My eldest is 18 today so it's got me thinking about his upcoming University options. He's had offers for Kings College, Exeter and Bristol an having now seen them all he's favouring Bristol. Need to look at finance options so wonder what experiences others have had with their offspring. My understanding is he can get a loan for the tuition fees of around £9,250 a year and other loans for living costs are available but some may be means tested.
We're in a position where we could avoid fees, but I'd like any thoughts on whether that's a good idea or not as I guess it's cheap borrowing. On the other side, I don't want him coming out with tens of thousands of debt.
His current school fees are around £15,000 a year which I'll be saving so my thoughts are to consider paying his tuition fees with that money, my parents have offered to help with his halls of residence fees and he can get a job to pay his living costs (as far as work ethic goes, my parents had me working in their business holidays and weekends from ages 13 and I've instilled that into both my two boys. They both work hard and have savings). That way he would come out debt free. He's also very sensible with money.
We're in a fortunate position to do this, but am I missing a trick here? Should we put that money into something else and take the loans?
Have a listen to one of Martin Lewis' podcasts on this subject- he makes a strong argument for not paying the fees, let them borrow it in case they never have to pay it back. Use the money for something else like a house deposit for them or additional living expenses if necessary.
I'd take the loans (or at least some loans) and pay the maximum amount allowable into a lifetime isa.
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They're not really loans as such. The money will be repaid as a percentage of their salary above a certain threshold. Anything not paid off after 30 years us written off.
As said, just let them borrow the maximum, it may never need to be repaid.
It is a tricky one - my friend paid off her daugher's student loans when she graduated to ensure she worked through uni. However on reflection she is not sure this was the right decison.
Reasons being - SL doesn't count for mortgage and depending upon earnings may never need paying back. Not being sexist this probably applies more to girls but if marry and raise a family may have career break and hence not pay.
Another friend's neice plans to work in finance and so has borrowed privately from family & friends so doesn't face the extra payback that now incurs for higher earning graduates.
I think a lot depends on the course they are doing and employment prospects plus available money for post universtity as a house deposit may end up more useful for all parties than a boomerang graduate with no SLs ?
This - the old loans (like mine) were fairly small. My folks paid £1100 a year tuition and I had a maintenance loan of £3300 a year. I'll have mine paid off in a years time (12 years out of uni, 12k debt after interest) but the new style loans mean people are leaving with £40k+ and the higher interest rate levied against them might mean that on average career earnings you never pay off the balance until it is wiped after 30 years. These debts are subsidised by the fact plenty will get graduate jobs in the city and clear their whole amount (and offset others) within 10-15 years.Originally Posted by Dave+63
Stupid out-of-the-box idea...
Send him to live in Scotland for a few years and when he is a "Scottish" student the fees will be free.
Call it an extended gap year.
The truth is - they aren't really student loans - they are a graduate tax. Everyone in the system knows this - the RAB (the percentage that never get paid) is about 50%.
You'd be better off investing the money or saving it for a decent lump to put on a house.
Out of the Box Part Deux: Have you ever considered a study at a German Uni? For foreign, non German students, it is nearly Free Of Charge!
A 18 y/o girl from my son's sailing club started her Medicine Study last September in Berlin and is totally happy with it. (Mind you: in Holland, Medicine Study has a 'numerous fixes' system: less 'seats' than potential students. It a 'balloting & highest marks come first' system here).
Menno
I would look at the interest rate on the loans vs what return you could get on investing the same amount.
I studied in the £3000 fee days and when the interest rates charged on the loans were lower. I could therefore make more in interest on the savings I would have used to pay the fees than I was charged. I borrowed all of my fees and then when they changed the rates charged on the loan towards the end of my degree, I paid them off with the savings.
The earnings threshold is another good point, it depends on what he wants to/is likely to do upon graduation, I felt there was a reasonable chance that I would earn above the threshold following gradation (the threshold was lower then as well). As my total borrowings were much lower than they would be with current fees I thought I would have to pay all the loan off once working. With the higher fees, if he is not likely to work straight from uni or not initially earn enough to reach repayment/work abroad, that is another reason to take out the loan and keep the savings.
Thanks for your comments.
We considered investing the money as a few friends did that years back and made money (not sure of amounts but say interest was 2% and they could get 5% then they were up 3% - no longer possible as rates are so poor).
I'd watched Martin Lewis a few weeks back talking about this, hence giving me the idea for this post. According to his site the interest rate could be as high as 4.6% if you earn 41k. Cant predict what my son will earn after graduation but there's every chance he'll come into a family business and could be earning over the 21k which seems to be a payback threshold.
I bought a property for him and his brother very cheaply years ago so there will be enough equity for a deposit in there so not overly concerned about a house in the future.
Just seems a waste paying that money upfront but maybe it's the simplest thing to do.
