Save Money by not Paying your Tuition Fees Upfront
It sounds mad doesn’t it – you can actually save money by not paying your tuition fees upfront! The fact is that a lot of university graduates go on to earn less than the repayment thresholds set out by the student loans company. This means that they never actually have to make a repayment on the debt they have accumulated. If the loan goes for 30 years without being fully repaid it will be completely wiped anyway.
If you’re not likely to earn above the repayment threshold because you’re not sure you will actually get a job when you graduate, or you’re going into a low-paying field, it may well be a good idea to take the tuition fee loan instead of paying them outright yourself – or having someone else pay them for you.
Another thing you should remember if you don’t think you’ll earn close to the repayment threshold is that you can make your own voluntary repayments. Even if you don’t earn close to £15,000 (or £21,000 for students commencing studies from September 2012) , if you have any left over money at the end of each month you can still make a start on repaying your loan off your own back. You’re certainly not compelled to do so – and if you’re happy for the debt to be wiped after 30 years, you may as well keep your money and spend it on something else!
The flip side of things
If your parents are convinced that they want to pay your tuition fees upfront for you, there may be some merit in their plans. If you’re likely to go on to a high paying job, you’re likely to reach those repayment thresholds pretty quickly. If you’re more than likely going to have to repay your loans you may want to ask your parents to pay the tuition fees upfront to save you from accruing any interest on them (for students starting their studies in September 2012 and onwards) .
Student loans are very flexible because as soon as you stop earning the threshold figure your repayments will stop. This means that you may find yourself making repayments towards the loan once or twice during your working life – but you may never actually pay off the whole debt. When those 30 years are up any of the debt that you’ve not got around to paying off will be wiped – leaving you student debt free!
There’s no telling what the future may hold, but often paying off tuition fees during your studies is not the best way to spend your cash. If you never go on to work after finishing university you’ll never have to repay the loan amount anyway – so there really isn’t that much merit in paying upfront.
It’s up to you how you play it with your student tuition fees loan. Just remember that a large number of students take the loan and never repay it – if you’re likely to be one of those people who doesn’t repay for one reason or another, is there any point in you or your parents settling those fees upfront?