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Higher education

Talk to other parents whose children are preparing for university on our Higher Education forum.

Original poster

Apply student finance England for £1 or nil?

55 replies

Lasvegas · 29/08/2022 20:27

dd starting university next month. I am paying her tuition fees and living expenses definitely for year one.

But she may need a loan in years 2 and 3.

She needs to register in 22 as apparently in 23 they are changing the rules and then you have to wait 35 years before the loan is written off at the moment it’s written off after 30 yrs.
so she is applying and customer services said to put nil in the amount borrowed. Has anyone done this? We cannot get past a certain field in the application portal. Maybe the only way is to apply for a loan of £1? Any one have experience of asking to borrow a nominal or zero amount just to get into the system.?

thanks

OP posts:
BogOffTraceyBeaker · 29/08/2022 20:50

Why are you paying would she get her fees paid and have student loans by student finance for the 3 years

her repayments would be based on her earnings. If she wasn’t 35k a year she’s repay maybe £3 a month it isn’t debt like credit card debt. It won’t affect her credit rating

would it not be better to invest after she’s finished uni maybe in a deposit for a home or a car

HewasH2O · 29/08/2022 21:32

Student finance interest rates = sky high
Return on savings = piddling.
Compound interest would still be accruing and perhaps this family has enough spare cash not to need to pay this.

I would try £1, but I've not been lucky enough to be in this position myself.

blymey · 29/08/2022 22:05

@Lasvegas we applied for a loan for my son a while ago, then cancelled it when I sold my mum's house (she died a few months ago) and inherited the proceeds. The loan is now showing as zero. So maybe you could apply for £1 now then cancel it after it is approved.

HippeePrincess · 29/08/2022 22:07

It doesn’t make financial sense to pay these fees outright as the repayments will be the same percentage regardless of the amount borrowed.

Setyoufree · 29/08/2022 22:10

I'd go for £1 and see what they do. They are appalling to deal with btw so brace yourself...

Setyoufree · 29/08/2022 22:12

Yes, same % of salary but the underlying loan that needs to be repaid is compounding with interest at an eye watering rate from the day you take it out. So does make a difference unless you're gunning to just make payments all your working life and then get the rest written off at retirement....

BonesOfWhatYouBelieve · 29/08/2022 22:14

If she's borrowing the tuition fees and maintenance in years 2 and 3, she may end up paying back exactly the same amount as if she was borrowing it in all three years, but you'd have lost the savings. I'd calculate it all carefully before doing this. (Unless it's already too late in which case ignore me).

Original poster
Lasvegas · 29/08/2022 23:09

Thanks all. I am fairly financially astute and have done various scenarios based on likely career she will have and compound interest repayments.

Due to inheritance dd will have a good amount for house deposit at age 25 yrs.

my small mortgage is fixed for another 5.5 years at an amazing low rate which is way way less than the interest students pay on their loans. I have over paid so I have a mortgage float if I need to use it.

So I am funding dd university. I have a lot of equity and a final salary pension so I’m not that bothered about more financial security for my self. Morally as I have the money I cannot see my dd incur debts. Not least as when I was at university - graduating in 1991 it was all ‘free’

OP posts:
blymey · 30/08/2022 06:27

HippeePrincess · 29/08/2022 22:07

It doesn’t make financial sense to pay these fees outright as the repayments will be the same percentage regardless of the amount borrowed.

The repayments will be zero if you borrow nothing.

If you have the money sitting there, don't want to use it to buy a property, and are confident your DC will be a relatively high earner in the future, it makes sense to pay upfront. Like the op, I spent a lot of time researching it before coming to that conclusion.

pinklavenders · 30/08/2022 08:07

Morally as I have the money I cannot see my dd incur debts.

The student debts increase at a higher rate than inflation - RPI +3% so yes it does make sense to avoid her incurring this debt.

cptartapp · 30/08/2022 08:11

We paid too. DH is an accountant and did all the sums. We also have boys, who are statistically more likely to pay it back.

mattressspring · 30/08/2022 09:00

Is she going to uni with no intention of earning and repaying a loan? Why does an added 5 years to the 'write off' make a difference?

