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).

@tiredandcold7 but the terms are not changed retrospectively (as demonstrated by you having different terms for your two loans which were taken out at different times). So students do know what they are committing to at the time when they take it out.

But why would you feel the need to go off at a tangent to undermine someone in that way? Nobody has a crystal ball, so people can only go with their gut. If, as you suggest, "she's a paralegal for a few years first or she ends up in a regional firm earning far far less than that" then she will still be likely to earn more than the average graduate, which is what counts for answering the pp's question. They can model different scenarios, but need to make a decision on what they feel is likely. That depends as much on their own affluence and their attitude to risk as on their ability to predict their DC's future, and we know nothing about those things. If the DC is never likely to have such a large pot of capital ever again, then putting this inheritance aside for a housing deposit might be a wise move. But if they're likely to have other timely inheritances and a good income too, then that can swing the pendulum the other way.

Pretty sure when students took out the mortgage style loans they didn't know the government would sell their loans to private companies who would then chase them for the debt.

Why does it matter if you're chased by a private company or the government? You still owe the money.

My dd is 13 and already thinking about uni, she wants to be an engineer. She currently is seriously considering a career in the military as she is worried about university fees.
If she joins the military they will fund her degree and she will have a career in service afterwards. It’s a sensible plan, I am not financially in a position to help her. But as a mum I’m sad that it would mean she was away from home for long periods of time and highly likely to settle miles away from me. Not that I would ever tell her that!

@Biscuitandacuppa there are many companies that offer level 6 engineering apprenticeships, not just the military.

@Biscuitandacuppa

Highly recommend looking into this route. My dd is an engineering officer and it's a great life, so many opportunities that simply aren't available for non forces. The deal on offer re fees is far better than she got too! (She's having to pay her fees back though she got the equivalent of half on staged bonuses which she could have used to reduce the debt instead of buying a car!)

Thank you both! Will look into apprenticeships.

The main thing to know is that there is no central hub for apprenticeships. UCAS are trying to create one, but I've seen apprenticeships advertised on Indeed and other job sites that aren't on there. Nevertheless, you can set up alerts for them as you would for any other type of job advert, with obvious search terms like "engineering" and "apprenticeship" within X miles of your postcode.

@Tirangapete The problem is that many of these graduates who appear very good don't necessarily get the jobs. Starting off with a degree in law or another academic subject from Oxbridge helps a great deal. This is still where many recruits come from. Then there’s class of degree and internships secured. If only drive and determination was the only factor. Most of thd grads applying have that, but getting through the selection tests takes a great deal more. It’s best to stay grounded and be realistic.

Regarding loans, take them. Should dc need to pay for a masters, I’d use money for that. Plus the more you earn, the better the deal is. Really high earners can pay them off much much quicker do so far less interest paid. You take a gamble on earnings with law though unless you are a top performer. Most don't really know that until they get to uni and the best unis provide the greatest number of magic circle recruits.

She is a top performer and has 3 x A*s
national debating titles
Junior civic leader
national speaker on human rights and immigration
TV and Radio appearances
spent 3 weeks in Washington this summer on work experience with Democrats Senator

oxbridge pathway headhunted (and rejected them)

she is a shoe in for a Magic Circle

it will be “which firm”

and we are grounded have a disabled child who has struggled academically so we have had it both ways, her older sister achieves for her disabled sibling, she is motivated by her younger siblings life challenges

We take nothing for granted …but We know we are so lucky to have this child on our journey with us and we are blessed to be on her’s

think I answered my own question pay the tuition to not do so is to settle and plan for less than best

Headhunted by both Oxford and Cambridge?

That is fantastic @Tirangapete . You daughter sounds amazing, undoubtedly is amazing and I can completely see why you are so proud of both your children. My only thought is if your DD feels strongly enough to have decided not to go the Oxbridge route (when clearly very feasible and given it can be better value for money as less expensive than some Uni's, with a higher tutor/student contact time/ratio - I'm definitely not saying the be-all and end-all by any means as I know of quite a number of exceptional students who have decided to opt for a different teaching style), then be prepared that she may also decide not to go the Magic Circle route either. She obviously holds strong beliefs. Sometimes this type of emotional intelligence overrides the pursuit of high financial gain. I have no opinion on the merits of either, it's just horses for courses really. The world needs all types. If you already know that the Magic Circle is her mission and are sure she won't be deflected, then I understand where you are coming from.

Sorry, my input bears no relevance to the main point of the thread. I'm just following all points with interest.

@Tirangapete I earn enough for a decent life, single mum. Just not enough to pay any back.

No they can’t change the interest rate upwards like that on Plan 5 loans as it’s in the terms and conditions. As with the RPI + 3% loans, the govt cld set the interest rate on plan 5 loans at a rate lower than RPI if RPI in one year was excessively high, but that’s at govt discretion. There isn’t an option the other way round for the govt to increase it. The loans do have terms and conditions that you sign up to. They can’t arbitrarily change them to your detriment but they can make them better for you.

