Page 5 | AIBU to ignore Money Saving Expert advice?

Lookingafterthepennies · 2026-01-31T21:46:02+00:00

Has anyone regretting taking out student loans rather than using savings to cover tuition fee costs? My children are in for fortunate position of having an amount equivalent to over 2 years worth of tuition fees in their trust fund accounts. I understand it makes more financial sense from a numbers point of view for them to keep that money invested and use it for eg a house deposit in the future, and take out tuition loans, but the idea of them having to pay back a debt for most of their working lives makes me feel a bit sick. So AIBU to think the psychological stress of having a never ending debt is worse than the the benefit of having a big chunk of money to use for something else. YABU: it’s fine, you accept the debt and it doesn’t really phase you YANBU: the never ending dent in the pay packet due to loan repayments is demoralising and should be avoided if poss.

Whatwerewetalkingabout · 01/02/2026 09:53

I would only use the money to pay tuition if they're more likely to piss the money up the wall than save for a house deposit. But if they will save it for something sensible then it makes 100% more sense to have liquid assets. Can they invest it in a LISA to lock it away until they need a house deposit and benefit from a 25% boost?

Schoolchoicesucks · 01/02/2026 09:53

CactusSwoonedEnding · 01/02/2026 09:27

Although it's called a "loan" it is structured effectively as a graduate tax that those who fully self-fund can opt out of.

I don't think there's much "psychological stress" and doesn't make much difference to most young people. Psychologically it feels more like a tax than a loan which is half way between the basic income tax that everyone pays and the higher rate tax that the higher earners pay.

On a salary of £39k ish (uk average salary) with no student loan the take-home each month is £ 2,524.10 per month after Tax, NI and a 5% pension contribution but no Student Loan repayment whereas with a Student Loan the same person would take home £ 2,419.10 per month - a £105 difference really isn't that much whereas the difference between the rent that someone with no access to the housing ladder has to pay vs being able to get a mortgage for the same level of housing will often be several hundred pounds - but if this Trust Fund is only enough for a couple of years and any loan is needed, they will still pay that same £105 per month whether the debt is £10,000 or £70,000 so unless you can top up the Trust Fund to pay for full living expenses and fees throughout the course, there's not much benefit.

It does make a bit more of a difference with a salary of eg £90,000 where Take Home without a loan would be £ 5,119.71 and with a loan would be £ 4,632.71 so that's a difference of nearly £500 but how confident are you that your DC will be earning at that kind of level? (top 5% of earners) meanwhile if one of them ends up not earning much (eg if they are a SAHP or work part-time due to childcare) they would pay very little or nothing, and you can't be sure.

If you have enough spare capital yourself that you can cover the shortfall between the Trust Fund and the full cost, and if you are reasonably confident that your DC is heading for a top-5% career then my advice would be that you start off with taking the loan but wotj you paying the accruing interest off right from the start (interest is charged from Day 1 of the course so a lot accumulates during the years of study) so that the debt doesn't grow. Do that until 3 years after graduation by which time it should be clear whether they are being successful and are genuinely on their way to stellar salaries or whether they are closer to average. If the former, then releasing the trust fund at that point and paying off the remaining debt would be sensible. If the latter then using the Trust Fund for a house deposit and paying the repayments as a graduate tax will save more money.

This is interesting. I know it is possible to make additional payments to the SLC. Parents in the position of "having" the funds to pay could choose to pay the interest directly to the SLC so that their children's 9%s go straight towards the capital. Students could do the same themselves while they have the £ in a trust funds if these are accumulating above rpi return (though if they spend it on a house deposit it's not there any more).
Definitely one for me to think about at least in the short term while DC is studying and first few years afterwards.

berlinbaby2025 · 01/02/2026 09:56

latetothefisting · 01/02/2026 09:23

Exactly. Bad housing/annoying neighbours/stress of moving has caused me far more "psychological stress" than my student loan ever has! The vast majority of their peers will have student loans so they aren't at a disadvantage, whereas if lots of their friends start getting money to help with deposits they might feel hard done by.

