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Whilst were discussing student finances, what’s the view on this:
Just supposing I had managed to squirrel away a hundred quid a month since the kids were born. Am I right in thinking it makes infinitely more sense putting that £25k down as a deposit on a cheap house in whatever town he chooses to study in, then he can use his flatmates’ rent to pay off his mortgage? ( Compared to trying to avoid/ minimise the student loan)
We've had a similar discussion here. A few of the wealthier students/parents did this when I was at Uni. The first problem is you probably need them to make it through first year to get the friends to share with. The second problem is they need to find friends who will reliably pay the rent (and whose own parents aren't trying to milk the system like you are!). Then of course you are gambling on the investment paying off in the 3 or so years of ownership, decoration/repairs/furniture etc; and who knows what might happen to property prices over the next 5 yrs.
Three examples:
- My now wife shared with someone whose parents owned the flat. Her brother had gone to the same uni before and the timings worked really well. The parents owned the flat and did nicely out of it. Their child paid no rent and got no debt so did ok too!
- A colleague of mine did the same but where HE was the owner, and it not only gave him a comfy uni experience (although he jammed as many people in a flat as he could to max income/min rent for all - I'm not sure it would meet the modern HMO rules!), but got him very nicely on the property ladder.
- One of my wife's former staff lived in a flat his parents had "bought" at Uni (AIUI they put down the deposit and its technically in their name but the other tenants pay the mortgage). 10 yrs into employment, he's in his 30's still lives like a student, expects the parents to sort every problem with their flat, and doesn't pay any rent... ...I can't work out whether to congratulate him or despair at the lack of responsibility.
With 2 kids I'm more leaning towards the first example!
I like your cynical Dad approach @thegeneralist – rigorous lowering of expectation, send them off to uni with a spring in their step.
Guilty as charged. I've always been a GlassProbablyHasABloodyCrackInItSoWhoCaresIfItsHalfFullNow.GiveItAWhileAndImSureItLlBeGoddamnEmpty kind of guy.😃😉
And after a year of lockdown I'm even worse.
few of the wealthier students/parents did this when I was at Uni. The first problem is you probably need them to make it through first year to get the friends to share with.
Yep, need to find the balance point between waiting long enough to ensure they're actually going to stay at uni, but still complete contracts before the start of 2nd year
The second problem is they need to find friends who will reliably pay the rent (and whose own parents aren’t trying to milk the system like you are!).
Not convinced it's gaming the system is it? Just sensible planning with what you have? Or are they essentially the same thing?
Then of course you are gambling on the investment paying off in the 3 or so years of ownership, decoration/repairs/furniture etc; and who knows what might happen to property prices over the next 5 yrs.
Agreed. But these are all standard with property ownership. The immense advantages of this plan versus me doing BTL or BTHL include:
No second home stamp duty surcharge.
No capital gains tax
No IHT
Rentaroom scheme applies to first £x,000 of rental income from his flatmates'.
Negligible income tax for the rest of the rental income as his income will be sod all.
No estate/rental agency fees for finding tenants.
The advantages to me seem absolutely huge.
My 2 kids are 22 and 19. One in first year of degree. Other graduated last year but just got a place to go back in September to do a masters to become a speech therapist. They only get the minimum maintenance loan on account of household income. As the masters leads to a registered qualification she can access full student funding again for 2 years and gets £5k a year from govt (she tells me- not seen the details on this)
So- as above best advice is take out max loans they can- tuition £9250 a year. Maintenance is about £4K I believe outside London. This doesn’t cover rent. So I pay the rent. Maximum loan is £8k I think- would cover rent outside London but would need a job for beer money. They live off the £4K. Pre covid the older one got a job to subsidise. Younger one hasn’t needed to as nowhere to go out since he’s been at uni. Has started buying vinyl though so will need to soon I reckon.
Hoping the 2 year masters doesn’t cost us another 2 years rent... we shall see.
He’s studying for a BSc in Pilot Studies with commercial pilot training. The practicals are eye watering. He’s chosen a BSc route with an extra year of study, rather than just gain the license in 18mo so he may have something to fall back on later – perhaps entry to a Masters degree. You can’t borrow for a student loan for pilot studies. Anywhere. It’s BomAd or a training scholarship from industry (which as you can imagine is not exactly open).