P.S. I'm surprised no one said buy a load of watches
I think I owe about £30k in total.
Last pay check had £60 deducted. So that would take me 40 years to pay off.
Not worth worrying about.
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If it gets wiped after 30 years it will be free money you have used ..result..i think the write off also applies if you become ill/disabled ... not saying that is a nice result but we should plan for the unforseen.. money in the hand or bank is better than in the governments financial sink hole.
Another way of looking at it:
As someone else said, it's not really a loan, it's a tax. So a pertinent question would be, would you pay any of your other taxes years in advance when you didn't know whether they would ever become due anyway?
Agreed, but it's a tax that carries a rate of interest which presumably will be compounded.
http://www.independent.co.uk/student...-a7565716.html
May be of interest in regards to your thought process.
Depends on the lender. Our mortgage lender takes it into account. My wife and I are both paying loans back and they affect our borrowing. We pay around £120/£130 each so it affects us the same as having a £250 monthly loan repayment.
I thought you're an IFA - do you really need to ask the question? To my mind taking student loans is a no-brainer.
And as a Bristol graduate myself - congratulations to your son!
The terms have changed since you took your loan
The government should be ashamed of themselves for marketing loans in the way they do to clueless 17 year olds (age at which most will apply to university)
All this taking the loan and investing in x, y and z seems a lot of bother, especially given the new loan terms.
It appears you are in a financially comfortable position and are good at planning your finances. In your position , I would pay the fees for the boy and perhaps get him to repay you when he is earning. You can then use that money to help him with something else like renovating a house, car, wedding, etc etc
It instills in him that the money for fees didn't fall from the sky, helps you help the boy (which parent would help if they could) and ultimately sees you help him twice with the same money. Once with fees and once with something else as he pays you back
Yes I am but I have absolutely no idea about student loans, so thought I'd ask here. I wondered if there were any unusual quirks or tips that people may have had.
Both mine have taken the full loan- (will both total around £45k each)
We are under the threshold of family incom (sub £45k I think) so they both qualify for the full amount- both studied in London
My eldest graduated in 2015 and is paying around £25 a month- we supported them with day to day expenses etc
I think it's a no brainier
When the time comes for my daughter she'll be taking all the loans ... if nothing else if she thinks she has to pay all of it back though the bulk of her working life at least it might galvanise her into picking a course that is worthwhile and hopefully lead to a decent job prospect.
Behind the scenes I'll have the money stashed away to give to her once she graduates (*) and if her earnings means it's beneficial to pay it all off then she can, if not she can use the money to supplement her income. My gut feel, even if she is having to pay it off she'll be able to get a better rate of return investing the lump sum than the interest being charged. You're an IFA so you'll know better than me - but hasn't the annualised rate of return even on tracker funds (I'm thinking Vanguard World trackers / ETFs) somewhat outperformed the interest rate being charged on SLs ???
(* In reality, if I can I plan to give her a larger lump sum upon graduation, say around £100k, with the message "yours to do with as you please, but a smart person would make something from it" ... so she can clear her debts, use as a house deposit, or best of all invest it or start a business with it. Either way, the Bank of Daddy will be shut from that point forward)
Son is now at Newcastle Uni. Take the loan for the fees and "grant/loan" for living allowance. Realise in reality that you will not get a full grant and it will most likely not cover anything than just the halls accommodation. This is now the bit where you help. You need to make sure you provide the excess required for living expenses. None of that you can get as a check government loan and so you want them to come out with just those loans rather than any extra bank ones.
Last edited by reecie; 26th February 2017 at 20:47.
The first question i'd ask is if he is going to leave and come into the family business, does he need a degree for this, or is it just a box ticking exercise?
If not, is the other option of having some type of company sponsor a way of driving down costs, if he doesn't have to come to the family business after uni of course.?
I specifically told my son not to go to a Uni where he would be tempted to stay at home. I look on part of it as a way to grow up a bit more, make your own decisions and look after yourself in what after all is a fairly supportive environment. Whether that is worth the eventual debt is another matter of course. If you can get a degree via an apprenticeship/sponsor route then I imagine that is very appealing.
Yes it will be good life experience for him. I actually suggested 12 months abroad travelling/working to broaden his horizons, but he seems very keen on Uni now. He needs AAB so if he gets it (or anywhere near that) I'll be extremely proud.
That is an excellent point as the business could sponsor him to do a certificate in management and an MBA via Open University Business School or similar while he is working. The fees used to look expensive but are probably very good value now. I was sponsored and the business saved some corp tax so good for both of us and also highly useful to the work I was doing.
My daughter took the tuition loan but not the rest.
To me it made sense as she may never pay it all back.
M
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the obligatory thing here.
Buy your sons a Submariner or if you're feeling lush "invest" in some Pateks for the next generation.
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