risen in line with CPI inflation over the same period (as assumed by Martin Lewis's calculator) it would only be £28.5k now.

And I'm no high flyer.

@Netcam yes valid point re house deposit

There is however a link. The VAT exemption which currently applies to schools, universities and nurseries is the one that applied across EU and prohibited tax on education (crammers which sold qualifications courses singly did not fall under this provision). Now that we have left EU, we no longer have to follow their VAT rules and can set our own sales tax , and could extend that to education if we wished.

The potential effects on universities and nurseries are there, and until exact proposals are made known we simply don't know if they will be included in the scope. It would be a bit of an oddity to say that sales tax would be imposed when the pupil is of compulsory school age, but not for the voluntary early/further years.

@Scaevola The potential effects on universities and nurseries are there, and until exact proposals are made known we simply don't know if they will be included in the scope. It would be a bit of an oddity to say that sales tax would be imposed when the pupil is of compulsory school age, but not for the voluntary early/further years.

On a previous thread on this topic, someone made the valid point that we have a VAT system which treats biscuits differently depending on whether they have chocolate on just one surface or are fully dipped, so it's not remotely unfeasible that it might be able to distinguish between an educational provision which is part of every child's right to receive an education, vs a "luxury" version which is priced to exclude all but the very wealthiest.

I would be in favour of a VAT rate which was zero for the first £X where X is whatever the average spend-per-pupil is for state education for that age range, and then 30% on all fees per pupil in excess of that tax-free amount. There are some private schools run on a shoestring (eg some arts-specialist or welsh-language-medium) which aren't any more expensive per-head than the state provision they are just a way for parents to opt out of the state offer, and those shouldn't be taxed into oblivion.

Of course it's feasible!

I didn't mean to imply it wasn't. Rather to make the point that until exact proposals are made, there is a potential link.

VAT is not a luxury tax. It's a general sales tax.
Yes, the old Purchase Tax (banded by perceived "luxury") was abolished when VAT introduced as part of our membership of EU, but that wasn't because VAT is anything to do with luxury - it was because from that point forwards, there was only one sales tax and it was the EU one which was not banded by how luxurious the item.

Plan is to either buy DS a house he could rent out (or put it in our name) so the rental income pays for uni.

No they won’t have to because there are no “free state university” options for HE.

Martin Lewis did a podcast episode on this a few months ago. It was very informative and his advice was yes help pay living costs but don't pay tuition fees. He advised if you want to put money aside for something you are far better off starting a pension for your kids rather than saving for tuition fees.

The Martin Lewis Podcast - Uni costs to increase 50% – Everything you need to know - BBC Sounds

Also worth reading this article from last month: Student loans 2012-22: the truth about uni fees, loans & grants - MSE (moneysavingexpert.com)

Only if you think there's a reasonable chance your child may be a low earner! Most people know their children well enough to weigh up that risk pragmatically.

As ML's advice is mostly aimed at families who are worried about affordability, rather than high income families, he also doesn't consider the inheritence tax angle at all.

There's some advice aimed at high income families in an FT article from Sept22, titled "Should you pay your child's university fees up front?" The conclusion is that yes, you should! It makes sense if you think about it - why would the Government design a system that didn't encourage wealthy families to pay upfront for their kids to go to university?

It’s because some courses (marketing, art, design, HR, journalism, drama etc) require long hours at low / no pay after graduation before you can earn real money. Obvs if your child is going onto one of those courses paying their fees makes no sense.

If your child is studying medicine / architecture / stem - it makes more sense as they’ll be on high salaries from the start: eg stem grads can start in some retail banks on £60k!

4 of my children are lawyers and I paid school and then university fees. However I am a lawyer so have also helped all the children buy a first property in their 20s so it was not a choice of one or the other in my case.

I was keen the 5 children had money in their 20s rather than closer to when I die due to IHT - I only haev a £325k IHT band which is almost de minimis so 40% IHT is a huge deal.

stem grads can start in some retail banks on £60k!

Some (like Goldman Sachs) pay over 100K to graduates, as do some City law firms (to Trainees)

@XelaM

They are very much in the minority. Atypical stem grad schemes are circa £30k, we have 2 on them here

I think it's more important to help your children get started with a property in their 20s than anything, especially in the SE. If life goes wrong for you, and they are succeeding (and most of us expect our kids to do well) then the gift can be transformed into a loan. We are looking for the right place to buy DC a starter home outright with our savings, but if we struggle later, we'd retain the option to expect some repayment on the capital.

Starting salary is only one factor. Career progression is the other and unfortunately Martin Lewis doesn't factor it in to his 'calculator'. His default assumption is that starting salary will steadily increase in line with (low) inflation. However, many people beat inflation by getting promotions, taking on additional responsibility, and/or move employer. This means that even graduates on very average starting salaries can end up earning much more than ML's predictions over their lifetime.

We are in Scotland, so hopefully, no. However, if we need to, yes, definitely. Not if they dick about with it though.

I quite agree. My Dd went from a grad salary of £25k to £60 in 4 years (and she did not do law, medicine, economics, stem nor did she go to oxbridge or any “elite” uni). If I thought any of my kids would get a 29-30 starting salary and then stay there for life I would not have paid their fees. But there is zero possibility of that, realistically

I’m not so sure medicine pays well.

Yes.

Are you serious? Have you seen how much a consultant earns?

Yes @Blodwen9, I do. Do you?

A consultant after 14 years, just under £120,000. A junior doctor under £40,000 for same period. Average NHS Registrar yearly pay in the United Kingdom is approximately £47,614.

It takes 4-6 years of university study to train as a doctor in the NHS. Graduates become junior doctors after university. Two years as a foundation doctor, then up to three years as a ‘core trainee’. Then 3-7 years as a registrar. After completing the registrar period, they can apply to be a consultant. Apply!
Post uni, it takes up to 12 years of further training to become a consultant.

Only 2% of doctors fully private. Earning about £600,000. NHS consultants doing private work have to ensure there are no conflicts of interest.

Cost of training, students loans, etc.

the statistic that only 2% are fully private is misleading. Many many doctors have some private practice which significantly boosts their NHS earnings.

and all their NHS earnings come with a very generous defined benefit scheme not open to anyone in the private sector…..,