Your goals
Student debt or a house deposit: which helps more?
This is a thorny issue: student debt versus deposit for a mortgage for a family member.
This is a thorny issue: student debt versus deposit for a mortgage for a family member.
Students have come to view tuition fees as yet another tax. The latest version of fees is taking an extra 9% of a student’s income when they start work and could result in them paying a marginal tax rate of 51%. They could be paying this tax for 40 years.
Reducing the weight of this debt for your child would allow them financial independence and the headspace to make decisions for their long-term future and wellbeing.
Paying the cost of tuition fees and living costs up front may well suit a student better than help with a deposit for a house.
Inheritance tax (IHT). Now that pensions are included in an estate at death, some grandparents have opted to help grandchildren with tuition fees and house deposits which can be considered as potentially exempt transfers and IHT free should they live for more than 7 years. Also gifts out of excess income could help.
The choice of helping the next generation to avoid a debt trap or have an easier path into house ownership is a difficult decision and is very dependent on the different financial positions of the members of the family.
Information, not advice. This guide is general information to help you understand your options. It is not personal advice and not a recommendation to buy, sell or hold any investment. If you are unsure what is right for your circumstances, consider taking regulated financial advice. The value of investments and any income received from them can fall as well as rise, and investors may receive back less than they originally invested. Past performance is not a guide to future returns.