Also what if they drop out or never earn enough to pay back their loans? Then you will have lost out by paying upfront. There's always the possibility the government will forgive/wipe out some student loan debt at well - they took £1000 off both of my siblings for some reason.

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Totally agree there @latetothefisting @IhadaStripeyDeckchair. The psychological cost of renting, and for a long time, can be immense - it’s always at the back of your mind that the landlord can chuck you out, you can’t decorate or in some cases can’t even hang a picture up, high rents which limits your opportunity to build up a deposit to buy something, time and energy spent looking for another rental (often competitive), unethical landlords, rents increasing, a higher probability of shitty neighbours…I’m not saying being a mortgage payer is a walk in the park, but it’s generally better than paying someone else’s mortgage for years.

ChapmanFarm · 01/02/2026 09:57

Zanatdy · 01/02/2026 06:16

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.

While this makes total sense in these circumstances, most people won't have the option to live rent free (in a house to themselves) in order to save.

I think the majority of posters are saying that taking the loan gives more options if you don't have sufficient funds to cover everything.

If the OP's child gets a graduate job close to the family home then paying off the loan on graduation may make sense.

But there are just too many variables. They may remain in their university city or need to move to the other end of the country for a job opportunity, or move with a partner.

In those circumstances, a lump sum is much more helpful.

At this point there's no way of knowing which is the better of the choices but if you don't take the loan you've lost the choices.

The interest between a savings account and the loan should balance it out while they see how life pans out.

Original poster

Lookingafterthepennies · 01/02/2026 09:58

The fact that the goalposts could move on thresholds and interest rates over the 40 year payback term is also a consideration.

I expect they will take the loans at the start. As many have said that then gives them the freedom of choice. We have sat down and talked about pros and cons.

I’m a single mum and had a period where money was tight, I’ve learnt that you never know what tomorrow will bring which is also why such a long term loan/debt/tax make me uncomfortable.

It’s great to hear everyone’s perspectives so thank you all for taking the time to contribute. It has been very helpful.

OP posts:

lljkk · 01/02/2026 09:59

imho, this is a decision you should make with your young adult person not with randoms on Internet.

My one tuppence is: the young person will value their education more if they go into debt for it. This sharpens their appreciation of the commitment they are making. Not wildy more... but yes, people value things more when they didn't get them for free.

(says parent of a Uni drop out & yes we paid most of the fees/loans, because inflation was hugely eroding the value of our cash savings anyway, or he was going to get a lot of CCJs because loans stop the moment they drop out).

KarmenPQZ · 01/02/2026 11:13

university is all about learning. Not just academically but also independence and life skills, especially budgeting shot and long term. This is the first real debt they will have but unlikely to be the last in their life. Learning to mange this practically and psychologically will set them up to fully adult the rest of their life in my opinion.

Although mine was old style I took it and saved it and worked at least 20 hours term time and often 60+ during all holidays. It gave me options of travelling when I graduated, having better options for housing when first started work and I ultimately bought a whole house in London at 26 instead of paying off the loan. I’m in my 40s and I still maintain it taught me good money management.

JamesClyman · 01/02/2026 11:18

It's not a loan it's a "graduate tax". Keep the cash.

BlueMum16 · 01/02/2026 11:39

My DC has taken out the student loan but is working too and aims to pay a big chunk off when he graduates. He took out the maintenance loan in the first year but has repaid that but already and didn't need it for year two.

If you do the numbers of expected earnings in 5 years. 10 years etc and how much they'll pay over the next day 30 years it's a massive amount compared to the £30k they leave with, assuming 3 year course. If they can settle the debt quicker and save interest, why wouldn't they?

HeBeaverandSheBeaver · 01/02/2026 11:39

@KarmenPQZ

If you're in your 40s. Houses were in reach of most salary's. There are no longer in reach and add a student dept to that.

