Discussion
I have been trying to work this out in my mind, as background my eldest will be going to University (probably) in 2016, as to what is the best option. Obviously assuming the situation then is the same as now - and yes I know they keep changing the format of it all on a regular basis!
As I understand it the loan works like this;
Up to 9K a year loan for fees and 5-7K loan for maintenance a year
Interest is charged from the start of the loan at RPI + 3% - fixed annually
So for a 3 yr course the end debt is approx £50K (wow, would I have gone to University if I had to take on £50K debt - I don't think so!)
Repayment is 9% of everything they earn over £21K - first question is this their gross or net income - i.e. suppose they start work on £25K, then their repayment in year one would be 9% of £4000?
If this is correct then it seems to be a small positive that the payment is taken pre-tax.
FInally the loan is written off after 25 years.
The query I have then is if it is better to pay their fees so they end with no debt, or take the full loan available and then aim to set things up so they never earn much over £21K (obviously in a legal way!).
As an example do dividends count towards their income or is it just PAYE income?
I know that a lot can change in 2 years but I do like to try to plan ahead as much as possible, and we do have two children so that is £100K potential total debt/cost ahead.
Actually writing it down like that makes me think I should seriously consider putting them off University and getting myself a Ferrari instead
As I understand it the loan works like this;
Up to 9K a year loan for fees and 5-7K loan for maintenance a year
Interest is charged from the start of the loan at RPI + 3% - fixed annually
So for a 3 yr course the end debt is approx £50K (wow, would I have gone to University if I had to take on £50K debt - I don't think so!)
Repayment is 9% of everything they earn over £21K - first question is this their gross or net income - i.e. suppose they start work on £25K, then their repayment in year one would be 9% of £4000?
If this is correct then it seems to be a small positive that the payment is taken pre-tax.
FInally the loan is written off after 25 years.
The query I have then is if it is better to pay their fees so they end with no debt, or take the full loan available and then aim to set things up so they never earn much over £21K (obviously in a legal way!).
As an example do dividends count towards their income or is it just PAYE income?
I know that a lot can change in 2 years but I do like to try to plan ahead as much as possible, and we do have two children so that is £100K potential total debt/cost ahead.
Actually writing it down like that makes me think I should seriously consider putting them off University and getting myself a Ferrari instead
Firstly, don't think of it as debt. It doesn't go onto a credit file, and beyond the money being taken from the pay packet it has no other effect. It really works like a tax, albeit one that can be paid off eventually.
Deductions come off of gross pay, and will also be deducted from dividends/interest/etc. if you file a tax return.
If you can afford to give the money to your kids it's a nice thing to do but IMO there isn't any need.
Deductions come off of gross pay, and will also be deducted from dividends/interest/etc. if you file a tax return.
If you can afford to give the money to your kids it's a nice thing to do but IMO there isn't any need.
davepoth said:
Firstly, don't think of it as debt. It doesn't go onto a credit file, and beyond the money being taken from the pay packet it has no other effect. It really works like a tax, albeit one that can be paid off eventually.
Deductions come off of gross pay, and will also be deducted from dividends/interest/etc. if you file a tax return.
If you can afford to give the money to your kids it's a nice thing to do but IMO there isn't any need.
Exactly as how Martin Lewis explained it on his TV Program on Friday nightDeductions come off of gross pay, and will also be deducted from dividends/interest/etc. if you file a tax return.
If you can afford to give the money to your kids it's a nice thing to do but IMO there isn't any need.
https://www.itv.com/itvplayer/the-martin-lewis-mon...
x5x3 said:
thanks for the replies folks, very helpful information.
On the programme he says that Lenders may ask if you have a student loan, so this could make it harder to get a mortgage or similar significant loan?
Yes.On the programme he says that Lenders may ask if you have a student loan, so this could make it harder to get a mortgage or similar significant loan?
The student loan deductions will be detailed on the person pay slips or self assessment paperwork.
It won't make it impossible but it will make it harder.
I'm currently at looking in to how to finance uni, depending on how much you earn your child will only get up to £4k for maintenance so you'll need to top that up as decent accommodation will be more than that!
For now I'm lucky enough that my parents are in a position to fund me through, and although your idea to set them up with there own company would probably work in the long run, depending on what industry they are looking to go in to they will probably be on PAYE system for at least their first 5 years or so of work I would have thought.
For now I'm lucky enough that my parents are in a position to fund me through, and although your idea to set them up with there own company would probably work in the long run, depending on what industry they are looking to go in to they will probably be on PAYE system for at least their first 5 years or so of work I would have thought.
I also have a couple of kids, and the finances are scary.
Leaving school with a 50k debt, and what is now a very common qualification seems to be a total failure of the system.
If my kids choose a career that doesn't need a degree, I will try to push them into getting professional qualifications and experience rather than a degree for the sake of it.
Leaving school with a 50k debt, and what is now a very common qualification seems to be a total failure of the system.