Has he considered military flying training? it takes a long time however you get all your training for free and get paid a considerable wage and the flying is far more interesting. I say this as someone who studied for a Bsc in aviation and I am now a military pilot. I look at my peers and yes they earn more money in the commercial area however unsociable hours and flying around on IFR the whole time is not exactly exciting and some have already decided to leave flying (and that was before COVID)
It’s worth spending some serious time looking at scholarships and other funding. Used to absolutely boil my piss knowing that some of the most deserving kids never even looked at this because they’d no idea it was an option and often those that did assume they’re not entitled.
Yup, when I did teacher training 14 years ago there was a specific fund for sons and daughters of Church of Scotland Ministers who were training as teachers. My wee sister was blethering to a mutual friend one night and mentioned I was doing it. The friend was the funds accountant/lawyer and got me a pretty generous bursary. But how niche is that?
johndoh
Free Member
But @chrishc, your experience is very much anecdotal. There is no ‘correct’ way to approach higher education and what worked for you (and didn’t work for your brother) could just as easily be told the other way around for someone else.
Totally agreed, it's anecdotal and not the way to go for everyone!
However I can say within my organisation (26,000 employees) 'engineers' with shopfloor backgrounds and no degrees outshine pure academics every time. I am a simple engineer, in the role for 4 months and I am managing a team including a few academic lead engineers. More anecdotes, I know
Also, trust me, there is no better motivation to better oneself than spending a few years sleeping in a sleeping bag because you can't afford the heating, eating plain boiled pasta and walking to a shit job that makes you anxious just taking a step closer while having 0 job security and being literally a few quid from not having rent money and being homeless. I'm not sure dossing around a uni campus with your mates conveys the same message (yes I know uni is hard and not a doss, I did it while working 12hr days and renovating a house)
What you all need to do is have so many kids there is no way you could equitably support any of them at uni, and impress on them early that when they hit eighteen, they’re on their own.
That’s what happened at House von Saxon, and it’s working just fine! 🙂
The interest rate is so obscene that you have to be earning a lot to get ahead of the added interest every year. Overall, it’s a spectacularly stupid scheme.
Or it's a way of getting the high earners to pay more
Offsetting the shortfalls
It's a tax, just done differently, high earners pay more so therefore "progressive"
Would going to Uni have changed things? Maybe, maybe not. I guess my point is that I regret not going and am stuck in a life of mediocre middle management. I can’t see it would have done any harm.
Plenty of people with degrees stuck in mediocre middle management
Has he considered military flying training?
He did not want to joint the military. He would have been interested in the transport side, but chose not to - and the competition is so high that he probably wasn't academic enough to secure a place (despite having a PPL before he could drive) with three A Levels. Instead he worked at LHR as a security officer and saved (a lot) for the first year.
Plenty of people with degrees stuck in mediocre middle management
And plenty of people without a university education in very good jobs. Like my millionaire mate who left school at 16, started working in pubs, got to area manager level, got a job at a hotel chain as a national manager, was head-hunted by an international company and got a share option in his package. Due to buy-outs and whatever he now has a personal wealth well in excess of a million, owns several houses (which he rents out) and some lovely cars including a cool concourse condition MG Midget which he bought simply because it was the car he always wanted but couldn't afford to get when he was working as a dish-washer in a pub.
Three of ours went through uni like this. Don’t think any of them will ever pay the loan off. One is even avoiding the tax by working in the EU. The interest rate is so obscene that you have to be earning a lot to get ahead of the added interest every year. Overall, it’s a spectacularly stupid scheme.
I dunno. Borrow tons of money, never have to pay it all back. You won't get a better deal than that anywhere else.
Interest rate is RPI + 3%. Not great (why isn't it just RPI?) but not what I'd call an obscene interest rate.
Like my millionaire mate who left school at 16
This always comes up. It's not exactly common, is it? And it requires a great deal of luck as you illustrated.
why isn’t it just RPI
I have said that so many times - it is shocking that companies profit out of lending money for higher eduction.
This always comes up. It’s not exactly common, is it?
I am not saying it is common, I was simply offering up a different perspective. It is particularly interesting as (long before he came into the significant sum of money) he would constantly eat himself up about the fact he didn't have a university degree and felt he'd hit a glass ceiling because of it and that he'd always be stuck in mediocre middle management.
I have said that so many times – it is shocking that companies profit out of lending money for higher eduction.
Do we know for sure that it's all profit? Does the government pay the shortfall that 75% of students don't ?
( Genuine question, I'm not startin')
This always comes up. It’s not exactly common, is it? And it requires a great deal of luck as you illustrated.
