'Don't pay your kids tuition fees upfront' Discussion Area

melancholly

Oldernotwiser wrote: »

Sorry, M, you're wrong. The repayment threshold was increased to £10,000 to £15,000 in 2005.

ah - forgot that. but in general, it isn't an index linked threshold on an annual basis. 6 years at £15K is a long time!

setmefree2

kayr wrote: »

"Compared to long term car loan or credit card borrowing, the student loan is likely to be substantially cheaper."

I don't know about borrowing apart from mortgages - we have always saved up for cars (probably why we have very basic, older models!). Hope our kids don't go down the expensive car route, but that's their problem. Maybe the new loans will be cheaper than credit card rates etc but I would hope our children don't get into debt as a way of life and earn enough not to have to. This whole subject is really complex and made harder by the fact that "student" covers a huge range of abilities. They have very variable career prospects. I can understand why people like Martin Lewis make generalised pronouncements; they are aiming to reach a certain audience. What he says is not necessarily relevant for my family's situation but I am used to interpreting what journalists say. Take the sensible, useful bits and draw your own conclusions.

We bought a new car 2 weeks ago. The finance deal offered from the car company was 4% (I only asked because I thought it might be interest free ) We didn't take it. We paid up front.

Anyway, if my kids want to buy a car at some point that's their decision. I don't feel we have to finance that. Investing in their eduation is something different altogether imho. At some point their must be a separation of my kids finances and ours. I draw the line at cars!

As for mortgages - well my son is 17!!! He probably won't need a mortgage for over 8 years - who knows were the mortgage market will be in 8+ years. They could be giving them away with cash back by then ( unlikely I know), or we could be quite easily be back to a 10% deposit being the norm.

Also, doesn't being loaded down with student debt make it more likely that your child will have to take out expensive car loans and credit cards not less, especially over a 20 to 30 year time frame.

Being loaded down with student debt surely also makes it less likely that your child will be able to save up for their own deposit not more.

I think I might have made my decision.....

silvercar

setmefree2 wrote: »

Anyway, if my kids want to buy a car at some point that's their decision. I don't feel we have to finance that.

Given that most kids want to learn to drive at 17, you probably find they need a car before they get to uni.

As for mortgages - well my son is 17!!! He probably won't need a mortgage for over 8 years - who knows were the mortgage market will be in 8+ years. They could be giving them away with cash back by then ( unlikely I know), or we could be quite easily be back to a 10% deposit being the norm.

Long term trend is for increasing house prices, so the earlier you buy the better - in general. I first bought at 22, something I would never have thought of at 17.

Also, doesn't being loaded down with student debt make it more likely that your child will have to take out expensive car loans and credit cards not less, especially over a 20 to 30 year time frame.

Being loaded down with student debt surely also makes it less likely that your child will be able to save up for their own deposit not more.

I think I might have made my decision.....

The who,e point of Martin's article is that it is a tax more than a debt. Having repayments of 9% on your highest chunk of income won't stop you getting a mortgage or saving.

It makes more sense to let your kids use the money that could reduce their loan as a house deposit.

Lokolo

setmefree2 wrote: »

I don't want that for my kids.....

What you want, and what they want, could be entirely different though.

I doubt my mum ever thought I'd be working in the city, buying a house in 6-12 months and without a gf! But alas, here I am in that situation.

By all means I think it's great you want to help your children out as much as possible, but mortgages are more expensive than student loans.

Lets take the average, £25k graduate salary (a little more than average, but lets go with this figure for now). They will repay £25k in today's prices, and £43k in future value. This is on £43,500 loan.

A mortgage, at 4%, of £43,500 over 30 years will repay £75k.

I am not sure how you got to the point whereby a mortgage is a better deal.

Not only that, but the mortgage will be more risky - still have to pay it if you get ill, lose your job etc. The biggest risk to student loans is that you end up having to pay more back the more you earn.

setmefree2

Another what if...

....what if we don't pay our son's tuition fees and we do give him him a house deposit
and then his marriage fails
and his wife gets the house...

dear son will be left still paying 9% of his salary in tax and have no where to live....

setmefree2

silvercar wrote: »

Given that most kids want to learn to drive at 17, you probably find they need a car before they get to uni.

We live in London. Nobody "needs" a car....

and if my son wants a car that's his decision I don't want it to have anything to do with me...

setmefree2

silvercar wrote: »

Long term trend is for increasing house prices, so the earlier you buy the better - in general. I first bought at 22, something I would never have thought of at 17.

Or house prices could quite easily fall over the next decade..... 50% if you listen to some

setmefree2

silvercar wrote: »

The who,e point of Martin's article is that it is a tax more than a debt. Having repayments of 9% on your highest chunk of income won't stop you getting a mortgage or saving.

It makes more sense to let your kids use the money that could reduce their loan as a house deposit.

I can only deal with known knowns - the tuition fees.

As for the unknown knowns - our kids might marry someone rich and may not need a house deposit, our kids might inherit and may not need a house deposit, our kids may be able to get a mortgage at a really low interest rate, our kids might end up divorced and lose their house ( we have boys).... all unknown...

setmefree2

Lokolo wrote: »

By all means I think it's great you want to help your children out as much as possible, but mortgages are more expensive than student loans.

Our mortgage is less than 1%.

And that is not what the ML article says - it says the mortgage and the SLs cost are the same. (All though I have to say I disagree, I think mortgages will be cheaper than 2012 SLs if you look at them over 25 years. But that's another unknown known)

setmefree2

Lokolo wrote: »

Not only that, but the mortgage will be more risky - still have to pay it if you get ill, lose your job etc.

Mortgages can be extended, over paid, renegotiated to a lower rate. You can sell your house, rent out rooms....

....9% of your salary for 30 years, is 9% of your salary for 30 years.

Decision made.