help my child with student fees vs putting the money aside for their first deposit

HelenA101

Hello,

I am interested in your views on what works best financially in our case. We have saved about £10k which with be £15k by the time our first son will start university. We would like this money to go to them in one form or another but not sure what's more viable - paying for part of their student fees or take a loan for that and keep this money for later and help them with a deposit for a flat when they will finish university?
I am unsure about the student help as we have another child that will hopefully follow the same path in 4 years time and there is the risk that we will not have the same amount of money to help them equally with their tuition fees. But if that money would be saved in an account, then it could be split equally to go towards a help with their deposit.
There are two components here, the ethical part (would love to help them in the same way) but also what makes more financial sense, helping with the student tuition or deposit? Would they need to pay any taxes if we help with their deposit?

Many thanks,
Helen

Albermarle

Normally it does not make financial sense to pay the tuitions fees or the maintenance loan . Better to get the money as a student loan . These are not really loans in the normal sense , as they only have to be paid back if the graduate starts earning above a certain limit . A large number of loans are only every partly paid off and some are never paid off.

You will still probably have to top up the day to day living money and if you have decent salaries , they will get a smaller loan so you will have to top it up more . Obviously costs are much higher in London and are much lower if they live at home . So this top up can typically vary between say  £1K to £7K pa ( on top of the Student Loans ) . Also some students work rather than get parental help.
Student loans: the truth about uni fees, loans & grants - MSE (moneysavingexpert.com)

where_are_we

Do not use this money to pay for student fees. 83% of students do not pay back all of their student loan. If your son`s student loan is not paid back in full paying up front will be money wasted. Then in the future you can equally help your children with your savings. The only tax you might possibly pay with helping with a house deposit for your sons is Inheritance Tax. Consider  putting some of your savings in a Stocks and Shares ISA if a house purchase is more than 5 years away. Consider a cash LISA for your son or sons in a few years time if it looks certain they will buy a property.

adindas

HelenA101 said:

Hello,

I am interested in your views on what works best financially in our case. We have saved about £10k which with be £15k by the time our first son will start university. We would like this money to go to them in one form or another but not sure what's more viable - paying for part of their student fees or take a loan for that and keep this money for later and help them with a deposit for a flat when they will finish university?
I am unsure about the student help as we have another child that will hopefully follow the same path in 4 years time and there is the risk that we will not have the same amount of money to help them equally with their tuition fees. But if that money would be saved in an account, then it could be split equally to go towards a help with their deposit.
There are two components here, the ethical part (would love to help them in the same way) but also what makes more financial sense, helping with the student tuition or deposit? Would they need to pay any taxes if we help with their deposit?

Many thanks,
Helen

As other people have highlighted. You might want reconsidering using the money to pay the student fees.

Martin produce a very good article about the truth of the student loan. It is called a student loan. But in reality it is actually works like "Tax on Graduates".

https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/

As other people have said vast majority of students do not pay back all of their student loan. Some people are even never pay back back even a penny.

daveshep26

I think there's some tough psychology at play here - as parent you definitely want to do your best to help out.  We're now on sons #2 & #3 going through and my very real experience converges on other advice already given,
We ended up paying the parental (maintenance) contribution (ofc) and also said we'll put XX thousand in a building society a/c fro you each year, and when you've finished then, you can choose to pay off "loan" or invest it/ start a business/ put towards deposit....
I started off thinking hope they minimise the loan, but we left it at their discretion and number #1 (now having graduated) tells the others, take the maximum loan and use this additional for other things - I think that's convinced me

london21

Personally, property deposit is better.

No taxes if gifted deposit.

Student loan is not like a bank loan, you only pay it back once you start earning a certain threshold.

MaxiRobriguez

Help with deposit. Many reasons why:

1) As others have suggested, most students don't actually need to pay off their full loan.
2) Emotionally better for your children (see lots of youngsters irate about inability to get on housing ladder rather than student loan being a burden).
3) Gives a good financial life lesson (home ownership, real debt payments) early on, which hopefully they can put to practice in other areas (like saving for pension).

anonmoose

They get less student loan though based on parents earnings don't they? So in my case although I would much rather put it in a house deposit fund the shortfall of loan would need contributing anyway. Or am I misunderstanding? Off to read martins article on this..

Albermarle

anonmoose said:

They get less student loan though based on parents earnings don't they? So in my case although I would much rather put it in a house deposit fund the shortfall of loan would need contributing anyway. Or am I misunderstanding? Off to read martins article on this..

Regardless of parents earnings they can borrow the full amount to pay the tuition fees, which are typically £9kPa.
The amount they can borrow for maintenance/living costs varies , depending on parents income . 
Even if they get the full amount , it usually needs topping up and/or they get a job .
Even if the parents have high income , they can still borrow some , but obviously needs topping up more.

HelenA101

Thank you all for your views and opinions, as I was inclined too, the consensus is to put it towards a possible deposit. I will now look into Stocks and Shares ISA and a cash LISA and also, thank you for highlighting that home ownership it's a real financial lesson, so very true!

london21

anonmoose said:

They get less student loan though based on parents earnings don't they? So in my case although I would much rather put it in a house deposit fund the shortfall of loan would need contributing anyway. Or am I misunderstanding? Off to read martins article on this..

Student loan not income assessed. 

Income of parent is taken into consideration with regards to bursaries etc.