Subsidise offspring or let them take full student loan?
Discussion
Our eldest is off to St Andrews to study Astrophysics, he is looking at the Student loan which comes with a fairly high interest rate.
The options are to take the full loan or perhaps we can sub him a lump sum to reduce the debt at the end of his course. However looking at the repayment schedule - nothing till earning £25k then a % of earnings above that - it seems like the loan may be the best route as the lump sum is then still in the trousers towards a rainy day / house deposit / fancy car etc.
The hope is obviously that he will be earning a bit more than £25k but does anyone have any experience of repaying the loan, what the monthly payments are if eg you are earning £50k etc. I understand that the loan is also written off after a certain number of years so does anybody ever pay it off?
My traditional gut feeling is always to minimise debt but, with the student loan, it seems it is regarded almost as an extra tax that you just pay each month, so reducing the overall debt by say £15k is not going to make much difference (whereas a £15k lump sum could come in handy).
Anybody got any practical experience of the pros and cons and what is best to do?
The options are to take the full loan or perhaps we can sub him a lump sum to reduce the debt at the end of his course. However looking at the repayment schedule - nothing till earning £25k then a % of earnings above that - it seems like the loan may be the best route as the lump sum is then still in the trousers towards a rainy day / house deposit / fancy car etc.
The hope is obviously that he will be earning a bit more than £25k but does anyone have any experience of repaying the loan, what the monthly payments are if eg you are earning £50k etc. I understand that the loan is also written off after a certain number of years so does anybody ever pay it off?
My traditional gut feeling is always to minimise debt but, with the student loan, it seems it is regarded almost as an extra tax that you just pay each month, so reducing the overall debt by say £15k is not going to make much difference (whereas a £15k lump sum could come in handy).
Anybody got any practical experience of the pros and cons and what is best to do?
Unfortunately the interest accrues from the day the money is paid, so effectively the start of the course. It will certainly add up but, given the repayment terms and lack of requirement to ever pay it off fully, my thoughts are that keeping the lump sum to one side may be the better bet.
Some info and figures here: https://www.moneysavingexpert.com/students/student...
You might also need to make contributions depending on your earnings anyway.
You might also need to make contributions depending on your earnings anyway.
Most of them have always been spoiled little whasnames anyway ( I come from part grant part loan years ) So many ‘bank of mummy and daddy’ types, it was incredible. If it was me, I’d say get on with the loan, if you need more, get a job to top up. I’m in a minority. The ones that have to work as well, tend not to fair well in anything more taxing than ‘history of art’ degrees or the like, IME. It’s hard to stay below ‘threshold’ on repayments unless you’re a total waste of oxygen. The repayments in early years can hurt. Of course you can skim the bottom of the tank until it’s written off ( about 10 years IIRC). I know a lot of people that worked for mummy / daddy after getting into proper employment, and they ‘officially’ earned below threshold ( of course they did 
) for as long as it took to have the loan written off it’s just another system to be played.
) for as long as it took to have the loan written off it’s just another system to be played.Edited by Maximus_Meridius101 on Friday 16th July 19:09
I have a student loan, and don't consider it onerous. As you point out, you only pay when earning enough to do so. Save the money for house deposits etc.
Being responsible for one's own student loan may also help one focus on studying, as opposed to constant partying and ditching the course the moment the maths gets hard.
You could also consider offering to pay the loan off as carrot to finishing the course and getting a good grade. E.g. 3rd =10%, 2:2 =25% 2:1 = 50% 1st = 100%. I did something similar with my younger son for his GCSEs and he surprised me with far better grades than I and his teachers anticipated. Expensive, but worth it in my view!
Being responsible for one's own student loan may also help one focus on studying, as opposed to constant partying and ditching the course the moment the maths gets hard.
You could also consider offering to pay the loan off as carrot to finishing the course and getting a good grade. E.g. 3rd =10%, 2:2 =25% 2:1 = 50% 1st = 100%. I did something similar with my younger son for his GCSEs and he surprised me with far better grades than I and his teachers anticipated. Expensive, but worth it in my view!
GliderRider said:
I have a student loan, and don't consider it onerous. As you point out, you only pay when earning enough to do so. Save the money for house deposits etc.
If you’re earning enough to save that, below threshold, and live (not with mummy and daddy ) something is up.GliderRider said:
Being responsible for one's own student loan may also help one focus on studying, as opposed to constant partying and ditching the course the moment the maths gets hard.
3 months into most difficult degrees then 
. GliderRider said:
You could also consider offering to pay the loan off as carrot to finishing the course and getting a good grade. E.g. 3rd =10%, 2:2 =25% 2:1 = 50% 1st = 100%. I did something similar with my younger son for his GCSEs and he surprised me with far better grades than I and his teachers anticipated. Expensive, but worth it in my view!
