FT Logo

Copy article

FT Editor Banner

Student loans and the IHT jigsaw

Journalist: Hereward Mills, FT Adviser

ended 05. March 2026

High interest, frozen thresholds and a 9 per cent repayment rate has left many graduates paying back money but seeing their debt increase. This is a worry for students and parents - and increasingly grandparents.

Meanwhile, changes to IHT rules are leaving clients and advisers searching for new ways to efficiently pass on wealth.

Advisers - are you seeing an increasing number of clients looking to support grandchildren while reducing their inheritance tax liability, whether by contributing to university costs or helping pay down existing student debt?

Thanks in advance for any comments! 

Hereward 

2 responses from the Newspage community

Copy all

Copy

Editor
Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
Yes, we’re increasingly seeing grandparents step in to help with university costs or student debt, and it’s often driven by two motivations: supporting the next generation while also planning efficiently for inheritance tax.

Student debt has become a long term financial drag for many graduates. With high interest and repayment structures that can see balances grow rather than shrink, families are starting to treat it as a broader family planning issue rather than just a student problem.

For grandparents in particular, helping with education costs can be a practical way of passing wealth earlier and seeing the benefit during their lifetime.

However, it needs to be structured carefully. Gifts must fall within IHT rules and be part of a wider financial plan, not just ad hoc support.

When done properly, it can reduce future tax exposure while giving younger generations a meaningful financial head start.
Copy

Premium
Jess Best
Independent Financial Planner at McLaren Capital
Inheritance tax and how to plan for it has absolutely become one of our most-discussed topics amongst our clients and if they can afford to make outright gifts, paying off their grandchildren's student loans is a great option.

Grandparents could choose to outright pay off the loans, commencing the 7-year clock for gifting for inheritance tax purposes or alternatively, they could use their annual exemptions of £3,000 each which is automatically exempt, paying off a proportion of the loan each year.

Paying off the loan in full would also give their grandchildren a head start when they begin working because they are not having monthly deductions out of their paychecks when the cost of living is already so high.