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??

[Lucysky2017]

I agree they are not counted as loans for borrowing but they are part of what you fill on the form when you apply for mortgages. My chidlren have definitely had to fill in details even of what they spend monthly ion transport, the gym, cars and had they had a student loan that cost too. Some poor borrowers even are penalised for being sensible enough to pay into a pension (as they the have less free cash to make the mortgage payments).

[alreadytaken]

Despite claims by the government that student loans do not affect mortgages and other loans of course they do. If you are paying 9% of salary it affects your ability to pay for anything else, including rental properties if the landlord has any sense at all.

As stated interest rates are soon going to be 6%+. If you are in a well paid job you will be charged those extortionate rates on your debt but overpaying wont necessarily mean paying less, it may just mean more is "written off" at the end of 30 years. If you havent taken out all the loans it may make sense to overpay and get a personal loan at much lower rates as soon as the debt reduces to a low enough level. A simple spreadsheet can help you work this out - I had about half a dozen making different assumptions about interest rates, with and without shared parental leave and so on.

[KimmySchmidt1]

Makes zero financial sense to pay 6.1% interest on a loan you don't need.

Start her with good habits so she doesnt end up constantly borrowing and living beyond her means - unsecured debt is a sometimes necessary evil not an obvious appendage for modern life.

[TalkinPeece]

already
The point is that the debt does NOT count as borrowing.
It counts as 9% reduction in income - which is a VERY different thing.

If your salary is £25,000 and you looking to buy a property, with student loans of £50,000, you will be eligible for a mortgage of around £70k

The same salary with normal unsecured debt of £50k (think credit cards and hire purchase) - you won't even be able to sign a tenancy agreement, let alone a mortgage.

Half of all people in the UK earn less than £21k
something that posters on the MN education boards seem to forget most of the time.

[emma8t4]

I did as it enabled me to buy and insure a car. The rest was put into a saving account and earned a decent amount in interest and was used as a deposit on our first house.

These days I wouldn't advise it, interest rates on savings are none existent, interest on the loans is increasing, the threshold for payment kicking in have changed and the big one for me is that payments now get taken into affordability when applying for a mortgage.

[chemenger]

The 9% repayment is on the salary over £21 000, not the whole salary, isn't it? So on £25 000 per year that is £360 per year or £30 per month.

[Lucysky2017]

I think m ost people hope that by getting a good degree they might earn a fair bit more than £21k though..... I certanily accept Talk's point but NQ city lawyers earn £60k in their 20s, 100k in their 20s after 3 years (£115k 3 years after qualifying Allen & Overy for example) so if you think you might have lawyer daughters as I do then I think I made the right decision to ensure they graduated debt free.
So if you were on £115k less 21k loan free amount presumably that is 9% of 93k = about £700 a month.

[chemenger]

Around 400 000 students graduate every year in the UK, I don't think that a large proportion of those go into city law jobs. Only about 1.5% of the total tax paying population earn more than £100 000 so the fraction of recent graduates who do cannot be large. Around 7% of all taxpayers earn more than £60 000 pa so again the fraction of graduates who do must be small, given that they make up such a small fraction of the population. Most graduates have starting salaries between £20 and £30 000.

[titchy]

Median earnings 5 years after graduation are less than £30k (including Law) - even paying 9% of £9k is less than £70 a month. Doesn't seem that onerous...

[TalkinPeece]

lucysky
You are very, very unusual financially.
Please do not extrapolate from those around you to the world outside North London private schools and corporate law.

A newly qualified Nurse or Primary Teacher could never consider taking out £50k of debt other than as a student loan
and are very unlikely to ever repay their full loan.

Current estimates are that Student Loan recovery will be around 40%

As it is, the cost of hall fees is so high nowadays that certain universities are only available to those with families able to top up significantly.

[Lucysky2017]

I agree. However I would want girls from even the poorest homes to aim for the top law jobs on £100k by the way. My immigrant muslim cleaner's son did the same LPC law course (after a London comp and law degree) my daughters did which is brilliant - good for him, now working in the City. If he can do it plenty of others can.

[TalkinPeece]

If he can do it plenty of others can.
Except that they can't. Get real.

North London is a bubble.
City Law is a bubble.
How many people in city law firms went to state schools in Grimsby, or Camborne or WhiteHaven ?
How many people in city law firms have parents who did not do education beyond 18?
50% of UK adults earn less than £21k a year

[DoneInn]

Well my DC are never going to be city lawyers. We will see when DC2 graduates what his prospects are and decide then whether to pay it off. Teacher son will be lucky to earn more than average.

[aginghippy]

If he can do it plenty of others can.

It is, by definition, an elite profession. Elite meaning it is a select group. Most people, even graduates (even me) don't earn anywhere near that.

[Lucysky2017]

In which case it is better to take the loans. I am not suggesting otherwise , just showing that if your children might want certain jobs (and by the way my daughters work with City lawyers on high sums from all kinds of backgrounds who just happen to have A* in all exams and a first and they come from all over so let us not be defeatist. I am from the NE for a start..... I just happened to get the best exam results in the school).

[chemenger]

I say again only 1.5% of the working population earn over £100 000; it is safe to say that the fraction of graduates achieving that in the first few years is vanishingly small. Maybe Lucy happens to know a lot of them so it seems common to her, just as many of the people I know are chemical engineers, but many others on here will never have met one! This tiny number of graduates is not relevant to the subject under discussion, we now all fully understand how successful Lucy and all her family, friends and acquaintances are, the majority (the vast majority) of parents, students and graduates do not and will never earn that much and may, in many cases need loans, and need to know that the repayments are likely to be manageable.

[antimatter]

If he can do it plenty of others can
of course every single vacancy in city (law) firms are filled up on that level
how many graduates do they take yearly?
1000 or 2000?
they aren't going to suddenly employ every single able graduate in the country!

[Lucysky2017]

Just take a decision based on what you think your child will end up doing. That's all. You can see city law firm salaries as trainee, as 1 year qualified, as 3 year qualified on line -it's no secret and if you like my daughter and her 2 school friends eg want to go down that route you have a fairly good idea that might be what will be earned if your child has good exam grades and is ambitious and picking a career like that.

I think if they earn £40k a year they only pay the interest on the loan for the 30 years and none of the debt off. However rules change and that is unfair on students. The £21k starting point was supposed to go up with inflation but that was changed.

I am not showing off. My older graduate son was a post man for 3 years on about £22k. I know what most people earn.

[LadyinCement]

I was just on MSE and it says a new student loan guide is being written at the moment in the light of the higher interest rates. So we shall see what the advice is now!

[2rebecca]

My son didn't. He is likely to earn over 21k as an engineering student and didn't want to start with a debt mountain looming over him that he didn't need.

[Lucysky2017]

MSE should do a comparison between career development loans which lawyers often taken on for their one year post grade if a law firm will not pay it - no interest until your year is up and then it's about 9% v the 9% graduate tax at 6% interest with interest accruing and perhaps do sums based on say high earner lawyers, mid earning and then those on just over £21k.