That’s an idea that may have worked 20 plus years ago, but might not fly now.OP I did some spreadsheet work on this as I was curious and usually it's not worth paying and you'd be better helping them with a house deposit etc
If you leave with £40K in loans and never earn enough to pay anything back then (as the interest rates stand) your loan balance at year 30 when it came to being written off would be over double.
Interestingly if you go just over the contribution level then the interest on your loan jumps up (2.6% to 5.6% at present I believe) and the loan balance at year 30 would be over x4 the £40K!
If you earnt £50K every year for 30 years you'd end up with the same £40K capital as your written off balance.
A scenario where you pay a high amount ie just about settle the loan and capital as you get to year 30, would be something like this, Yr 1-4 35K, 5-9 45K, 10-14 55K, 15-18 65K, 19-22 75K, 23-25 85K, 26-28 95K 29-30 105K you pay over £100k back.
So if you move into work and a career progression that looks to pay quite well ie you'll end up paying for it one way or another then it might pay to clear it to avoid the effectively £50K (say that's the loan balance at year 10) mortgage at 5.6% for 20 years.
If you aren't likely to pay it off then it's money down the drain (or to the state/government so perhaps not totally!?) ie not directly helpful to your son/daughter.
If you leave with £40K in loans and never earn enough to pay anything back then (as the interest rates stand) your loan balance at year 30 when it came to being written off would be over double.
Interestingly if you go just over the contribution level then the interest on your loan jumps up (2.6% to 5.6% at present I believe) and the loan balance at year 30 would be over x4 the £40K!
If you earnt £50K every year for 30 years you'd end up with the same £40K capital as your written off balance.
A scenario where you pay a high amount ie just about settle the loan and capital as you get to year 30, would be something like this, Yr 1-4 35K, 5-9 45K, 10-14 55K, 15-18 65K, 19-22 75K, 23-25 85K, 26-28 95K 29-30 105K you pay over £100k back.
So if you move into work and a career progression that looks to pay quite well ie you'll end up paying for it one way or another then it might pay to clear it to avoid the effectively £50K (say that's the loan balance at year 10) mortgage at 5.6% for 20 years.
If you aren't likely to pay it off then it's money down the drain (or to the state/government so perhaps not totally!?) ie not directly helpful to your son/daughter.
Get the student loan, statistics show that not many people end up paying it all off. You hope he’s going to use his degree but most people don’t do there’s no guarantee he’s going to end up making 25k.
That money you could give him could be better placed and help him out much more than replacing a student loan.
University is a good way to know about the real world, get student loan, go broke, ask parents for money, repeat but that for some can be a good thing because it teaches money management.
That money you could give him could be better placed and help him out much more than replacing a student loan.
University is a good way to know about the real world, get student loan, go broke, ask parents for money, repeat but that for some can be a good thing because it teaches money management.
I could afford to pay my daughter's tuition fees but the 'financial advice' I received was - "Don't do it". I went with the advice and kept the car/holiday fund intact. Paying the accommodation fees is bad enough.
I'm in the minority that as an adult the decision to go to university is a choice that comes at a cost. I'm more receptive to gaining a degree where it is a prerequisite for a career choice, but a degree in 'Needlework' etc. that's a different matter. As it stands taking in a Master and potential PhD into account I reckon £70k will be owed and in reality will never fully be paid back.
Would I be happy shelling out £70k? Nope
I'm in the minority that as an adult the decision to go to university is a choice that comes at a cost. I'm more receptive to gaining a degree where it is a prerequisite for a career choice, but a degree in 'Needlework' etc. that's a different matter. As it stands taking in a Master and potential PhD into account I reckon £70k will be owed and in reality will never fully be paid back.
Would I be happy shelling out £70k? Nope
Maximus_Meridius101 said:
GliderRider said:
I have a student loan, and don't consider it onerous. As you point out, you only pay when earning enough to do so. Save the money for house deposits etc.
If you’re earning enough to save that, below threshold, and live (not with mummy and daddy ) something is up.My kids were lucky that due to the amount I choose to put into pension rather than take as salary, they were considered to be from a low income family, and thus were able to get additional maintenance grants and STEM bursaries.
Also because my parents live in Wales, where tuition is free, they insisted on giving them money towards tuition.
Both of them choose to invest the tuition money and my son saved the money from.his bursary too.
What it means is that they had/have the deposit saved for a first house.
At times living on less than £25k for the us was painful, and we had to dip into savings, but I reckon the free money my kids got and the additional pension payments I made were worth it.
