AIBU to ignore Money Saving Expert advice?

Some of this depends on what you think the earning potential is for yout children. If they're aiming for careers where their repayments will stay low then 100% take the loan.

If they're going to end up 50kish+ I think it gets more nuanced, as it is a drag to see hundreds disappearing from your pay check for it, with no real prospect of it ever disappearing. Its an extra tax in effect and not a small one.

If its house deposit or loans then the house deposit will end up more useful, if you can easily afford both then I'd give them the debt free start as well.

I just repaid the last couple of K on my student loan because I was gifted a large sum out of an inheritance, and we're buying a house next year.

I had run out of tax free places to put savings, so I just decided to clear it so that my take home is larger when we apply for a larger mortgage.

That's one of the few circumstances where it might be worth it. Paying upfront is madness, and all about your psychology rather than the financial facts.

Do you have any background issues with money, OP? The only woman I knew who paid off her loan was a total spendthrift who hated debt but spent money like water, hung onto assets she could have sold, entered then left car leases, put her house on the market to downsize then took it off again...

In my view, if it’s either get the loan or use the money for a deposit then it’s the latter. Why would you want your child paying dead money on rent for years and years? And not everyone has partners to buy with. The average house price in the UK is I think £260k!

If it's a choice between a house deposit and a student loan I would go house deposit. If it's not that choice, then my student loans are an incredibly expensive debt and if someone told you you'd be paying an extra 9% on your tax rate tomorrow I'll let you imagine how well that would go down.

It means that I pay over a 50% tax rate on everything above 50k and if I'm lucky enough to reach the 100k mark the taper band will make even more of a mental tax rate.

I'm in the top 5-10% of earners and am only just paying off the interest. I need to do the maths for if I should just pay them off in cash but even that makes me cross because it means those who are wealthier (either at uni or e.g. me now) have the option to buy our way to lower tax rates. (To be clear if I did pay it off it would totally rinse my savings, so while I have good savings that would then prevent me from e.g. having money for moving house for example.)

I've just played about with numbers for plan 5. If DS gets the NHS job he wants he will be initially paying back £37 a month which means he'd never pay off the loan on a £30k salary.

But it's a 40 year loan so the salary he'd get now is going to increase due to inflation. I bet the threshold for repayment does not. Does anyone know if this is the case?

So say in 20 years he's on £50k due to inflation and pay scale increases he's then paying back £187 a month. He'll still never clear the debt because it will be so high by then due to the interest applied.

If you are rich and can afford to pay the fees I definitely would. If it's a choice between the fees and a house deposit the latter is definitely best.

This.

Martin is giving advice for the masses. these loans have evolved and if your kids are high earners it will def shaft them.

https://uk.finance.yahoo.com/news/biggest-student-loan-records-nearly-093421972.html

Sobering reading.

I do not envy teens and 20 somethings

That's about plan 2. The current plan is different- interest rates are fixed at RPI.

My DC’s dad has paid for their uni. The interest is really high. DS has graduated and is a trainee actuary so will definitely make enough money to repay all the debt. He didn’t think it made any sense to pay the interest when he had the money. House deposits - DS and his gf are saving for a deposit, they are living rent free at moment in ex’s house as he is overseas. Ex may assist with a house deposit, but if not, they are saving. I personally think not having student debt is a good thing if family are in a position to help.

I’ve thought for a few years now that student loans will be the next big “mis-sold a …..” scandal. Plan 2 has been in the news lots this week and I hope this is the start of a proper investigation into student loans. I have returned to full time work to pay for as much of the DC’s higher education as possible. It worries me that they could still be servicing their own student debt while trying to support their own DC through uni.

Yes. They are up to Plan 5 now and they all have different T&Cs. Also what you pay back massively depends on how much you earn. What was right in the past might not be best for future students.

But what has changed with the current plan is far more Plan 5 graduates will pay theirs off compared with those on previous plans. Even though the interest rate might be lower, the cost for a typical graduate has nearly doubled and hardly anyone has noticed.

As to whether it's right to take the loan depends on many factors, many of which are unknown. Get it right and it could save you tens of thousands. Get it wrong and you could be throwing tens of thousands away, especially if you pay fees instead of taking loans and your DC stay in low paid careers or spend an extended period as a SAHP etc.

