Possibly daft question about private finance box on UCAS form

[Valleyofthedollymix]

Dear all, so sorry I'm looking for shortcuts by tapping into the collective wisdom of this site as googling seems to have left me confused.

DS has just texted me to ask 'I'm getting private finance for uni right?' as he's the midst of trying to sort out an early UCAS form. I didn't realise there was a box you had to tick for this and it's left me with lots of questions.

1. Why do you have to let UCAS know? What are they trying to gauge and how is it their business at this point?

1. As I've always vaguely understood it, you might as well get student loans whatever the family finances because the student might never have to pay them back and the interest is low. Have I got that right?

1. In other words, if we can fairly comfortably pay upfront, what's better - to do private finance (and therefore tick that box) or apply for student loans?

Apologies, I'm sure I can find out the answer myself but it might be something that one of you kind people have front of brain.

It's worth checking the current interest rate: I don't think it is that low. Also worth checking when interest starts to accrue. Even though a lot of people never end up repaying, I don't think it's an absolute no brainer to take the loans if one doesn't need them, especially if you are reasonably confident about your child's long term employment prospects

DH is adamant loans are the way to go (and to be fair we do have a stereotypical relationship in which he does household finances and I do the cooking, sigh). Money Saving Expert seems to agree. It seems as though the only way you'll end up paying more if you take the loans is if you're a very high earner very quickly on graduation.

Do you know why UCAS ask? What's the relevance to them? Does it affect applications in any way? I know, for example, that it seems easier for my friends who live abroad to get their kids into top universities here, paying foreign fees.

You can always change your mind whatever you decide. So maybe tick loans so your son doesn’t just expect you to cough up and then just don’t take the loan when fees are due. Or do take the loan. Whatever you decide.
I think ucas ask just to get a broad picture of loan v private in the cohort

It depends how comfortable you are and how confident you are he will be a high earner.

If he is on track to earn say £60k, the student loan payments will be £245, and he’ll be paying that back for a long time, as the current interest rate is about 5.6%

Therefore, if you can afford it, and are fairly confident he will always been in a high paying job, it’s better to pay upfront.

But, if paying the fees is in anyway a sacrifice then take them, as it’s not an unusual position to be in, and they do get written off eventually

(Running a quick calculation - based on earning £60k for ease) if his original loans were £45k, he would be paying them off for 18 years and pay £74,524.

If he earnt £40k, he would be paying them for the full 30 years and pay £86k over this time (again, assuming original debt of £45k).

This is all so helpful, thank you very much. Will tick the loans box and then can see nearer the time where his possible career interests might lie.

It is possible to take the loan for fees but choose to cover the maintenance yourself. It's quite a flexible system.

1. I'd have thought you have to let them know so that they know who to bill for the fees.

1. Yes. Also you don't know how circumstances might change in the future. You might become ill and unable to work. Your child might decide they want/need to do a Masters and the loan for that is a set amount that often doesn't cover tuition let alone maintenance. You might need the money to fund that instead.

1. See above

UCAS asks as a preliminary data gathering exercise, and it means data is already passed to student finance so the process has started. It doesn't affect admission at all, and you can tick the box and then not take them, or the opposite, with no problems.

I'd just point out that with student loans, the repayment is based on earnings and if his earnings change due to unexpected job loss or haven forbid illness in his future then his loan repayments would stop. Unless he's self employed the loan repayments are usually taken by his employer before he's paid so you never end up "missing" that money as you didn't have it.

As someone already mentioned its a flexible system you can choose to take just the tuition fee loan for example and cover the maintenance side of things yourself.

The UCAS fees box I used when working in admissions and enrolment to give me an indicator of which students were not likely to show on the student loan portal when enrolment onto the course was going ahead so I knew to follow up with them to find out what their plans were or help them sort out payment plans and such

The interest is actually fairly high and is compound interest which accrues daily from the date they give you the loan. Currently, it accrues at 4.2% while studying for 2021/22. The interest rate is variable, so will change with RPI. After graduation, the interest rate depends on your income. The higher your income, the higher the interest rate. It ranges from RPI to RPI + 3%. There is no cap on interest. (RPI is currently 1.5%)

The reason most students won’t ever “pay off” their loan is mostly because the interest is so high. In some cases, their repayments are low enough that their loan balance still owed increases every year. Most students will be paying something towards their student loans for the full 35 years because the threshold is always below the average wage for U.K.

Moneysaving expert has a student loan repayment calculator you can use.
www.moneysavingexpert.com/students/student-finance-calculator/

Oops *full 30 years. Not 35.