Should a Parent Borrow for their Childs Education?

Many parents worry about their children’s education and whether they should help them to get a better one. Even if they go to a state school, there is the expense of university to worry about which is not free for any student. This means that many parents consider getting a loan to help their children out.

With regards to university, there are student loans which can give students a sum of money which will pay for their course fees and possible costs of accommodation as well. It can be tempting to see these loans as a big burden for the students and feel that, as parents. We should pay it for them so that they do not need to get into any debt. However, a student loan may not be as bad as it sounds. There are many differences between it and a conventional loan. For example the debt is written off after thirty years. It only has to be paid back when earnings are above a certain level and it is taken out of the tax code and so does not affect their credit rating or ability to borrow money in the future. Of course, there is always the worry that the government might change the rules in the future, but most people are willing to take that risk and assume that if the rules are made too unfair there will be a big outcry and many complaints from the public.

If you compare the loan interest rate on a student loan to other loans it can seem expensive and parents may think that they may be able to borrow at a better rate and not have to repay so much. However, many students never repay their loan in full, due to the fact that it gets written off after thirty years and they only have to make repayments once their salary reaches a certain amount. Therefore it could work out a lot cheaper, so comparing the interest rate may not be the best way to calculate which is the best option. It could be much better to think about whether the loan is likely to be paid back in full. This would only happen if the student graduates, finds a job immediately that has a salary above the highest payment threshold and works for a full thirty years in a job of that salary or more without any breaks. This is unlikely to be the case for many graduates.

Many parents will top up the student loan with some extra money. This is because the loan will not normally be enough to cover all of their expenses. Some students will get a job or have savings to help them pay the difference and some may be able to get a grant or a higher loan, but there will be many that need that extra money. This is a situation where parents may need to consider a loan to help them. If possible it would be better to give the money without getting a loan. Perhaps using savings or paying them a little each month from their earnings, but it will all depend on your own personal circumstances and the only way you can afford it would be to get a loan. In this situation you will have to decide whether you think it is worth borrowing this way to help them. It may be the only way that they will be able to manage to get a degree and you will have to decide whether you think that this is worth it.

Borrowing for primary and secondary education is problem more of a risk for parents. This is fourteen years worth of education in total and the fees will therefore add up to a huge amount. You may not need to borrow all of the money but it is till well worth thinking hard before doing this sort of thing. Borrowing to help them at degree level only means three years of borrowing which is very much smaller than the fourteen years of schooling. With schooling there are free alternatives but with university there is not and therefore this should have some bearing on your decision of whether it is worth borrowing, as well.

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