No, on STW everone who didn't go to Uni is a millionaire (apparently).
It’s a tax, just done differently, high earners pay more so therefore “progressive”
Except that its not really...
- if Mummy and Daddy are cash rich they can subsidise university so their kids don't leave uni with debt and thus pay none of this pesky extra tax.
- if as discussed on this thread your parents can subsidise some of your accom costs with a deposit you can avoid the load and benefit from a Buy to let with now CGT etc
- If you end up in a job that pays OK but not amaziningly you probably never end up paying off the loan but over the course of your career payback 60K in interest. If you earn lots quickly you payback the loan and principle quickly and pay less in total. Of course some will never pay back a penny - most are not earning much at all, but some will be taking advantage of being out the country, other tax fiddles, marrying someone who earns loads etc.
And as its financial institutions behind it - it seems like a privatised tax! Just increasing tax or if you must having a proper graduate tax would probably have been far fairer.
Except that its not really…
– if Mummy and Daddy are cash rich they can subsidise university so their kids don’t leave uni with debt and thus pay none of this pesky extra tax.
– if as discussed on this thread your parents can subsidise some of your accom costs with a deposit you can avoid the load and benefit from a Buy to let with now CGT etc
I just see this as a case of people with more money to start with will have more money afterwards....
Not convinced it’s gaming the system is it? Just sensible planning with what you have? Or are they essentially the same thing?
I said milking the system! I didn't suggest it was wrong, or that its realistic to suggest people don't do it. As I say its a consideration here, although there is a bit of me that thinks its simply adding to the inequalities in society and something should be done to make it less favourable. Its essentially exploiting the fact that other housemates for not having wealthier parents!
yes - but my homes have always been purchased with a longer term view. I guess Brexit, Covid, Possible Scottish Independence, make me more suspect about house prices than I have been at some other times. Massive amounts of student apartment building in the area also make me question if rental rates will drop - but I've not made it that far in my calculations...Agreed. But these are all standard with property ownership.
The immense advantages of this plan versus me doing BTL or BTHL include:
No second home stamp duty surcharge.
No capital gains tax
No IHT
Rentaroom scheme applies to first £x,000 of rental income from his flatmates’.
Negligible income tax for the rest of the rental income as his income will be sod all.
No estate/rental agency fees for finding tenants.
Ah good point about stamp duty, Scotland's approach is slightly different, I might just fall under the LBTT threshold depending on the size of flat! If I remember rightly CGT has a reasonable threshold pa, which accumulates - so before any liability so would need a net gain of quite a lot in a short period; it comes out of profit so isn't quite as painful as Stamp Duty.
IHT isn't a concern here because I will live forever/its only retrospective for 7 years/we don't have enough to hit the threshold* so unlikely to be an issue (they'd be financially better off it we were both to die though!).
Income tax is a fair point though... at the very least it probably means my wife should be the landlord rather than me if we do it!
*delete as applicable!
The advantages to me seem absolutely huge.
I think they are significant - but of course, others may agree, so if he falls in with a crowd of well-to-do friends they may all want to be the capitalist!
I just see this as a case of people with more money to start with will have more money afterwards….
Yes, so that's not really "progressive".
I said milking the system! I didn’t suggest it was wrong, or that its realistic to suggest people don’t do it. As I say its a consideration here, although there is a bit of me that thinks its simply adding to the inequalities in society and something should be done to make it less favourable. Its essentially exploiting the fact that other housemates for not having wealthier parents!
Apologies. You can see that education was wasted on me. 🙂
In that case I agree. I would be milking the system and the fact that some people can afford to bung that deposit ( and some can't) does indeed add to inequalities.
Though, in my defence, a hundred quid a month isn't exactly astronomical for a large proportion of the population.
But yes, in broad terms you're right. Guilty as charged.
I reckon let them to the max loans as they may not have to pay it all back. If they do then they are earning enough, probably because of the university education.
If you have the ability to fund their University education you may be better off letting them take the full loans and instead funding a house deposit for them in the future. Big deposit = lower loan interest rate on the mortgage. That saving on monthly interest could easily cover the student loan repayments.
It’s man maths innit!
All three of mine maxed out every govt. loan they could get based on the very excellent advice of Martin Lewis which is regularly updated. It’s worth reading carefully. We did pick up their rent which has been eye watering especially as I’ve had two at Uni for 4 years and two in London.
https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/