Paying daughters Uni fees
Discussion
Greshamst said:
Student loans for tuition fees are one of the cheapest ways to borrow money that you'll ever find. There's no real time limit on it, and if you're not earning, you don't have to pay anything.
Maybe give her money for living, but definitely not for tuition.
If you're not intending earning the minimum required to pay back the loan after obtaining a degree I wouldn't take the degree in the first place. The current minimum earning threshold is £21k and this will remain the figure going forward, meaning in real terms the threshold drops over time. Maybe give her money for living, but definitely not for tuition.
The thing is, the terms of the government loans are not fixed and can be changed by the government, any government, at anytime in the future. So expect the amount to be paid back to be higher than the present terms. If it's a labour government that changes the terms, then expect the high earners to be hit much more than the rest. So if your child is a 'high flyer' with high earning potential then it may be better not to take a government loan.
Also, statistically, because mum's tend to earn less over their lifetime than dads due to the effect on their career of having children, then this can be a factor in whether to take a government loan or not i.e. Statistically mums will pay back less than dads.
Finally, remember once you've taken out a government loan you can't pay them off early, you have to go the full 30 year (ish) term.
Edited by Phil. on Saturday 19th September 08:34
Phil. said:
Finally, remember once you've taken out a government loan you can't pay them off early, you have to go the full 30 year (ish) term.
Really? Is that new? I can make additional payments to mine and pay off whenever i like. I should have mine knocked off soon, but only had about 14K in loans, as i was on an older system. Edited by Phil. on Saturday 19th September 08:34
I did hear Martin Lewis on Radio 5 a while ago talking about it (the new changes to the loans process) and he said you should always take the loan. He also said you shouldn't look at it as a loan, but as a Graduate Tax Payment, as you wont necessarily have to clear it off, and its linked to your earnings much like income tax.
If it were me, i would get them to get their loans, and keep your cash and possibly help them out in later life with a mortgage or something else where they need cash.
Similar debate in our house at the moment. Except mines looking at 7 years 
For the reasons outlined in the first few posts she will be funding Uni through student loans combined with working one day a week in the industry she is studying. Plus begging off Mum and Dad of course.
We outlined the financial reality of Uni to her when she decided on her career path and she started saving a few years ago. We'll double whatever shes saved and that will buy her a decent car to get home at weekends and give her a decent financial buffer to see her though the first few years.
When and if she actually goes into real work then she can repay the government and if needed we can contribute then.
What makes me weep is accommodation fees!
For the reasons outlined in the first few posts she will be funding Uni through student loans combined with working one day a week in the industry she is studying. Plus begging off Mum and Dad of course.
We outlined the financial reality of Uni to her when she decided on her career path and she started saving a few years ago. We'll double whatever shes saved and that will buy her a decent car to get home at weekends and give her a decent financial buffer to see her though the first few years.
When and if she actually goes into real work then she can repay the government and if needed we can contribute then.
What makes me weep is accommodation fees!
Phil. said:
Finally, remember once you've taken out a government loan you can't pay them off early, you have to go the full 30 year (ish) term.
not true....Edited by Phil. on Saturday 19th September 08:34
"Are there any penalties for repaying early/overpaying? There were initial concerns that early repayments may be banned and/or attract penalties. Yet in February 2012 it was confirmed penalty free repayments will be possible."
Greshamst said:
not true....
"Are there any penalties for repaying early/overpaying? There were initial concerns that early repayments may be banned and/or attract penalties. Yet in February 2012 it was confirmed penalty free repayments will be possible."
Apologies, I stand corrected. This makes the decision on taking a loan out a complete no brainier. If the graduate income rises then pay the loan of quickly before the more expensive interest kicks in. There is an interest hike at £41k income presently. "Are there any penalties for repaying early/overpaying? There were initial concerns that early repayments may be banned and/or attract penalties. Yet in February 2012 it was confirmed penalty free repayments will be possible."
Making a few assumptions (for which I apologies), I'd say your daughter probably should take the debt.
For full explanation as to why, read below. For the short explanation, read the final section below.
The system works like this (IIRC):
- University loans are in two parts - Tuition and maintenance. The tuition loan is £9k per annum, the maintenance loan is £5740 per annum (higher in London). Thus over a 3 year course, you would be expected to borrow about £45k.
