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Would you take a student maintenance loan just to save it?

(30 Posts)
restfultartan Tue 25-Sep-18 20:17:50

If you may need to dip into it or may not to. With funding for all accommodation and food etc coming from limited savings. These will be wiped out by the cost.
A full tuition fee loan will have to be taken anyhow.
To take the max amount, of £8,000 a year and to save it in a good savings account to spend after university.

Be that to put towards any future courses taken, or to even put towards as a house deposit.

OP’s posts: |
mimibunz Tue 25-Sep-18 20:19:35

Depends on the terms of paying back.

restfultartan Tue 25-Sep-18 20:21:18

9% of any earnings over £25k, for up to 30 years.

There is a fair chance of a successful, highly paid career after the degree.

OP’s posts: |
hugoagogo Tue 25-Sep-18 20:21:31

I think there was a time when this was a good idea. However my understanding is that interest is now charged on student loans as soon as you receive your loan and it is not the nominal rate that was charged years ago.

Check out moneysavingexpert for more info.

ambostraw Tue 25-Sep-18 20:22:54

I don't understand this. Maybe I'm stupid but how would the living costs be met if the student loan was put in a savings account?

restfultartan Tue 25-Sep-18 20:23:35

Personal, separate savings would be used to meet living costs.

OP’s posts: |
User212787555 Tue 25-Sep-18 20:23:36

What is the rate on the loan, and the repayment terms?

What would you consider a “good savings account”? What rate do you think you could get?

I’m assuming the affordability of a future mortgage would be affected by having to repay c£30k of student debt, so while I can see the appeal of saving the loan as a deposit you might be robbing Peter to pay Paul (unless you know you are going straight into a high paying career...)

ambostraw Tue 25-Sep-18 20:28:15

Personal, separate savings would be used to meet living costs.

Right. This I definitely do not understand. What's wrong with leaving the savings where they are and using the student loan for the student living costs?

User212787555 Tue 25-Sep-18 20:29:58

Cross post. Can you pay it back in a lump sum if you wanted to? If so, you could invest it in a tracker fund for a few years and hope you make some money on it (some do well, but obviously you can lose out too). Then pay the loan back in full.

I think the question of how the debt would affect any mortgage application is an important question to answer before taking the loan for savings.

2BoysandaCairn Tue 25-Sep-18 20:40:46

Not sure, are you a mature student, or a parent. As the maintenance is paid out on parents salaries, to get £8000, the maximum, you need to be on benefits and or earn less than £30000. then a sliding amount down to £4300.
In other words not ever student gets £8000.

hugoagogo Tue 25-Sep-18 20:44:30

money saving expert

prettybird Wed 26-Sep-18 00:00:42

Depends where you are. In Scotland, the interest rate is only 1.5%, so worth taking the loan and finding a good saving rate.

LemonysSnicket Wed 26-Sep-18 00:03:46

No... you pay interest from the day you start uni.

I got less than £3k btw, it is funds assessed.

MarchingFrogs Wed 26-Sep-18 00:05:19

Better still, be from a dirt poor household (would the personal savings have been accrued through your own financially-productive endeavours, or through mum saving every penny of her child benefit ?) and go to university in London - that would give you a couple of thousand a year more to play with?

ForeverBubblegum Wed 26-Sep-18 00:27:15

I did, and would again. Well similar, I got a bursary from my university but didn't reduce my load by an equivalent amount so was able to save around £3000 a year. Finished uni with £10,000 which was enough for a flat deposit in my home town. As it turned out this has actually been far more useful then my degree.

Even with a high paid career I think it would be worth doing. It won't effect repayments for the first few years as you would still be paying 9% back from the fee's lone anyway. Once you get to the point where the fee's lone would have been paid off then you are out of pocket but this may never happen, and if it does you will have a high enough income that you can afford it. If you can use the money as a deposit then what you save on rent will be less then the interest anyway.