If my kids choose a career that doesn't need a degree, I will try to push them into getting professional qualifications and experience rather than a degree for the sake of it.
I agree with both comments, the fact that the number of students complaining about low quality courses has gone up significantly is worrying. I think any University they go to will have to be one of the Russell Group.
He is looking to do some Computing related source and it was interesting that IBM came to his school a while ago - they offer an "apprenticeship" type job straight from A Levels which I suspect we may see a lot more of in the future.
Once again, thanks to all who posted - I am at least a little more comfortable I understand all the pros and cons now.
Maybe I will go for that Ferrari after all
He is looking to do some Computing related source and it was interesting that IBM came to his school a while ago - they offer an "apprenticeship" type job straight from A Levels which I suspect we may see a lot more of in the future.
Once again, thanks to all who posted - I am at least a little more comfortable I understand all the pros and cons now.
Maybe I will go for that Ferrari after all
Just to confirm, are uni fees £9k pa now? Is that standard for all uni's?
When i was at uni (started in 2000) it was (i think) about a grand a year. I left with something like £10k student loan, but i had a decent bar job which paid for my fees and food and car during term time and then work my socks off in the summer break driving a fork lift or doing whatever agency work i could find, so my loan pretty much went on rent and usually a decent night out when it hit my account. Have fees really gone up almost 10 fold, I may have fallen out of touch with the subject and i knew they had gone up but that sounds nuts!
If its £9k a year i wouldn't recommend going to uni. I didn't actually finish my degree for one reason or another and i have never found the lack of a degree has held me back at all. The experience was worth a great deal but in theory £30k's worth of experience, i am not so sure.....
Personally i didn't see it as my parents responsibility to pay for my further education and i didn't ask them to, but at that kind of fee level i wouldn't have been able to go without their support.
When i was at uni (started in 2000) it was (i think) about a grand a year. I left with something like £10k student loan, but i had a decent bar job which paid for my fees and food and car during term time and then work my socks off in the summer break driving a fork lift or doing whatever agency work i could find, so my loan pretty much went on rent and usually a decent night out when it hit my account. Have fees really gone up almost 10 fold, I may have fallen out of touch with the subject and i knew they had gone up but that sounds nuts!
If its £9k a year i wouldn't recommend going to uni. I didn't actually finish my degree for one reason or another and i have never found the lack of a degree has held me back at all. The experience was worth a great deal but in theory £30k's worth of experience, i am not so sure.....
Personally i didn't see it as my parents responsibility to pay for my further education and i didn't ask them to, but at that kind of fee level i wouldn't have been able to go without their support.
Studio117 said:
Insist they attend a top 10 university. My university wasn't great and I feel sorry for the poor sods who are paying 9k a year now. There is very little value having a degree from a crap uni.
Bit restrictive on the top 10 but I pretty much agree with your view. Also important to choose the right course. Unfortunately too many kids are running up massive debt for decades to come just so that iSOME middle class parents retain bragging rights at their dinner parties
A lot of people study up in scotland... Because it's cheaper!
£1800 in fees for the best universities in the world, accommodation is cheaper, food is reasonably priced, public transport is cheap (£6 for an ALL DAY train ticket for the whole of Glasgow) and you don't really need a car in Glasgow/Edinburgh; most things are is walkable because the city is reasonably sized.
Means you'll be paying back less loan amount when you do get a job. Certainly won't be in 50k of debt this way.
ETA scotland uni courses are 4 years
£1800 in fees for the best universities in the world, accommodation is cheaper, food is reasonably priced, public transport is cheap (£6 for an ALL DAY train ticket for the whole of Glasgow) and you don't really need a car in Glasgow/Edinburgh; most things are is walkable because the city is reasonably sized.
Means you'll be paying back less loan amount when you do get a job. Certainly won't be in 50k of debt this way.
ETA scotland uni courses are 4 years
Edited by Meths on Friday 31st May 12:48
Meths said:
A lot of people study up in scotland... Because it's cheaper!
£1800 in fees for the best universities in the world, accommodation is cheaper, food is reasonably priced, public transport is cheap (£6 for an ALL DAY train ticket for the whole of Glasgow) and you don't really need a car in Glasgow/Edinburgh; most things are is walkable because the city is reasonably sized.
Means you'll be paying back less loan amount when you do get a job. Certainly won't be in 50k of debt this way.
ETA scotland uni courses are 4 years
good idea - except we live in England and therefore they would charge us more!£1800 in fees for the best universities in the world, accommodation is cheaper, food is reasonably priced, public transport is cheap (£6 for an ALL DAY train ticket for the whole of Glasgow) and you don't really need a car in Glasgow/Edinburgh; most things are is walkable because the city is reasonably sized.
Means you'll be paying back less loan amount when you do get a job. Certainly won't be in 50k of debt this way.
