What to do about student loan? Advice needed.

[kenchurch]

My DD will take a fees loan at £9,250 for the 3 years.

We can't decide what to advise her in regard to a living costs loan.

DH and I are willing to pay for her accommodation and 3 meals a day at her college. This will be only for around 24 weeks a year. (Oxbridge)
We are not willing/ can't quite stretch to pay for her extras such as going out etc.

She is working the summer so should be able to save around £3000 and will be given around £1000 by her grandmother. Which would equate to around £77 a week for 52 weeks. Not a huge sum if she wanted a holiday or something but not pittance. She will also have long holidays that she would be able to work a bit during, but of course dependent on work load. This could pay for anything she needed extra. But would tie her summers down to working when she may need to do other things.

She hopes to become a city lawyer, or perhaps go on for further study. So possibly extra courses to fund herself after undergrad. We would not be able to pay anything towards these.

I'm not sure if I'm being too conservative/optimistic in regard to living costs etc.

Should I advise her to save on future repayments and do a year on tight money?

Or should she take a full £8000 a year living costs loan for 2-3 years and save it to fund the uncertain years after graduation. Such as if she had to pay for the GDL/LPC/Masters. She currently doesn't have a car either, although I think it'd be daft to pay such high interest on a loan to use it for that.

Any advice?

What else would she do in the summers?
Does she even have a driving license?

I come from a country where all students work. I just about understand vet science/medics/lawyers on internships/trainee journalists not having paid jobs. The rest I envision must work somewhere, somehow.

The holidays are extra long at Oxbridge however the workload is such that the Christmas and Easter holidays should be spent studying as they have exams at the start of each term. Additionally in the summer term there are exams at the start and end. It's not just the fact they have exams but their workload leaves them really tired. My dc is doing sciences and hence the work load is high.

My DC at Oxbridge (five graduated so far) have needed far more than three times eight weeks of accommodation, so your calculations are already out. Also, depending on the college, they might rent a house for a whole academic year which is more expensive, generally.

On a different point if your DC wants to be a successful City lawyer, they won't need to pay for the GDL or LPC as City law firms pay these and it would be unwise to go ahead without a Training Contract at that sort of firm (two of my DC have gone down this route, with all expenses paid). Masters is another matter of course and you can reckon on £26k for that.

Will she really be eligible for £8k maintenance loan if you can afford to pay her accommodation?

If she's taking out the fee loan her repayments will be same same regardless of whether or not she also takes out the maintenance loan. However if she's likely to earn a lot, and Law and Oxford suggest she will be a high earner, then she will probably end up paying a lot more than she borrows so keeping loans to a minimum makes sense.

Can she take out the maintenance loan and put it in a high interest account so she keeps her options open?

The maintenance loan is means tested. My DS gets the full £8000 odd but I only earn £14000. My friend's DS gets approx £7000 and they can't afford to help him at all.

Apply for all she can for the 1st year and see how funds are at the end of it. Funding has to be applied for every year so by doing that she will have a good idea of how much she needs to get by on, be that from maintenance loans or employment.

Also because the holidays are so long their living costs are lower as they are back living at home so much.

If she is Oxbridge, she will need a bicycle, not a car.
Term dates are sufficiently short that even in a part time summer job she'll earn enough to last the whole year.

Dd1 didn't take maintenance loan - wish she had as it would pay for her LPC for which no student loan is available. Dd2 has banked hers - will be available either to pay back or to use for course after Masters if she chooses, house deposit, travel...

Hindsight is a great thing, but I wish dd1 had taken it and kept it in the bank just in case.

We pay/paid rent for both and gave them £250 a month each as well as a few food parcels. My dad sends them the odd £100/£200 every now and again too. They work/ed in long holidays to supplement their income.

Also because the holidays are so long their living costs are lower as they are back living at home so much.

The '8 week terms' are the core when they must be there - in reality, I'm finding mine is there for longer at either end - supervisions, group work or library, helping with events - and a few days chilling with friends. Quite a bit of the accommodation at her college, after the first year is 39 week contracts. The details will obviously vary between colleges, but chances are you can find them online.

Definitely no cars for undergrads in oxbridge.

First of all maybe check exactly how much she'd be able to borrow for maintenance.

And then from what you've written, she would have less money after her first year anyway, so would probably need the loan, so you're probably only talking about saving a year's worth? Is that worth it?

Dd's wannabe lawyer friends were applying for internships over the long vacation, so as you say, she might not be able to rely on earning much (although with half the year 'off' hopefully she can manage a bit!).

And yeah, don't worry about a car

OP it’s a no brainier.
Take both ‘loans’.
You only repay depending on income and the amount she repays depends on her INCOME not on the AMOUNT of the loans. It is not like a usual loan where a set amount is paid back over a short number of years.
Any money she saves now should be used to top up her living or saved for eg future housing.
Hope this helps.

There was a superb programme by Martin Lewis in student loans recently. See if it’s still on itv iplayer or YouTube.

If not, look on his website for advice.

Another one agreeing that the concept of 8-week terms is a bit of a red herring. DS (4th year) is only coming home for 2 long weekends this Easter, as he needs to stay in college to work on his project. At Christmas he went back just before New Year. In reality, especially in the latter years, he has been in college accommodation for far longer than 24 weeks per year. The maintenance part of his loan doesn't even cover his rent for the 8 weeks, let alone any food or other expenses.

