Was I the only one who didn't realise what you start paying interest on your student loan from the first day of year 1 ?

[CobsNobs]

For some reason I had heard (maybe misheard) Martin Lewis saying that you don't have to worry about student loans until you finish uni and start working and in my head took that to also mean that you wouldn't start accruing interest until that time.
Obviously I was completely wrong but just in case anyone else had made the same assumption I am posting here.
My son is doing a 4 year course and will be borrowing £54k but at the end of year 4 that sum will have increased to approx £64k.
Scary!

(In my defence I am not from the UK and never had a student loan).

I am, yes . Or I'm working for my pension one day !

And it is those extra 10 years that will be the most lucrative for the Student Loans Company.......... but the Student Loans Company reserve the right to change the conditions. So while RPI has been very high (it was around 13.5 per cent last year), the SLC have capped the interest rate temporarily at 7.8 per cent.

@Stoufer The Student Loan Company does nothing more than administer the loans. Policy - all the examples in your posts - is set by governments -plural as education is a devolved matter. The beneficiary of the extra ten years is the taxpayer.

To quote directly from the horse's mouth We are a non-profit making government-owned organisation that administers loans and grants to students in colleges and universities in the UK. https://www.gov.uk/government/organisations/student-loans-company/about

I was clever enough to go to university in the sense that I completed both an undergraduate and masters degree in the end, but I was not clever enough to read the ts&cs of the student loan when I was seventeen. So I'm not sure the two are related.

Correction here:

It's a tax mainly paid by the squeezed middle graduates. The wealthy don't need the loan and the very low income qualify for grants

@bobbyrt

What grants? Please explain where they come from? Some universities offer bursaries on top of loans but who gets their fees and living costs paid by grants? I'm only aware of the vast majority of students taking the loans based on parental/household income. The lower the income, the maintenance loan is larger up to the max.

Correction here:

It's a tax mainly paid by the squeezed middle graduates. The wealthy don't need the loan and the very low income qualify for grants

Tuition fee loan take up rate - that would be about 95%.

Grants. Well to echo @TizerorFizz What grants? Granted, no pun intended, Wales does have a grant-loan mix for maintenance. However as students from Wales make up a very small overall percentage of the student population not really relevant.

@bobbyrt you, and indeed others, may find this illuminating https://researchbriefings.files.parliament.uk/documents/SN01079/SN01079.pdf

If everyone on here had a sudden 9% increase in their taxes over £25k I think you'd certainly be feeling it!
I went to uni in the US so the uni costs seem unbelievably low. Still, my DDs first year uni accommodation (catered) costs more than the maximum maintenance loan. Even with a part time job that puts it out of reach for many.
I think the interest rate should be lower and not start until they graduate.

@boys3

Very interesting link will read in depth later but look at Government expense! Plus explosion in student numbers. It's why we have a funding crisis.

But where did I say I was concerned or that it wasn’t fair? I said it is what it is. I’ve paid it almost every month for the last 18 years (bar these last 3). It’s just something I’m used to and so I was happy to rack up another chunk to follow my dreams 🤷🏻‍♀️

The interest rates now (plan 5) are pegged at RPI. Which I think is 3 or 4% for next year. That's more reasonable.

@bobbyrt from where? My DD qualifies for a small bursary due to our income, but the max is £2750 (approx)/year for the lowest income (I think it's below £20k). She's applying for general scholarships but nothing is handed out - she has to write essays and have interviews and explain why she the education is worthwhile and presumably is competing with many others as most that are not subject or religious or locality related are not just for UK students. The highest awarded open scholarship we found is £6000, which might cover accommodation fees at some unis for a year but what about the rest? Most are only worth a few hundred pounds.

They are now pegged at RPI, but that can be changed. The Gov waived the RPI + 3% when RPI went too high, what is to stop them from doing the same to the new plan? Make it RPI + a % if the RPI gets too low?

Question
my daughter has come into some inheritance around £30,000 she will go to uni to study law her career path might be that of a high achiever
should we use that money to pay her course fees and thus not have these high interest student loans (plan 5)

That depends on

1. how much your daughter intends to earn when she leaves uni and for the rest of her life, taking any maternity etc periods into consideration.
2. whether she plans to live rent-free with you or pay rent until she can afford a deposit for a house.
3. What her future inheritances might be.

In other words, nobody here can answer your question. But she/you should read online info and play with the online calculators to make a judgement based on your family circumstances. Many people start here: https://www.moneysavingexpert.com/students/student-loans-decoded/

She aims to be in a magic circle career path earning 60-150k within 5 years of uni

Or you could find she's a paralegal for a few years first or she ends up in a regional firm earning far far less than that.

It does. Thankfully I've only paid one payment in 20 years

Then bear in mind that Martin Lewis's advice tends to be aimed at the "average" graduate, the majority of whom earn far less. Check the default assumptions on his calculator very carefully. But don't expect to get detailed tailored advice on Mumsnet. 🙂

For us, it was worth it to pay the fees (not least because it will reduce future inheritance tax if we give them capital now), but I wouldn't have done it if I thought there was a high risk of them being low earners in future.

Yes could happen but I very much doubt it based on her determination and drive

Thankfully ?? That would suggest that you’re not earning a great salary ? Or has other circumstances played a part ?

That’s exactly what I wanted to hear, I don’t trust martins advice it’s aimed at the 50% of poor achievers (career salary wise) who are not ever going to pay it off

we read this article and it scared the life out of us .. we have now come to realise it will cost 60k for the basics over 3 years (fees and accommodation)

www.theguardian.com/money/article/2024/aug/04/id-be-better-off-if-i-hadnt-been-to-uni-uk-graduates-tell-of-lives-burdened-by-student-loans

I'm sorry but that's a really naive approach. It isn't only about determination and drive. Thats a bit like going onto the X Factor and saying "but I really want it".

She will be competing in a very competitive field. She will need to be the absolute best of the best. Determination and drive is only a very small piece of the puzzle.

Anyway, back to the point of the thread, Both of my DC also want to be lawyers and we have decided to pay the fees and then they will pay us back (without the astronomical interest).

no it’s not like that analogy lol

in the workplace determination and drive still count for something add in intelligence and emotional maturity, and that’s a potent package… limitless potential

sadly her sister is a little different ha ha

The concerning thing for me is that the government can and will change the terms at any time. I have an early plan 1 loan, think I was the first year of these type of loans alongside tuition fees when there wasn't the real understanding like there is now that low earners will never pay them off. Then I have a further plan 1 loan on different terms from PGCE a few years later. The different terms across the loans are very unfair and seem to be driven by nothing other than whim of whoever is in that cabinet office at the time. Payment age and threshold have gone up and down. Students can't be sure what they are committing to.

Ok well having recruited (and dismissed) trainees and junior lawyers for many years I can tell you that determination and drive are only a very small part of the picture in a successful legal career.