- Whilst at uni, interest is charge on the debt at RPI+3%, calculated annually
When you leave uni:
- The debt is paid pack on the basis of your income - 9% of any gross income above £21k. Hence if you earn £31k repayments will be £900 per year.
- The interest rate on the debt is also linked to income. Whilst your gross income is less than £21k, interest is RPI. As income rises from £21k to £41k, the interest rate scales linearly to RPI+3%.
- Any remaining debt is cancelled 30 years after graduating.
(- Under current projections, at least half of graduates will have some debt cancelled - i.e. they will not pay back the full amount.)
The upshot is this:
- If expected future earning are low, take the debt. It's likely you will have some debt cancelled.
- If you might expect to take a career break (e.g. maternity leave), or go part-time, in the 30 years after graduating, take the debt (unless you expect to be a high-earner). It's highly likely this career break will mean you will have some debt cancelled.
- If you expect to be a high earner (e.g. graduate starting salary of £30k+, and rising to 40% tax bracket within 5 years), don't take the debt (assuming you have this choice). You will repay the full amount, and incur/pay interest at RPI+3% for most of the debt's term.
For full explanation as to why, read below. For the short explanation, read the final section below.
The system works like this (IIRC):
- University loans are in two parts - Tuition and maintenance. The tuition loan is £9k per annum, the maintenance loan is £5740 per annum (higher in London). Thus over a 3 year course, you would be expected to borrow about £45k.
- Whilst at uni, interest is charge on the debt at RPI+3%, calculated annually
When you leave uni:
- The debt is paid pack on the basis of your income - 9% of any gross income above £21k. Hence if you earn £31k repayments will be £900 per year.
- The interest rate on the debt is also linked to income. Whilst your gross income is less than £21k, interest is RPI. As income rises from £21k to £41k, the interest rate scales linearly to RPI+3%.
- Any remaining debt is cancelled 30 years after graduating.
(- Under current projections, at least half of graduates will have some debt cancelled - i.e. they will not pay back the full amount.)
The upshot is this:
- If expected future earning are low, take the debt. It's likely you will have some debt cancelled.
- If you might expect to take a career break (e.g. maternity leave), or go part-time, in the 30 years after graduating, take the debt (unless you expect to be a high-earner). It's highly likely this career break will mean you will have some debt cancelled.
- If you expect to be a high earner (e.g. graduate starting salary of £30k+, and rising to 40% tax bracket within 5 years), don't take the debt (assuming you have this choice). You will repay the full amount, and incur/pay interest at RPI+3% for most of the debt's term.
Sheepshanks said:
gregf40 said:
...until they have to get a mortgage (which they presumably will) and end up with a higher interest rate than the student loan?
..although the student loan repayments might have an impact on mortgage affordability calculations.Which would mean her salary is also far higher than most unless she took a HUGE loan or pays back more than the minimum. Its £250 back when you earn 50 grand according to listentotaxman
My partner has a few grand left from the £30k she borrowed, I think she'll not clear this till she's 28. It certainly comes into mortgage calcs.
My partner has a few grand left from the £30k she borrowed, I think she'll not clear this till she's 28. It certainly comes into mortgage calcs.
okgo said:
Which would mean her salary is also far higher than most unless she took a HUGE loan or pays back more than the minimum. Its £250 back when you earn 50 grand according to listentotaxman
My partner has a few grand left from the £30k she borrowed, I think she'll not clear this till she's 28. It certainly comes into mortgage calcs.
My partner has a few grand left from the £30k she borrowed, I think she'll not clear this till she's 28. It certainly comes into mortgage calcs.
Combined salaries of £100k+ I reckon 
I'm due to clear mine before I'm 29 - frustrates me that some people will never repay theirs But then my tuition fees were only £1.6k p.a. so I was lucky.To the OP, buy something nice for yourself for now. You can help out in better ways later on in life and that may or may not be through paying off her student loan.
AyBee said:
Combined salaries of £100k+ I reckon I'm due to clear mine before I'm 29 - frustrates me that some people will never repay theirs But then my tuition fees were only £1.6k p.a. so I was lucky.To the OP, buy something nice for yourself for now. You can help out in better ways later on in life and that may or may not be through paying off her student loan.
I take it back, pretty standard.
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