My sister in law, did what I think was the most stupid thing with her oldest. She saved up and paid off his student loan when he graduated. £40k at the time.
Then his degree in community drama got him.a low pay job in London, where for 6 years he wouldn't pay a penny in loan payments.
When he eventially got married, they moved in witj parents in merseryside for 2 years to save a deposit on thier first house.
Just think of student loans as a Graduate tax. Everything above a threshold gets taxed at 9%.
It's very clever though. There's a sweet spot about £35 to £40k where you'll pay for the full time, just about paying it off, and paying the most.
Earn over £60k and you pay very quickly, but don't pay many years of interest so it actually doesn't cost as much, or stay part time (become a parent and share child care ?) On a low paid job, and never pay anything.
I throw this into the frame.
18. They are adults. It's not really your problem is it?
(It is because we want the best outcome for our kids)
Also, in years gone by, middle class families like my wife's parents, would balk at paying any living costs once thier kids got to 18.
Come from a low pay family and the state would give you a grant.
Come from.a family with 2 teachers who went to teacher training college, paid for by the state, and you can forget it. They weren't going to find £2k a year for each kid. So I think loans have opened up opportunities for study that were not there before.
We had lads on our degree, in thier late 20s who, got so far in life and decided to break the glass ceiling, and because of thier age got a full grant. They also did well because they understood what 3 years not earning a wage was costing them.
I honestly think universities should not take anyone who isn't at least 23 years old.
But that's going off track a lot.
Get your child to take the loan. Pay your top up. Help them to stick to a budget.
Also because my parents live in Wales, where tuition is free, they insisted on giving them money towards tuition.
Both of them choose to invest the tuition money and my son saved the money from.his bursary too.
What it means is that they had/have the deposit saved for a first house.
At times living on less than £25k for the us was painful, and we had to dip into savings, but I reckon the free money my kids got and the additional pension payments I made were worth it.
My sister in law, did what I think was the most stupid thing with her oldest. She saved up and paid off his student loan when he graduated. £40k at the time.
Then his degree in community drama got him.a low pay job in London, where for 6 years he wouldn't pay a penny in loan payments.
When he eventially got married, they moved in witj parents in merseryside for 2 years to save a deposit on thier first house.
Just think of student loans as a Graduate tax. Everything above a threshold gets taxed at 9%.
It's very clever though. There's a sweet spot about £35 to £40k where you'll pay for the full time, just about paying it off, and paying the most.
Earn over £60k and you pay very quickly, but don't pay many years of interest so it actually doesn't cost as much, or stay part time (become a parent and share child care ?) On a low paid job, and never pay anything.
I throw this into the frame.
18. They are adults. It's not really your problem is it?
(It is because we want the best outcome for our kids)
Also, in years gone by, middle class families like my wife's parents, would balk at paying any living costs once thier kids got to 18.
Come from a low pay family and the state would give you a grant.
Come from.a family with 2 teachers who went to teacher training college, paid for by the state, and you can forget it. They weren't going to find £2k a year for each kid. So I think loans have opened up opportunities for study that were not there before.
We had lads on our degree, in thier late 20s who, got so far in life and decided to break the glass ceiling, and because of thier age got a full grant. They also did well because they understood what 3 years not earning a wage was costing them.
I honestly think universities should not take anyone who isn't at least 23 years old.
But that's going off track a lot.
Get your child to take the loan. Pay your top up. Help them to stick to a budget.
Pit Pony said:
Then his degree in community drama got him.a low pay job in London, where for 6 years he wouldn't pay a penny in loan payments.
That degree sounds like a winner for earning big money. That said some degrees are a lifestyle choice where not everyone wants to earn big bucks.As an adult self-sufficiency and money management is part of growing up when they should take responsibility for their life. Being away at university teaches them this and is often more valuable than the academic part of their studies.
It's also a different society these days where it appears the norm to use finance rather than save to buy.
philcray said:
Our eldest is off to St Andrews to study Astrophysics, he is looking at the Student loan which comes with a fairly high interest rate.
The options are to take the full loan or perhaps we can sub him a lump sum to reduce the debt at the end of his course. However looking at the repayment schedule - nothing till earning £25k then a % of earnings above that - it seems like the loan may be the best route as the lump sum is then still in the trousers towards a rainy day / house deposit / fancy car etc.
The hope is obviously that he will be earning a bit more than £25k but does anyone have any experience of repaying the loan, what the monthly payments are if eg you are earning £50k etc. I understand that the loan is also written off after a certain number of years so does anybody ever pay it off?