In your position I'd advise your DD to borrow everything available this year and see how she fares.

Just to clarify: when I said it would be unwise to go ahead with the GDL/ LPC without a Training Contract at that sort of firm I meant that if you're in the frame for a Magic Circle firm you'll almost certainly have done internships ahead of the GDL/ LPC so will have all the funding already in place. If you've been rejected after internships then you really aren't likely to be taken on after the GDL (without something more), so might want to re-think direction if your heart is set on 'City law'. I did not mean to imply that 'City law' is the only or best law worth doing - absolutely not!

DH and DD set up spreadsheets to examine amount of loans, possible pay profiles: lower/higher pay, whether there would be breaks (unfortunately always going to be more likely for women), disaster scenario of being unable to work. The conclusion they reached was that really, the only scenario where taking the maximum loan would turn out to have been the wrong decision(assuming current T&C hold) would be if she has a good, solid professional career. While this is the most probable outcome for her, it would be one in which she was able to make the repayments- and heaven help us, someone has to!

Without doing the same exercise for your DD, my guess would be the pragmatic course is to take the loan, and if therefore you/she can save any money, invest it so she has a bit of cash at the start of her working life to e.g. buy a car without being trapped by one of those infernal hire purchase contracts.

That is Super Helpful, Errol.

They often rent out the accommodation for conference use during the holidays - I got to keep my room for free in exchange for a few hours chambermaiding each day - about 3 hours, and it taught me hospital corners! That might be an option if she wants to stay up.

Dd's very specific choice of law is not city - much harder to get LPCs paid for for that unfortunately without some underpaid paralegal work first. I really admire her for what she wants to do. Whatever it's used for, it doesn't hurt to have it to hand. I'm over the scary debt thing now - first of all it's not my debt/choice, and secondly it's just the way it is.

Yes she would be able to borrow £8,000 for living costs. (Wales)

So the consensus seems that she should take the full amount this year and see how she fares. I suppose it is for the best in some regards to not need to worry about money. Just hope it doesn't end up costing her dearly in future if she is successful.

Wow, I didn't realise the maintenance loans in Wales were so high. My daughters get about half that - we pay their rent, but not food, and they are able to live on that. So maybe get the loan and see how much she has left from that and her savings at the end of the year. It might be that she will only need the loans for a year or two, rather than all 3.

I am still confused and conflicted about student loans. Martin Lewis was, IIRC, paid by the government to promote student loans when the fees first trebled so I take anything he says with a pinch of salt. He also said that anyone can go to uni, which evidently they can't if their parents can't/ won't make up the difference between the student loan and actual living costs.

I fully understand the current arrangements, which would apply for 30 years or until it's paid off, but am I right in thinking that any government can change anything about the loans in the future and that such changes could apply to anyone still paying off a student loan in 5/10/20 years time.

e.g. they could change the interest rate, number of years repayment, threshold at which repayment begins, % repaid (currently 9% above £25,000). And they can change it retrospectively, so current DC could, in theory, end up paying 10% interest, no write-off until 40 years, frozen repayment threshold etc. whenever they want. This is the massive red flag as far as I can see.

Or am I missing something? Is there a safeguard to stop greedy future governments raiding easy targets i.e. students.

As pp said take all that's available. Don't see it as a loan see it as a tax as it will get deducted from salary so it's not like she has to purposefully make those payments. I just think if you view it like this it's a bit less scary. And as pp said it goes on her income so if she's not earning she's not paying it back .
I do find your comment funny about if she needed a holiday- I've a well paid job and can't afford a holiday so I think she might have to wait for such luxuries.

In many colleges she can earn money off her accommodation and food costs by working in college - as a "scout" (cleaner), in the library, behind the bar. I worked both behind the library desk and in the bar. Other than that I worked full time in breaks in my first and second years and just pinched the pennies. Lol to the "holiday" part :) she doesn't need a holiday.

As things stand, it will be the taxpayer who will pay for the majority mickey mouse degrees which confer no benefit to the economy or society but it will be the the student/ graduate who will pay far more for the doctors/ teachers/ senior nurses etc. as they are likely to earn more, so will pay much more over 30 years though we need people with degrees in health and education, not so much in Swiss Polka Dancing History etc.

I suppose it keeps youth unemployment down and thousands of people in the bloated HE sector in work . We need more apprenticeships and technical education.

Sorry OP- I digress.

I have come to the conclusion that you either run away from student loans as fast as you can and do everything to avoid them or pay them off quickly, or capitulate and then accept your DC will be paying them off for, probably, their whole working life so they may as well take maximum loans and keep their savings for other puroses e.g. house deposit.

I think the worst of all worlds is to take a maintenance loan for only half their time at uni- they will still probably be paying off the loan for their whole working life as most loans will continue to increase for the first 10+ years due to the high interest and low repayments. There is therefore no advantage to struggling to keep the amount of maintenance loans taken out at uni lower.
At least their Oxbridge degree will be worth the cost!

At the moment I think we are leaning towards option 1