Many parents worry about the cost of their children’s university loans. They often wonder whether they should help them out in any way. One possible option is for the parents to pay for the university themselves, perhaps using savings that they have or by getting a loan themselves. To parents this can feel like a fairer way of doing things as they worry about their children being in debt before they even start full-time work. This is understandable but it might not be a good thing to do.
Facts about student loans
It is worth knowing all about student loans before you start to worry too much about them. The loans do not work like real loans and they will have no impact on a graduate’s credit record. The loans only have to be repaid once salary reaches a reasonable level and then the student will pay back a little each month and that will increase as their salary increase but go down as their salary falls. This means that the repayments are kept at an affordable level. The repayments come out in tax before an employed graduate is paid (but come out of yearly tax if a graduate is self-employed) which means that they do not have to remember to make the repayments. If they are employed they do not even have to worry about budgeting for the repayment as it will come out before they get their salary. After 30 years they will have any remaining loan written off so they will not necessarily have to repay it in full.
Disadvantages of parents helping
If parents pay instead of the student getting a loan then there is a risk that they will be paying more than necessary. It is hard to predict but current figures show that about three quarters of graduates are not repaying their loan in full. This means odds are that this will happen in this case too. If so, then parents may have paid it unnecessarily. Of course, some graduates will get a well-paid job immediately and stay in that job for 30 years so repay all of the loan. If there is a really high chance of this happening, perhaps due to the course they are doing or if they have already had a secure job offer then there could be some advantage in paying it, but it is very difficult to predict what might happen.
Another possible problem with parents helping is that it could make students too reliable on their parents helping them out. If they feel that their parents will be able to bale them out whenever they need money then it could mean that they become reckless with their spending and never learn how to budget properly or manage on their own.
Other ways parents could help
If parents do want to help then there are still plenty of things that they can do. Firstly, the maintenance loan is unlikely to be enough to cover living expenses so a bit extra towards that could be helpful/ Better off parents will be expected to pay money towards living expenses anyway as their children will not be offered such a big loan anyway. In the holidays parents can let children live back with them for free.
It can also be wise to teach children how to budget well so that they can cope on their own with limited money. Show them what sorts of expenses they will be likely to have to pay when they are a student so that they know what they will have to pay out and how much money to put aside for this sort of thing. It can be difficult as they get a chunk of money each term and they have to make it last, ensuring they pay all of their bills, have enough food, cover their rent and have some left for books, travel and visiting home. Encouraging them to get a part-time job can also be useful as it will give them some money, some of which they might hopefully save towards the costs of university.
So, although it can be really tempting, especially for well-off parents, to help their children out, it is probably not wise. It could end up costing a lot more money and it could mean that children will not learn budgeting skills. Parents obviously will worry about it, but there is really no need as the loans are designed to be fair and the repayments are manageable. Parents may be expected to pay some of the money towards the students living expenses anyway but it should not be necessary for them to pay the fees as well as all students are allowed to borrow the money for these. Also if parents need to get a loan to help them out then this will end up costing a lot more money than letting the children take out the loan.