ETA scotland uni courses are 4 years
Edited by Meths on Friday 31st May 12:48
Not sure if I understand how this is legal at all?
brickwall said:
Your choice as to whether you should go to university is entirely dependent on how much additional income your degree is likely to generate for you, which is going to be largely a function of the course/location you're intending to study.
And this really is the absolute and only choice now surely? Way back when and you could walk out of Uni with a "mountain of debt" equating to what £15-20k it was as much about the life experience and learning to be independent as much as the actual degree. I don't think i could count on one hand any of my friends who actually do a job that directly related to their career (teachers aside that is), when you roll that figure up to £50k (or more) which lets face it is the price of a house in some parts of the country, I really would have to think long and hard about funding my child through to that level of cost.Frankly £50k is decent chunk of change to start up a small business or do some investing.
big_boz said:
And this really is the absolute and only choice now surely? Way back when and you could walk out of Uni with a "mountain of debt" equating to what £15-20k it was as much about the life experience and learning to be independent as much as the actual degree. I don't think i could count on one hand any of my friends who actually do a job that directly related to their career (teachers aside that is), when you roll that figure up to £50k (or more) which lets face it is the price of a house in some parts of the country, I really would have to think long and hard about funding my child through to that level of cost.
Frankly £50k is decent chunk of change to start up a small business or do some investing.
you should read the Martin Lewis prog referenced earlier - it explains it well.Frankly £50k is decent chunk of change to start up a small business or do some investing.
I'm not now going to finance the kids through University and I'm going to make sure they get the max loan possible.
It's the cheapest loan he'll ever get - take it.
Invest the money somewhere in the mean time, odds are it will outperform the interest on the loan. If that ever ceases to be the case then you can always cash in the investment and clear the loan.
See: http://www.moneysavingexpert.com/students/should-i...
Invest the money somewhere in the mean time, odds are it will outperform the interest on the loan. If that ever ceases to be the case then you can always cash in the investment and clear the loan.
See: http://www.moneysavingexpert.com/students/should-i...
x5x3 said:
good idea - except we live in England and therefore they would charge us more!
Not sure if I understand how this is legal at all?
Aha! They seem to have changed it since I started (bumped it up to over 6k/year). I have English friends in my year (3rd) that are paying £1800 a year.Not sure if I understand how this is legal at all?
Could always move to scotland
big_boz said:
And this really is the absolute and only choice now surely? Way back when and you could walk out of Uni with a "mountain of debt" equating to what £15-20k it was as much about the life experience and learning to be independent as much as the actual degree. I don't think i could count on one hand any of my friends who actually do a job that directly related to their career (teachers aside that is), when you roll that figure up to £50k (or more) which lets face it is the price of a house in some parts of the country, I really would have to think long and hard about funding my child through to that level of cost.
Frankly £50k is decent chunk of change to start up a small business or do some investing.
you should read the Martin Lewis prog referenced earlier - it explains it well.Frankly £50k is decent chunk of change to start up a small business or do some investing.
I'm not now going to finance the kids through University and I'm going to make sure they get the max loan possible.
brickwall said:
I think you misunderstand:
a) The system. It's not a 'mountain of debt'. The system is best described as a time limited, contribution limited, graduate tax of 9% of income above £21,000. You can't take that 'price of a small house' and invest it elsewhere.
b) My point:I never suggested that your degree had to be directly related to a career, merely that it had to provide you with an earnings uplift compared to not doing a degree. To use the example I did before, I'd guess PPE at Oxford teaches you a lot of largely irrelevant things (just how many careers in philosophy are there?), but I'd also guess it sure as hell gives you some pretty good job prospects (that increase your income by more than enough to offset the 9% additional tax).
Sorry i wasn't clear , i don't consider £20k a mountain of debt, partially because as a 33 year old who doesn't have a degree, i earn more than most of the people i know who do because i worked hard to earn what i have, and frankly its not a great deal of money to me, which is the point i was trying to make. But i do agree that having a degree will sit well with a great deal of employers, if it is an intellectual degree. However frankly it is my absolute belief that there are a large number of degree holding individuals who on paper appear highly capable who i wouldn't employ to make me a brew.a) The system. It's not a 'mountain of debt'. The system is best described as a time limited, contribution limited, graduate tax of 9% of income above £21,000. You can't take that 'price of a small house' and invest it elsewhere.
b) My point:I never suggested that your degree had to be directly related to a career, merely that it had to provide you with an earnings uplift compared to not doing a degree. To use the example I did before, I'd guess PPE at Oxford teaches you a lot of largely irrelevant things (just how many careers in philosophy are there?), but I'd also guess it sure as hell gives you some pretty good job prospects (that increase your income by more than enough to offset the 9% additional tax).
Slightly off topic, but I think there is an increasing sense of entitlement in this country where by many people just expect to be given a job/money/house/lifestyle just...well...because....
A guy who i studied with who frankly was rubbish but did finish his degree (automotive design) now runs a halfords....pointless, but looking back i could have told you from day one that he wasn't going to get very far in life.
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