ForeverBubblegum Wed 26-Sep-18 00:29:39

load = loan, as does loneblush

I should probably go to bed

Ariela Wed 26-Sep-18 00:29:40

Isn't interest 6% on student loans from the minute you take it out?
Would be better to be very frugal and get a little p/t job to help you out. Or work in t he holidays.

MarchingFrogs Wed 26-Sep-18 15:05:31

Isn't interest 6% on student loans from the minute you take it out?

Yes, but whether your accrued 'debt' is £30,000 or £1,000,000, the rate at which you pay it back is 9℅ of any salary above £25,000pa.. So you are less likely to have paid it all back by the time the remaining balance is wiped; you won't be any more burdened with the payments whilst you are earning enough to have to pay them, than if the loan were interest free.

HoozThatGirl Wed 26-Sep-18 15:40:24

You can't know for sure whether you or DC will be a high earner unless perhaps if they are doing medicine. Otherwise the Oxbridge Maths graduate might go into the city or they might go into teaching.
If they go into a middle or low paying career they will never pay that money back in full.
Taking the loan for fees and not maintenance is the worst of both worlds.
As others have said it's not the amount you owe that determines repayment but the amount you earn.
So borrow fees only. Loan £28000 repayments are 9℅ of any salary above £25,000pa.
Take maximum maintenance loan as well and end up owing £54000 (or more if it's four years). Repayments are 9℅ of any salary above £25,000pa.
Exactly the same.

We hedged our bets. DC took max loans and if they go into highly paid careers we may pay off the loan. If not we'll give the cash towards house deposit. We can't do both.

Xenia Wed 26-Sep-18 15:50:23

Say they go into jobs earning £100k by 30 (not unusual in the City) and pay 9% of £20k to £100k income roughly = 9% of £80k that is a repayment of £7200 a year which you would not have if you had not taken the loan. I have paid/ am paying the 5 children's cost at university including fees so they graduate debt free but I realise that is an unusual choice. If they will earn a fair bit then may well get to the stage where you have no single person tax allowance, this 9% repayment, massive London mortgage or rents and probably extremely high full time childcare bills too so that the 9% is actually quite a bit chunk of their money. I wouldn't like my tax rate to go up by 9%.

ClerkMaxwell Wed 26-Sep-18 16:36:14

No. I wouldn't take from the public purse if I didn't need the loan for what it was intended.

howabout Wed 26-Sep-18 16:44:56

In principle I agree with Xenia if funds allow, especially if only eligible for minimum maintenance loan of £3k.

Otoh a lot of Uni bursaries are income dependent so being eligible for the maximum loan can unlock these and offset the cost of the loan interest.

The risk is that the Government keep changing the Ts & Cs and so if they further raised the repayment start point or dropped the interest rate that would change the calculation. There is also a risk that there is a change of circumstances part way through studying or a need to finance extending study.

Not sure it is a given that medics pay back loans as afaik they borrow substantially more - happy to be corrected.

howabout Wed 26-Sep-18 16:50:15

Posted too soon.

The most balanced approach is probably to take the loans while studying but then pay back ASAP if it looks likely you will be repaying in full with interest. The interest is on an income based sliding scale before it reaches the max of RPI + 3%.

Worst of all Worlds may be to be Scottish going to an English Uni as then you borrow under lower Scottish income thresholds and repay on earnings above £18k. You are highly likely to be able to borrow less and repay more notwithstanding the lower interest rate.

howabout Wed 26-Sep-18 16:52:58

Clark there is cross subsidy in the system so "rich" students taking the loan and repaying help to fund "poor" students who go on to be low earners. It is more public spirited to take the loan and repay through the 9% levy if you are "rich".

howabout Wed 26-Sep-18 17:23:18

Scottish Conservative policy is graduate contribution (£1.5k) above certain income level (£30k) and phased abolition of current loans. If you paid up front and the Government moved to this you could end up paying twice.

Personally I don't understand how they can justify taxing high earning graduates more than non-graduate high earners. General taxation slightly higher at higher rate is far fairer imho.

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