Should DD take out a maintenance loan even if she doesn't need one?

[miniss]

Due to it only needing to be paid back after 21k and it gets written off if not paid for??

She has enough money from saving from working and doesn't need it. However, surely it's better to stay in the bank and just pay it back with the rest of the loan that is for the course??

Personally I wouldn't take money from the public purse if I didn't need to.

Thank you

I don't see the point of taking out a loan if it's not needed. Someone ultimately has to pay for it; it isn't free money.

Plus if you don't think she is going to be earning more than 21k a year to pay it back, why is she even going to university?

I dint know if its better or not

Ds1 is going to uni in September and his father will be financing his living costs with ds1 just getting the loan for his tuition

This year at least

I do think she will earn over 21k??? But the money can be put into her bank and she can't pay it back out of her salary. Also, after 30 years, the rest gets written off...?

*can pay it back

I took mine out.

Wasn't sure if i was going to need it, didn't in the end as I got a holiday job.

Put it in the bank and used it as a deposit for a flat when i graduated. Got me on the housing ladder and saw me through the low paid training years.

Unless the interest is spectacularly high, i would.

I did this when I was at uni, some years ago now, on the advice provided to me, some internet forum somewhere and took out the max loan I could though I worked on and off during uni so probably could have got by with just a little of it but I put it all into ISAs afterwards and used it as the base for my house deposit. I'm still paying it off now of course but the reason for doing it was that it was the cheapest money you could borrow, that is, all other forms of borrowing, loans or mortgage, would lend at more expensive rates in the future and my loan would only rise with inflation.

However, the rules have changed quite a bit since then so I'm not sure it would work in the way it did for me. Suggest visiting Martin Lewis's website for advice.

They seem to be able to change the T&Cs unilaterally and retrospectively, so I think if I could afford for my DCs not to take the loan I would, just to avoid that risk.

(Having said that, I wonder what would happen if they replaced loan repayments with a graduate tax, and grants for future students funded by it - would it then be legal to charge all graduates the tax, even those who hadn't taken the loan that the tax was replacing? I have wondered.)

If she's taking out the fees component, unless she is going into a very highly paid job to start with, then I think she may as well take everything available. Everyone over the threshold pays 9% and looking at money saving expert lots of people will never even pay fees alone off, so she may as well take all she can. I think the system is wrong, but it would be silly to spend her savings and still have to repay 9% for 30 years.

Assuming she's taking out the fee loan her repayments will be the same regardless of whether she took the maintenance loan or not. I'd take the loan and make sure she keeps her savings somewhere safe for flat deposit in a few years.

The terms on the loans keep changing so it's irrelevant what poster did in the past. I'd go to money saving expert and do a bit more research.

Don't do it. I didn't really need mine but I took it out as a safety cushion. Got into an unhealthy relationship. Ended up spending it so my parents wouldn't find out about my boyf dropping out of his course and dossing around at home. 19 years later and I'm still paying it off!

The interest rate she wd need to pay on the loan is not low

Wish dd1 had - there is a 10k loan available for PG study, but no maintenance loan so I am currently supporting her for her PG study. Dd2 has her maintenance loan tucked away in case she also does PG study. Any career development loan has really high interest and counts as proper debt as far as mortgages etc go.

The whole debt thing is utterly horrible and it's taken me years to stop worrying about it as there's nothing I can do about it. Still makes me angry though.

First what people did in the past is irrelevant as interest rates are now so ridiculously expensive that most people face paying 9% of salary for life even if they just have fee loans. However once graduated they can, if paid enough, take out a loan with a much lower interest rate and pay it off if they want. So they dont necessarily have to have a fee loan for life.

It's a very complicated calculation based on what you think they might earn and whether they would be better taking the maintenance loan and using it as a house deposit. For most people that will be a sensible decision.

The past is another country on this - ignore it. The rate is now 3% above inflation. Inflation is this month 2.9% so you pay about 6% interest - much more than on mortgages, even buy to let loans and the interest starts accumulating from the start. I am funding the children fully including the fees.

Also the rules change regularly.
Also my own children tend to earn a fair bit - eg my daughters are/were 40% tax payers in their 20s (lawyers) and it has helped them getting mortgages that they have no student debt. If you areo nsay £100k wage, lose your personal allowance your marginal tax rate is 62%, add 9% graduate tax and your marginal tax rate is 71% or something massive like that these days.

With the old loans that sometimes had negative interest rates (yes really) it was no brainer.
Nowadays, if you do not need them, do not do it.

It will count as a 9% reduction in her income for all mortgages and loans
and the interest starts ticking from the day it is taken out.

From September the interest rate will be 6.1% - that's massive compared to current personal loan rates and mortgage rates.

So should I tell ds not to take the maintenance loan? He has only the minimum.

Is it possible to pay the loan off early in one go? If ds becomes an investment banker (haw haw) it would clearly be much better to clear the loan as fast as possible. If ds gets a job with a modest salary but in excess of £21K (far more likely) he won't be in a position to pay a lump sum but I suppose we could up to a certain level if the interest rates were very punitive by that time.

I thought they got penalised if they didn't have a loan?

None of my older children had loans and nor will the 2 going this year. There is no pently for that. In fact really there ought to be a massive benefit or discount for paying up front! If there is a penalty I didn't know about it. Lots of the boys in my sons' class are not taking any loans at all (fee paying school - the 9250 fee and £8k rent is about their current school fees)

Lady if he can manage with out the loan I would avoid it. It's often messy with loans. They get yo ur records wrong, cannot record properly you have repaid something when you did, lose your address. I just think if you don't need the money why put yourself into that cycle of regulatory complicated hell that is Government admin.

Yes you can pay it off early. When my daughters went £1k a year fees only some friends put all of it in an ISA (when the student loan rate was low) and then when they graduated paid it all off with a profit - that doesn't work now but you can stll pay it off. However interest starts accumulating at 6% as soon as you take the loan.

If you think your child will not earn much (my older son is about to spend 3 months cycling through Vietnam - so not much wage and befoer that was earning only about £25k compared to his higher paid lawyer sisters and might be a case in point) or will give up work when b abies come because your family or culture is that women don't earn much and men keep them once babies arrive then it may be sensible for them to take the loan or if they want to enter very low paid work eg doing art or acting (acting often means a life waiting tables).

Well, in actual fact ds did say he fancied being a house husband... and a writer. Chip off the old block, he is...

The repayments are the same however much they borrow. DS will finish with about 55k plus interest, which as some have said is high. It's unlikely he'll be a super high earner (teacher) so will basically pay 9% extra tax on his earnings over £21k.
We could just afford to pay off his loan but I feel it makes more sense to help him buy a house.
When I started work tax was 35% not including NI.

Please remember that "Student Loans" are not really borrowing, they are a graduate tax.
£55k of student loan does not affect your credit rating for mortgages and car loans and stuff.

£55k of other loans most certainly will.

It is therefore worth taking them out unless the family does not need to borrow at all.
Then there is the chance of paying them off early.

My personal plan is to hold money aside to help my kids buy houses rather than pay off their student loans