Student Loan or 'Daddy Pays'?

sololite · 22 April 2013 at 12:40PM

Hi everyone - a newbie question I am afraid.

but hopefully a straightforward question: Our son is off to uni this September (grades permitting!) and we are in fortunate position to be able to pay his fees out of our hard-earned cash. What are the pros and cons of taking out a student loan for his 9K a year loan vs us paying from our cash which is rotting in low-interest savings vehicles? Anyone else in this situ with good advice to give please?

Thanks for any advice or links to suchlike.

Sololite

Lokolo · 22 April 2013 at 1:08PM

I will do it against Student Loans

Pros
- If you die early, it's all written off
- It's all written off after 30 years
- There is an allowance so if you don't earn a lot, you don't pay a lot (same if you aren't working, you don't pay anything)

Cons
- It is essentially a 30 year tax unless you earn quite a lot and pay it off early, interest rate is a lot "meaner" than previously so makes it more difficult to pay it off early.

I think the money could be better used elsewhere. With house prices so high (relatively) then deposits can take a while to build up, a lump sum from parents is very useful. I am of course assuming you don't have another fund for this.