My traditional gut feeling is always to minimise debt but, with the student loan, it seems it is regarded almost as an extra tax that you just pay each month, so reducing the overall debt by say £15k is not going to make much difference (whereas a £15k lump sum could come in handy).
Anybody got any practical experience of the pros and cons and what is best to do?
There will inevitably be lots of different views on this, so take this as nothing more than my personal one. The options are to take the full loan or perhaps we can sub him a lump sum to reduce the debt at the end of his course. However looking at the repayment schedule - nothing till earning £25k then a % of earnings above that - it seems like the loan may be the best route as the lump sum is then still in the trousers towards a rainy day / house deposit / fancy car etc.
The hope is obviously that he will be earning a bit more than £25k but does anyone have any experience of repaying the loan, what the monthly payments are if eg you are earning £50k etc. I understand that the loan is also written off after a certain number of years so does anybody ever pay it off?
My traditional gut feeling is always to minimise debt but, with the student loan, it seems it is regarded almost as an extra tax that you just pay each month, so reducing the overall debt by say £15k is not going to make much difference (whereas a £15k lump sum could come in handy).
Anybody got any practical experience of the pros and cons and what is best to do?
For both of ours, we could have afforded to cover their tuition fees plus accommodation/living expenses - it’s pretty much a continuation of school fees for another three years.
However, we felt it was better that the kids felt that they had some “skin in the game”, so to speak. So we said we’d pay accom and living expenses, and they had to take the loan to cover tuition.
They don’t know it, but it’s likely that when they get to 25 or so we will clear the loan for them. For now though we think it’s better for them to have something at stake while they are at Uni.
So if you’re in a position to be able to pay their tuition fees, I’d say don’t, but put the money aside to pay them off after graduation.
I think that it depends on a combination of where you see your offspring being income-wise after the course and also what other expenses they will rack up along the way.
We started saving for our daughter to “go to university” shortly after she was born. At the time there were no tuition fees and no prospect of them, so the savings were really for her living expenses. When we reached the stage where uni was to start, the fees had fully arrived and we had saved up about £30,000 for her. This could have covered the fees, but she’d have been left getting loans to pay living expenses, so no better off. So it was the full whack of loans for the tuition fees and she’s pretty much got through the £30,000 just in living away for those three years. This was the original plan to be fair, but I’d rather she wasn’t starting out in life with £28,500 in loans around her neck. She studied law and has just graduated so I hope she will end up with a high-paying career which means she will repay all of the loan with interest.
We started saving for our daughter to “go to university” shortly after she was born. At the time there were no tuition fees and no prospect of them, so the savings were really for her living expenses. When we reached the stage where uni was to start, the fees had fully arrived and we had saved up about £30,000 for her. This could have covered the fees, but she’d have been left getting loans to pay living expenses, so no better off. So it was the full whack of loans for the tuition fees and she’s pretty much got through the £30,000 just in living away for those three years. This was the original plan to be fair, but I’d rather she wasn’t starting out in life with £28,500 in loans around her neck. She studied law and has just graduated so I hope she will end up with a high-paying career which means she will repay all of the loan with interest.
anonymous said:
[redacted]
He's an estate agent now. Says the ability to do improvisation in acting, is something that helps gaining rapport with clients. When he was working in London, one of the jobs he did was to teach autistic kids magic tricks whilst they commuted on a school bus.
Apparently they wouldn't let him teach them how to fire eat.
Maximus_Meridius101 said:
Most of them have always been spoiled little whasnames anyway ( I come from part grant part loan years ) So many ‘bank of mummy and daddy’ types, it was incredible. If it was me, I’d say get on with the loan, if you need more, get a job to top up. I’m in a minority. The ones that have to work as well, tend not to fair well in anything more taxing than ‘history of art’ degrees or the like, IME. It’s hard to stay below ‘threshold’ on repayments unless you’re a total waste of oxygen. The repayments in early years can hurt. Of course you can skim the bottom of the tank until it’s written off ( about 10 years IIRC). I know a lot of people that worked for mummy / daddy after getting into proper employment, and they ‘officially’ earned below threshold ( of course they did ) for as long as it took to have the loan written off it’s just another system to be played.
When did all these people you know graduate?) for as long as it took to have the loan written off it’s just another system to be played.Edited by Maximus_Meridius101 on Friday 16th July 19:09
The current debt write off period is 30 years after graduation, and for some people it's when you get to 60 or 65.
That's a long time to be under declaring wages just to avoid paying some of the loan back.
OP, I presume you and your kid are English and I presume that University fees are still free for those living in Scotland. Apologies if these assumption are out of date but on the presumption they're not, would it not be more beneficial to buy an apartment in Scotland, receive the benefit of no fees and then rent out a room or two to pay towards living costs?
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