One suggestion that Martin Lewis makes which I think is a good one, is to consider taking out all the available loans and then reviewing the situation when your child graduates in 3 years time. At that point you will have a much better idea whether your child is going to earn £££ in a magic circle law firm or wherever, or whether they will continue in academia/charity and never repay the loans. Think of the interest you accrue over the 3 years as the price of this option. (If you invest the £30k as well the option cost will be quite small now the interest on Plan 5 is RPI.)

If you use the inheritance now you may be kicking yourself if you find out that she would never have repaid the loans and could have had the £30k as a deposit for a house.

As others have said, you have to make a judgement based on imperfect information. If your child does end up earning £££ they will be able to overpay their loans and get rid of them quite quickly.

The current system is far worse for the lower end of grad earners. The higher earners can, and will, pay it off so the interest rate will be much smaller. Those paying over 40 years will pay much more. Martin Lewis makes this very clear. So cannot see much wrong with the MSE advice for higher earners.

Yes, you were.
This is common knowledge.

I don't think that's entirely fair.

Yes, these are adults (only just) - and intelligent ones - but they are led through this as the normal way for continuing their (hitherto free) education, by older leaders who are supposed to be wise, experienced and have their interests at heart.

Considering that incurring immense loans was decided on as 'the only fair way' by people in government who just so happened to have had their own university fees completely paid for by the state, I think whacking on a high amount of interest is just adding further insult to injury.

If we're deciding that uni students now all have to pay these huge fees - purely by virtue of being born later - would it really be so outrageously unreasonable to at least make them interest-free?

That way, the government would still be forcing them to repay a fortune for something that we older people (including most of them) got completely free - but at least they wouldn't also be looking to rinse them to (at least theoretically) make a profit out of them as well.

I know: inflation; but even this runs far below the level of profit that the government are seeking to rinse our conscientious young people of.

Your life education starts as a valuable investment that the state makes in you and your future; and it ends with you as the target for a lucrative money-making racket.

"would it really be so outrageously unreasonable to at least make them interest-free ...at least they wouldn't also be looking to ... make a profit out of them as well."

@TheHangingGardensOfBasildon charging interest doesn't "make a profit", it covers the vast costs of Government borrowing, the administration of the scheme, and the losses incurred from the many loans that will never be repaid.

The Government does not have reserves of cash to loan out to students interest-free. Nor can they simply "print more money". The Government has to borrow money from investors in order to loan it to students.

Hopefully the increased uptake in economics courses in recent years will help more people to understand these concepts.

Also, since you mentioned inflation, it's worth noting that tuition fees have remained the same for many years, and many universities are no longer able to cover the costs of providing courses. Tuition time is being cut to the bone, and so the 'value' of a degree is reduced. That is why tuition fees are tipped to rise under the new Government.

errr … you don’t mean the interest rate, you mean the amount of interest. The longer your loan is outstanding the more interest you pay in total.

My plan 1 loan debt currently stands at £25,726.58

When I graduated in 2012 it was £21979.89.

I have been a full time teacher for over ten years. I pay it through my salary and I pay just under £200 a mon

I don't think it's unreasonable actually, even if you don't understand economics, to not have understood when I first signed up for my loan at age 18 that this would be the state of it now.

Especially now I'm in my mid 30s, paying £2000 a month on childcare and really could do with that £200 a month in my own pocket!

"I have been a full time teacher for over ten years. I pay it through my salary and I pay just under £200 a month"

@Sunshinedaytoday the reason your loan balance has gone up rather than down is because you're not paying enough to cover the interest.

Personally, I think that more teachers should be entitled to reclaim their student loan payments under this scheme: https://www.gov.uk/guidance/teachers-claim-back-your-student-loan-repayments. But I know that if was extended, the costs of the scheme to everyone else would go up.

"I don't think it's unreasonable actually, even if you don't understand economics, to not have understood when I first signed up for my loan at age 18 that this would be the state of it now."

I guess Martin Lewis wasn't around to explain it all back then. These days, students are more likely to regard it as a tax than as a loan.

I understand the reason, but it's pricey. I have a plan 2 loan for my pgce and a postgrad loan for my MA.
It all comes out - almost £300, and it will continue to do so until it's written off (or paid, in the case of the postgrad)
Students today are told it's a graduate tax. That's fine as a concept, but when they sign up to a degree do they realise how much that will be per month later in life when they're strapped for cash and have lots of outgoings?

".. when they sign up to a degree do they realise how much that will be per month later in life when they're strapped for cash and have lots of outgoings?"

I'm not sure what you're suggesting as a solution to this. With or without a student loan, everybody under-estimates the cost of raising children, nobody can predict how their job will be impacted by changes in future economies, and nobody knows what life will throw at them - divorce, illness, bad luck can all take their toll on finances. But many graduates live well, and that is what students are hoping to achieve when they choose the university path, naively or otherwise.