AIBU to ignore Money Saving Expert advice?

[Lookingafterthepennies]

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.

The country needs doctors, engineers, nurses etc. we shouldn't have a system discouraging students from doing these things because of the debt they'll be landed with.
The student loan interest rates are the issue. You accrue interest while you're still studying, it's linked to rpi, some plans rpi+3%. You are not getting a cheap loan like it used to be sold as. At one point I had 8% interest on my loan. I can find cheaper loans from high street banks than what the interest is on my student loan, that is ridiculous. The thresholds before you start paying back are being frozen, so even minimum wage workers will be paying soon. You have to be earning extraordinary money to pay the debt and the interest back before the debt is written off

Apologies. It's just galling and panic inducing to read that my son's peers' parents are in this financial situation to have options like this. Gives me flashbacks to being at Uni when I went on marches, lobbied my MP in person, went on TV and radio trying to fight the inequitable rise in student fees of the early 2000s. The friends who did this alongside me were also from state comprehensives. The well-off Winchester College housemate didn't engage at all as they didn't see the increase as a problem. Because their family had enough money that the increases wouldn't limit options and opportunities.

I was expected to pay mine off in a reasonable amount of time but I actually can't do the job I qualified for any more for (physical) health reasons. You can't undo paying off a student loan. I was lucky to have the money but we bought a house instead which financially was the right decision.

You definitely never know what tomorrow will bring which is why a small repayment tied to your earnings is way better than investing savings. If your kids finish uni and aren't able to find jobs they will either be left with savings and no repayments or without savings and no repayments. I know which one I would choose!
I've been paying my loan for 7 years now and I can't even tell you how much of it is left but I can telly you that my repayments aren't even covering interest. So it is growing. Do I care about it? Not a bit. I was just approved for a mortgage so the bank doesn't either. I have plenty of disposable income and an odd £180 coming out of my salary every months is not making a substantial difference to my life. And my loan will be wiped before retirement. It's nothing but a bureaucratic merry-go-round.

What a wonderful idea. Yes! Let's imagine that wonderful world - the one in which there are no nurses, occupational therapists, physio therapists, social workers, teachers. The world in which there are no clinical researchers finding cure for cancer. No engineers. No designers responsible for book covers, package design, car design, assistive equipment. No radiologists or pathologists... No archivists and librarians.
Just lawyers, IT consultants and private dentists. Marvelous!

So no-one in Humanities or arts need go to university then? There is no merit in studying English or History, Art or Design. Its a shame that studying cultural subjects is not seen as beneficial to society.

Did you know that you need a PhD in History to even apply for most graduate jobs in Museums and Heritage?? Oh, and they only pay NMW.

though to be fair, if people did respond like that then that would force the government to increase the funding for them

I think from reading the latest news articles on this it's a never ending rip off.
In the old days the terms and conditions are great but compared to a mortgage the rates are sky high.
Also no one can keep up with the interest accruing so the government has been accused of mis selling them.
The long term means that people are stuck in a trap of paying for 40yrs because it can't be repaid.
I don't know what to say. I don't know what to do myself....

We had this discussion - decided to take the loan and use DD1's ISA to pay the deposit on her first house. We're going to help her with the student loan repayments once she has to start paying it back - so it shouldn't cost anything and we'll all have benefited from the upfront money.

How can it not cost anything? Haven't you got truckload of interest to pay?

Presumably their daughter is on Plan 5 where interest is matched to RPI, i.e. zero in real terms (give or take). It's easier to trust in that if she has an ISA that is earning similar interest year on year, rather than just an ever increasing debt.

@1stWorldProblems do you have a plan yet for what level to help her at? Psychologically the idea of clearing the interest every year appeals, even if the spreadsheets favour sticking to the minimum.

For plan 5 and some lower paid graduates on plan 2 the interest is RPI which is a measure of inflation.

The RPI rate currently being used is 3.2%.
Something that cost £9000 a year ago would now cost £9288. If you borrowed £9000 a year ago with an interest rate of 3.2% you would owe £9288. If you saved £9000 a year ago at an interest rate of 4% you would have £9360.

So not what most people would describe as a truck load of interest. Unfortunately plan 2 can charge RPI+3% but for most current undergraduates and those planning to go there is no real terms increase in the value of the loan.

This is what we're planning on doing. Taking out the maximum available loan and putting the maximum annual anount into a Lifetime ISA for DC's once they get to 18. Then in 10 years they will hopefully have at least £40k for a deposit. We cant afford to pay all fees for 2 kids, maintenance and pay a house deposit. Obviously if you can, then that makes sense, but it also means that your kids are so well off it doesn't really matter too much what you do.

Sorry @RainbowBagels, can you explain that again? You're taking out the maximum loans for fees and maintenance and then separately you're putting the same amount of money from your own pocket into an ISA for your DC?
And then when you DC graduates you're going to pay off their loan with the money that's been in the ISA? Or is that new money?

I had a loan during the 2 years I attended uni. I've no idea what I owe now, I've literally paid about £60 back a couple of times when I worked loads of overtime. Otherwise I've never earned enough to bother. DH finished paying his back a few years ago cos he got a decent paying job.

I can't say I have any psychological distress, I only really think about it when I read something about loans or the statement comes in. It will be written off soon and that's that. It doesn't affect mortgage applications or any other sort of credit so I don't see why I should worry about it.

That's why people need to think about their "likely" future earnings and do the number crunching based on their own situation rather than "following the herd" and glibly taking advice from MSE or others.

In your case, it's absolutely the right thing to take full loan - presumably you knew that you were unlikely to earn enough to pay much of it off over your working life based on the degree subject, your career aspirations, whether you planned to work full or part time etc.

Very different to say, a doctor or IT consultant who is almost certain to be a higher earner liable to make repayments, even if only working part time, where the interest charged on the loan WILL almost certainly get repaid on top of the capital.

One size answers don't fit everyone. People need to make the best stab at their likely future earnings when deciding whether to take out full loans and whether to make early lump sum repayments.

No, I was doing a science course with good career aspirations. I left at the end of 2nd year having failed spectacularly.

But I couldn't have afforded to go to uni in the first place without a full loan as my parents were not really able to support me.

No dc's can take out the maximum available loans and fees and pay them back themselves when they start earning out of their salary. I am separately puttng money into the lifetime ISA which is £4k a year. That's not for loans its for a house deposit so them paying off student loans doesnt prevent them getting on the housing ladder.