Cancelling student loan

[LyndaSnellsSniff]

My son is in his first year at uni. He received the fees loan to finance this year. He has just applied for a loan for next year BUT he actually no longer needs that loan. A relative has very generously gifted him money to cover the fees.

We cannot cancel the loan online as he's already begun the course. The uni will have to do it for him and he has an appointment next week with the finance advice office. I think I'm just looking for some reassurance that the application can be cancelled.

Has anyone any experience of such a situation?

You can make payments off your balance at any time. So even if the money lands in his account you can call up and pay back in full.

Has your relative given him the money to cover all three years?

in which case he cancels student finance for Y2 and doesn’t apply for y3

He then needs to get in touch with SFE to find out what his balance is, and pay that off. It will be slightly more than a years fees because of interest.

If the relative has just given money for next years fees, he doesn’t need to do anything for this year, and just needs cancel for next year

What's the current interest rate for the loans? Can he get a better rate in a fixed term savings account or something? If so I would still take the loan and sick the money in an account to gather interest then pay the loan back in full at the end of the course having made a small profit.

Yes, that's the plan. My concern is that he won't be able to cancel the year 2 loan now it's been approved. He's stressing about it and feeling overwhelmed. I want to reassure him that all will be well. He has an appointment to discuss it on Tuesday and, as far as I can gather, uni can complete a change of circumstances form and send on his behalf.

Hopefully!

It may be less faff to put the money in a high interest 1 year bond and use it for 3rd year. It can be a right faff to reapply. We had to amend mine when my mum lost her job, and it was a horrendus mess and I got paid nothing at all for 2 terms, then a massive lump sum. I'd been living off £8pw after rent.

When DS dropped out of Uni at the very start of Yr 2, it was too late to stop him student loan payment. He just rung them up and paid it back to them on his debit card.

I think I would be inclined to put it into a high interest locked away savings account and settle it at the end. Personally If I could fund uni I wouldn't, I would give it as a house deposit because it takes a long time to save up for that. If it is specifically for uni then pay the loan off when he finishes 2nd or 3rd year.

Why is he stressed? The worst that can happen is that he receives the money then just goes and repays it straight away.

(and I agree with other posters - take the loan anyway and use the money for a house deposit)

He tends to get overwhelmed and is struggling a little to juggle uni life. His dad isn't helping by stressing about it himself.

I haven't found a high interest account with an interest greater than the student loan interest rate and the money is really ring fenced for uni fees only.

Thank you all. Your replies have given me some reassurance.

If he only just applied in the last 14 days he might even have a right "of cancellation" under legislation - not sure which probably not consumer contracts regulations as it is finance and the financial services distance selling regulations were abolished but I bet there is some cancellation right. I would get the cancellation in writing to the Student loan co right away for year 2. Also if the gift will cover year 1 fees get those paid back too and keep chasing every single week as SFE is not always great at cancelling things.

(I paid my children's fees so they had no loans at all but that is very unusual and I have heard arguments from others on here over the years that the money should just be put into a high interest account but as a parent my gift was of the fees, not so the money could sit in an account so even if the children were worse off with not having a loan and not having the savings instead then that is no issue for me - I just didn't want them to have the debt)

The interest rate on student loans is way higher than you can get on any bank account. If you can’t cancel it, just pay it off immediately ?

Yep, currently plan 2 young people pay 7.3% interest on their student loans. I paid my DC off as the interest compounding would be massive if I had waited. Both are likely to be good earners. DC1's loan accrued £7,000 in interest just in the time they were at university. We paid DC2 off half way through their course when we could see they would likely be a good earner.

https://www.gov.uk/repaying-your-student-loan/what-you-pay

We were in a similar position to you with my eldest two years ago - but it wasn't till the summer after first year that the money came through. I don't recall her having too much trouble cancelling her second year student loan before the start of term. She hesitated on having the first year paid off until she looked at the balance and understood about interest being charged from the start of the course ...

The younger one had also put a student loan application in for first year, in case of delays, and again that wasn't difficult to cancel.

I think you’re all stressing unnecessarily. Your son should be able to cancel the loan request direct with SFE as long as it’s not already been paid to the university.

A change of circumstances form isn’t relevant as his circumstances haven’t changed. That would be used for suspension of studies or change of course, etc.

Plan 5 is not as bad - the current rate is 4.3%. I think some plans were on RPI+3%, but Plan 5 is just RPI; that makes a huge difference.
A good savings account can beat it, especially if all the money is available to put into the savings account now.