GetThatHelmetOn · 30/08/2022 09:05

Don’t be silly, apply from year one and save that money for a master, a house deposit or year 3.

Considering the price of energy and accommodation, she might need the money you have saved already to complement her loans anyway.

blymey · 30/08/2022 16:25

I think Martin Lewis has persuaded a lot of people that it's not worth paying upfront, but his advice is not nuanced to all circumstances (you have to read through a lot of info until you find the bit where he acknowledges this), and the default assumptions in his online calculator need to be carefully modified for individual circumstances.

pinklavenders · 30/08/2022 17:53

Don't most students go to University with the aim/hope of earning above £28K? In that case they will have to pay above inflation interest on their loan.
If you have the funds, I suggest you support your dd.

pinklavenders · 30/08/2022 17:56

But I also don't understand why an additional 5 years for the loan to be 'written off' makes any difference..? Is she not aiming to earn a high enough salary to repay the loan well before then?

blymey · 30/08/2022 18:46

pinklavenders · 30/08/2022 17:56

But I also don't understand why an additional 5 years for the loan to be 'written off' makes any difference..? Is she not aiming to earn a high enough salary to repay the loan well before then?

Yes, of course that's what she's aiming for, but the op is optimising her contingency plans, in case circumstances change.

Though personally I prefer the 2023+ loan, because, unlike the current system, graduates are not expected to pay back more (in real terms) than they borrow.

MeridianGrey · 30/08/2022 19:11

I would’ve thought it would only make sense to not apply for the loans if you are going to pay upfront for the whole degree. If you pay for year one then borrow for the second two years she may end up paying back the same as if you had borrowed all for all three years.
I also don’t understand why it is a big deal to get the existing deal, you might find despite the extra 5 years she pays less back as the interest rates will be lower.

blymey · 30/08/2022 19:15

Personally, I see paying upfront as a reasonably safe investment, pegged to inflation. It has its risks, but so do all of the alternatives.

gogohmm · 30/08/2022 19:32

Mine took £1000 each year

pangolinfan · 30/08/2022 20:14

I thought that the terms of the loan were be based on the first year of study, not the first year a loan is taken. But this is based on trawling the press and the information I could find online about the changes so may be incorrect. I did try to confirm direct with SFE but didn't get a response. We have also suggested to DD that she pays for her first year from her ISA whilst applicable interest rates are sky high, and then applies for a loan for later years, on the basis that she is extremely likely to pay at least some portion of her loan back, so if you have the option why not defray the cost now while interest rates are very high, and interest starts to accrue from day 1.

J0yride · 30/08/2022 20:22

You are crazy to pay upfront. Much better for her to take the loan and use your capital for a house deposit.

MeridianGrey · 30/08/2022 20:28

J0yride · 30/08/2022 20:22

You are crazy to pay upfront. Much better for her to take the loan and use your capital for a house deposit.

I agree with the above, I know you say she will also have a house deposit, but if she puts down that extra chunk she will avoid paying interest on it for the 25 year term of the mortgage. Who knows how affordable mortgages will be when she wants to buy, that extra chunk could be the difference between her being able to buy or having to rent.

PhotoDad · 30/08/2022 20:34

The OP has certainly done due diligence on whether her DD should take out the loans, and has concluded that she shouldn't, so this is a technical question about how to use the system!

(My DD will very probably never earn enough to pay back much, so the calculations are very different for us. She's happy with that so long as she can eventually support herself.)

Ragged · 30/08/2022 20:36

HewasH2O · 29/08/2022 21:32

Student finance interest rates = sky high
Return on savings = piddling.
Compound interest would still be accruing and perhaps this family has enough spare cash not to need to pay this.

I would try £1, but I've not been lucky enough to be in this position myself.

This is basically why we're thinking to pay DS's 1st year of Uni tuition & lodgings (at least). Our cash assets otherwise lose value at 10%/year minimum (or maybe 18%, whatever inflation is running at). At that rate, in 4 years, when DS might want a house, the same cash will be worth half of what it is now.

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