It's really winds me up when people born before the 90s spout this shit. It's not that Same AT ALL.

cestlavielife · 01/02/2026 11:45

Do as you wish.
But in 5 years would they like easily accesdible 18 k towards their car house deposit in the bank to access? Ad paying an extra "tax" from income ?

Or nothing in the bank and trying to save that % each month to build deposit?

Money in hand is maybe better
Loans will eventually be writren off
Theymight not be earning enough to pay anyway

berlinbaby2025 · 01/02/2026 11:49

BlueMum16 · 01/02/2026 11:39

My DC has taken out the student loan but is working too and aims to pay a big chunk off when he graduates. He took out the maintenance loan in the first year but has repaid that but already and didn't need it for year two.

If you do the numbers of expected earnings in 5 years. 10 years etc and how much they'll pay over the next day 30 years it's a massive amount compared to the £30k they leave with, assuming 3 year course. If they can settle the debt quicker and save interest, why wouldn't they?

Most students take out the loans for the fees and maintenance for the entire duration of the degree, so your son is in the minority. The average student graduates with £53k debt, which is part of the issue.

MidnightPatrol · 01/02/2026 11:59

KarmenPQZ · 01/02/2026 11:13

university is all about learning. Not just academically but also independence and life skills, especially budgeting shot and long term. This is the first real debt they will have but unlikely to be the last in their life. Learning to mange this practically and psychologically will set them up to fully adult the rest of their life in my opinion.

Although mine was old style I took it and saved it and worked at least 20 hours term time and often 60+ during all holidays. It gave me options of travelling when I graduated, having better options for housing when first started work and I ultimately bought a whole house in London at 26 instead of paying off the loan. I’m in my 40s and I still maintain it taught me good money management.

Edited

This is unrelated to the cost of student loans today however, given you are in your 40s and it’s a completely different system with far higher fees and interest (and - the costs of eg buying houses etc are far higher too).

Mt563 · 01/02/2026 12:08

Lookingafterthepennies · 01/02/2026 09:58

The fact that the goalposts could move on thresholds and interest rates over the 40 year payback term is also a consideration.

I expect they will take the loans at the start. As many have said that then gives them the freedom of choice. We have sat down and talked about pros and cons.

I’m a single mum and had a period where money was tight, I’ve learnt that you never know what tomorrow will bring which is also why such a long term loan/debt/tax make me uncomfortable.

It’s great to hear everyone’s perspectives so thank you all for taking the time to contribute. It has been very helpful.

Then you should value the money for house deposit more if you know how it feels for things to be tight. Options:

no loan, but higher housing costs due to lower deposit. If job is lost, hours cut, mortgage still needs to be paid.

student loans, lower housing costs or bigger emergency fund. If they lose their job, hours cut etc, then their student loan payments stop or drop.

Donotgogentle · 01/02/2026 12:13

DeftGoldHedgehog · 01/02/2026 08:11

The plan 2 loans are terrible on interest, I would hate to have that hanging over me. DD1 will have a latest plan loan which is different but I can see your point of not having it hanging over you.

Edited

Agree. Plan 2 seems completely unfair with RPI plus up to 3%.

new loans since 2023 have been Plan 5, so interest is pegged to RPI inflation. Also unfair as gov generally uses the lower rate of CPI but it seems fine. DC has taken the Plan 5 loans.

Donotgogentle · 01/02/2026 12:19

HeBeaverandSheBeaver · 01/02/2026 08:40

Rachel Reeves is changing this so I would read up on student loans very carefully before taking strangers advice on here

She said this week she thought the loan terms were “fair and reasonable” so I don’t see any changes in the pipeline. I wish gov would do something about the high interest rates on the Plan 2 loans.

Donotgogentle · 01/02/2026 12:26

Obvioushobbyist · 01/02/2026 00:06

Thats exactly what we were sold. And it’s the complete opposite of that. I think I am on something like 6 or 7% interest atm.

