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Beware paying uni fees upfront

Many may end up wasting £20,000+

With £9,000-a-year tuition fees now a reality, many parents are desperate to build uni funds to protect kids from huge debts. But this laudable aim could be throwing away over £20,000.

Many students won't need to repay anything close to the cost of their tuition fees. If that's the case, paying upfront is a waste. This guide show you how it works.

With £9,000-a-year tuition fees now a reality, many parents are desperate to build uni funds to protect kids from huge debts. But this laudable aim could be throwing away over £20,000. Many students won't need to repay anything close to the cost of their tuition fees. If that's the case, paying upfront is a waste.

We assume below it's parents with the cash – but the logic also applies if it's the students themselves.

A laudable aim gone wrong

"We've a great story. A girl's saved up nearly £30,000, so her parents don't have to borrow for her £9,000 tuition fees. She's a role model."

I almost shivered with fear when a journalist told me this. Bravo for the saving habit, but the idea of this being a role model to follow couldn't be further off the financial mark for many. It's a symptom of the widespread misunderstanding of the changes to English student finance.

2014 student loans: the basics

Beans On ToastStudent loans are a bizarre contradiction. Everyone talks about the price tag, which for many students could be over £50,000 after graduation, once you add up tuition fees and maintenance loans.

The calculations: Many will be paying unnecessarily

Now you know how the system works (if not, read the bit above), the best way to explain why paying upfront could lose you money is to give three example scenarios.

Safer alternatives to paying off the fees

For many on low to even relatively high salaries, it'd be a waste of money to pay upfront. But for those on very high salaries, it'd be a big mistake not to.

The moral hazard

Please don't take this as an essay on why you shouldn't save up for your children. That's not my point. It's whether the use of that cash is best served by paying their student loan.