This year, UK universities are offering students an incentives for paying the entire tuition bill upfront instead of resorting to government education loans. Those who bypass the installment plan offered by the treasury and pay the bill directly to the university will receive between 2% and 5% discount, which could add up to £1,000 over the course of study. Although the universities project that most of their students this year will be taking out loans to cover tuition payments, many schools also accept payments upfront — even via direct debit. Most are keeping this option quiet, partially in order not to create the impression that the entire bill must be covered before studies commence.
Now, a series of universities have introduced discounts of between 2 and 5 per cent for families who pay before the start of term. They include Portsmouth, Gloucestershire, Swansea and Southampton Solent.
Portsmouth University gives a 2 per cent discount if the yearly bill is settled, as does Swansea. Gloucestershire gives a £200 discount on its standard fee of £8,250 a year.
At Southampton Solent, which is charging £7,800 a year, 5 per cent will be taken off the bill, amounting to savings of £1,170 on a three-year degree.
Almost inevitably, the discounts are raising the ire of families and academics, with some saying that they privilege students whose families who are better off. Sally Hunt, the general secretary of the University and Colleges Union said that those students who can tap “the bank of mom and dad,” will find themselves again in a better position than their less-comfortable peers.
Michael Lewis, a financial expert, and the head of a student finance taskforce, cautioned against taking advantage of the pre-payment discount, explaining that families might come out much worse off. This would be especially true if their kids happen to graduate into a job slump and are unable to land a job that pays at least £21,000 a year, the salary level that triggers the loan repayment schedule.
“Unless they are guaranteed a lifetime of high pay, it makes financial sense to put the cash in a high paying ISA or savings account during studies and take the loan out,” the task force said.
“Afterwards if it looks like the loan will have to be repaid, clear the debt then. Or, alternatively, it may simply be better used towards lowering a mortgage or car loan, which are worse and costlier forms of debt.”
The universities aren’t the only ones taking steps to make pre-payment an attractive option for students. Recently, the government dropped a plan to penalize students who wish to pay down their education loans early with pre-payment fees.