100% take the loan. A monthly repayment tied to how much you earn, bit of a pain but no psychological stress. No way of getting on the property ladder = big psychological stress.

It’s now written off after 40 years and the repayment thresholds are being frozen.

So more people will be dragged into repayments and they will still be making repayments when they are 61 or 62 years old. Incredible, really.

I would not be surprised if we saw changes to the system over the next few years.

The conversation regarding loans is now starting to gain traction because those who were affected by the increases (starting university in 2012 and onwards) are starting to reach points in their careers where this is really affecting them. The numbers are only going to increase over the next few years and we’ll see more and more people calling out the insanity of the current system.

The current loan arrangement is for40 years. So that means it is either paid off or the student will be paying an additional 9% for the whole of their working life. It’s unavoidable for most. It’s simply not a choice many people have. And if it means no house deposit the loan is still best. But basically everyone will begin paying it and will either repay it all or be gojng fo 40 years.

Awful idea!!! DO NOT DO THIS!!! You and your children will regret it. Take the student loan!!!

You’re right it’s not! If these were private loans they would already have been struck off in court as being illegal!

Has it changed from when I was at uni?

I have no clue how much I have left on my student loan. I’ve paid off a little, when I had a high enough salary to qualify for repayment. But it gets written off after 30 years, doesn’t it? So why would you pay a loan that most likely you won’t repay anyway?

Or I’ve misunderstood and am about to get a horrible awakening in the comments.

20k in accessible cash is far more useful when you are starting out. That's why.

TBH a large part of this comes down to if your can afford the £9500 per year fees plus cost of living which if they live away is about £10,000. Most middle income families cant and have to take the loans . I have one on plan 2 and one on plan5. Neither particulary atractive but we had no choice. Those saying my child had an student loan and paid it off in 2 to 3 years were refering to either a pre 2012 student or not in England, lets not forget both Scotland and wales treat thier students alot better ( not familier with northan Irland) . Our.plan with DS who has just started paying back was to.use his trust fund to support his studies and his house deposit. The current real issue is Reeves not raising the inital munimun sakery payment thresholds in line with average wage as outlined in the loan agreement he signed in 2021! They have lots yet anothe 4 vote becuase of this from a prevous labour family.

I understand what you mean.
I used savings to pay off my student loan. Psychologically it was worth it to me. I also paid off the mortgage I got later ASAP, even though I could have got more interest in a savings account. Don't regret that either.

But I think it depends on your mindset and what the child's likely career path will be. And how soon they want to buy a house.

Graduate tax - therefore reducing the amount they take home when working. If you can help prevent that, why not? I have many peers still grappling with multiple deductions from their take-home and I am eternally grateful my parents ensured we didnt have student loans.
They are a perfectly fine vehicle to ensure everyone has access to higher education but if you can give your kids the head start of no additional 9% tax - what a gift!

With no student loans and living at home for 3 years after uni - I was able to save up and buy my first flat (mortgage) by 25

It's not the same as other types of debt. It doesn't appear on your credit report and if you can't afford to pay it off, you don't have to. No other loan or mortgage you will take out will let you do that.

What it is, in reality for most people, is a graduate tax. The interest rate on it is irrelevant as most people now will never pay the loan off before it is written off.

Ultimately of course you are only advising them, it is their decision not yours. You need to be really, really sure you're right if you are advising them to burn through their money as quickly as possible.

We have spreadsheets that say long term DD may be many tens of thousands better off taking the loans. We have factored in the extra expenses of years of paying rent, rather than mortgage, while she saves up a deposit. What we have said to her, though, is take the loans for now and if you want to prioritise paying them off over a house deposit when you're older, then do so. Taking the loan keeps her options open. Spending all her money on uni fees doesn't, and may make it harder for her to justify a placement year or master's. Obviously if she goes for early payback after graduating she'll have to pay some interest, but I think keeping that flexibility is worth it. Better that she make the decision at 22, or 25, than at 18.

Watching

And to everyone saying oh it’s not a debt, it’s not much etc,

Can you imagine if Rachel announced tomorrow that she is increasing income tax by 9%

The country would lose its absolute shit. There would be riots on the street.

It is a debt. It affects your affordability. So it does have bearing.

If you can pay it.