In my whole adult life it has by far been the most expensive loan I have ever had by a factor of c. 300-400%

And I am a lucky one on quite ‘favourable’ plan 1 terms.

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Plan 1 interest is currently 3.2%

newmummycwharf1 · 01/02/2026 13:09

NemesisInferior · 01/02/2026 00:52

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

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Not quite. 20k at the start versus 300 (or whatever) from your pay packet every month. How do you pay the mortgage and live as a young starter?
It does depend on whether you believe your children will earn more than the median wage early in their career - which you should if they are going to University (obviously not always). My parents were confident of that and where correct. Will do the same for my kids

AmplePlayer · 01/02/2026 13:09

Out of interest I just looked at a student loan repayment calculator, a 50k loan on plan 5 would take 21 years to pay back by someone earning 45k, there would be approx 24k of interest.

PoFacedStare · 01/02/2026 13:12

We paid our kids’ fees and they graduated and started working asap. Without a debt hanging over them. We ignored the evidence and have no regrets. They are very very grateful indeed.

newmummycwharf1 · 01/02/2026 13:16

viktoria · 01/02/2026 08:36

There is a difference between plan 2 (which mine would have been on) and plan 5 which current students are on.
If you are on plan 5 the loan will be written off after 40 years. You start repaying at a lower threshold, but at least you - currently - have lower interest than plan 2.
Interest starts accruing from the first day the loan is taken out, not when they finish uni

My two daughters inherited £20k each from their grandparents.
We advised them to use that money to pay towards the tuition fees.
We were in the lucky position to pay the rest. Even though we certainly felt it.
Luckily they weren't at uni at the same time, so the cost was spread for us.

Both had part time jobs during their studies, because our allowance paid for rent, bills, food and we covered extras like sports, or a pair of shoes or dental cost, they had to earn their going out money (apparently working up to 10 hours per week, actually helps students to plan their week better and they seem to do better than students who don't work or students who work more).

Our elder (25) is about to start a job where she earns £60k. I'm so glad she doesn't have to pay the extra 9% over the (I think £28k threshold)
I don't know the figure, but I assume she'd pay back about £250 a month - while the loan amount would still increase. Yes, it does get written off after 30 years.
But those are also the years where you really feel if you have £250 more or less to spend each month.

So going against the grain, I think if you can afford it, don't go for the student loan

Precisely this

HeBeaverandSheBeaver · 01/02/2026 13:38

@Donotgogentle 🤣🤣🤣
Crikey if RR says it's fair then it's fine right ??? 😳😡🤣🤣

NemesisInferior · 01/02/2026 14:24

newmummycwharf1 · 01/02/2026 13:09

Not quite. 20k at the start versus 300 (or whatever) from your pay packet every month. How do you pay the mortgage and live as a young starter?
It does depend on whether you believe your children will earn more than the median wage early in their career - which you should if they are going to University (obviously not always). My parents were confident of that and where correct. Will do the same for my kids

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Hardly anyone on a graduate income is paying £300 off a month, that equates to a salary of around 70k for plan 5.

The reality is, at the start of a young person's career they will be paying off very little of their loan, if anything at all, and will have very, very little wiggle room to save for a deposit. Having savings for a deposit on a house is far more valuable rather than saving £20 a month on loan repayments. The only exception is if there is enough money to cover all student expenses and then some.

Frenchcremefraiche · 01/02/2026 14:26

I wish someone had explained student loans to me properly. At 18 they were pushed so hard and I never really understood what I signed up to.

However, on my scheme I barely cover the interest each month. So it's not been a cheap loan. The APR might be low but because I will never pay it off, it is bloody expensive.

My tombstone will read "and she still never paid off that stupid loan".

Frenchcremefraiche · 01/02/2026 14:27

Having said that.. having a student loan is normal. Having your parents provide a house deposit is a privilege that not many people are lucky enough to have.