A (hopefully) quick question about student finance

[dyllemma]

Am I right in assuming that if you pay back student finance on the same day that it is paid out, then no interest will accrue? i.e. you pay back exactly the loan amount and no more?

I'd assume so, but why would you bother to take it in the first place if you were going to transfer back the day it went into your account?

Well, I could go into that, but then it wouldn't be a quick question.😉

Presumably if speed is of the essence though you'd be cancelling the loan before it's paid.

The loan is paid on a termly basis over 3 years - so nine payments in all. I'm 95% sure we don't want any of it (for reasons discussed on a different thread), but we might change our mind over time. It seems to me that our best bet is to take the loan, but pay it back after each installment. That way, we keep the balance at zero, but still have some flexibility to change our mind for later installments.

Ok so what about the fee loan? If you take that you'd have to check when slc pay the uni as well.

An alternative might be not applying for the loan until it becomes apparent that you need it. You have until May to apply for loan for that academic year.

I'm not sure what (if?) the process for repaying whilst still having an active loan is - could well be complicated.

There have been countles problems with the student loans company over the yearfs and getting balances and all sorts. It is one of hte reasons I paid so the children had no loans to avoid being in their system so there is probably a good chance if you pay each payment back the day it hits the child's bank account they will find that hard to cope with at the student loans company end.

I think (although not 100% sure) that you’d still owe one days interest.

but aside from that it won’t be easy to get through to pay it back so you would probably end up with extra days of interest as you try and get it sorted. Plus you’d have to be very on the ball about the day it arrives and making sure you have time to sit on the phone.

seems an awful faff

I think you might have misunderstood how the loan application works. It isn't a case of applying at the start of university and that is it. You have to reapply every year and you can apply for that year's loan any time up to 31 May after that academic year has started. So if your DC needs the money at any point, they can apply for the loan then. Processing time is about 6 weeks but they should be able to get an interest free student overdraft of up to £1500 in the first year (more in later years with some banks) that could tide them over. I would be putting an overdraft in place at the start of the year instead of taking out a student loan and repaying it on the same day.

chesirecat99, my understanding is that finance for a 3 year course is considered to be one loan, not three, and that it is the initial application date that determines the repayment plan.

In contrast, your description would imply that 2022 applicants will be on the 2022 repayment plan (with a 30 year repayment period) for their first year and the 2023+ plan (with a 40 year repayment period) thereafter. I don't think that's the case, is it?

Perhaps what you mean is that 2022 finance applicants will need to re-confirm that they want a further payment in subsequent years. Yes?

What you have to do to claim the loan for 2nd and subsequent years isn't 'reapplying' in the sense that the 2022/23 academic year woukd be on Plan 2 and subsequent years on Plan 3, no. But it is a reapplication, in that you have to state which component(s) you are applying for
for that year and if for the means-tested portion of the maintenance loan, the supporting parents have to go through the same procedure again, but wrt the tax year subsequent to the one relevant to the first year application. So it isn't just a case of confirming that you want to go on claiming the loan, either.

I'm probably not the only one wondering why the money available to pay off the loan immediately isn't just used to finance the student's studies in the first place, but chacun à son goût, as they say.

I see what you mean. You didn't say in your OP that was the reasoning for wanting to take the loan!

You need to speak to SFE directly. You might find that if you pay back the loan in full immediately, the account is closed. That wouldn't affect their entitlement in future years but it could mean that if they take further instalments in later years it is classified as a new application and falls under the new payment period rules.

If that is the case, you don't have to take the full loan that you are entitled to, you can specify the amount you want to borrow. They could borrow £1000 in the first year, maybe even less if there isn't a minimum value. The interest wouldn't be that much and a small price to pay for saving 10 years extra of repayments if they do need to borrow more in the future. Think of it as paying for an insurance policy. Your DC could always put the money in a Lifetime ISA that gives a £250 bonus for every £1000 paid in so it would be worth more than their debt at the time they graduate.

Your DC could always put the money in a Lifetime ISA that gives a £250 bonus for every £1000 paid in so it would be worth more than their debt at the time they graduate

Only up to £4000 a year. But currently planning to do that in addition to paying for DC's studies, so it's not an either/or.

I am aware that the annual limit is £4k. As I said, you don't have to take the full loan amount.

You are being quite rude when posters are only trying to help you, @dyllemma. I'm not sure what pointing out that the Lifetime ISA limit is only £4k achieves or adds to the discussion unless you just want to criticise my suggestion to feel superior... TBH, I'm not sure why I bothered replying after your first sarcastic response.

If you are 95% sure you can afford to pay the tuition fees and any maintenance AND pay £4k a year into an ISA, do you really need to worry about paying a couple of days' interest or even 3 years interest on £1k (about £100) as an insurance against your DC being on the new 40 year repayment plan if your financial situation changes and they do need to take a student loan in later years?

Not being rude at all. You're being over sensitive and have misinterpreted.

It's not an aibu thread. I haven't asked for help, or advice. I asked a question and I've had some useful factual answers. I've asked for further clarification of some of the answers. I've also had some opinions and some questions from people in return, some of which I've answered.

I think the 30 year loan repayment scheme is worse than the 40 year one. DS' interest rate is currently 12%. If it stayed at that level in six years he would owe double what he took out

It's an actual racket

The cap kicks in for plan 2 loans next March so the 12% (which I agree is extortionate) will be for a limited time.

I'm not sure you've taken on board the fact that it may not be possible to be both a loan recipient and payor though.

But sure you know all about that.

The loans plan depends on the year the course started, not the year you first access the loan, though? So someone starting an undergraduate course this autumn will be on Plan 2, even if they don't claim the loan for that year?

www.gov.uk/government/news/fairer-higher-education-system-for-students-and-taxpayers

To make the system fairer for students, the student loan interest rate will be set at RPI+0% for new borrowers starting courses from 2023-24...^