It's normal to have a student loan isn't it?

[elliejjtiny]

Dc1 and dc2 have student loans as we did at university and most of my friends did. I think there was one girl whose parents paid for everything and then bought her a flat at the end of university but she was the only one. We visit them, take them out for dinner and do a food shop. I've found out a relative has saved enough money for their children to go to university without having to pay anything and then enough for a house deposit. The dc aren't even teenagers yet. That's not normal is it?

I don’t quite understand when people say the interest rates on student loans are insane and they would rather get a bank loan. I keep reading it on threads on here and I don’t get it. Am I missing something? Plan 5 loans for this year have interest rates of 3.2% and I am not sure you can find a mortgage at that rate and bank loans are way more. So why would it not make more sense to pay off a chunk of your child’s mortgage or put money for a house deposit? Surely that debt is the smarter one to pay off? Especially considering we don’t know if our children may take time off work or go part time because of parenting/caring responsibilities, health or even unemployment etc. I’m happy to be corrected and hear other views, I just cant make the maths work to make it better to pay student loan than any other debt

"I don’t quite understand when people say the interest rates on student loans are insane and they would rather get a bank loan. I keep reading it on threads on here and I don’t get it."

You haven't read that on this thread.
People who say that are probably referring to the plan 2 loans, not the newer plan 5 loans. And they may not have fully understood the repayment terms.

The complexity of the different plans and t&c's confuses people.

A comment on this thread last night said something about the interest rates being insane, and then there was another comment on this thread by someone who was taking money out of their own pension to make sure that their child is debt free, and another couple saying they would pay all student fees as cheaper than school boarding fees, but their child would have to find their own money to buy a house. My own conclusion was that it would be much better to put any spare cash you had towards your child’s mortgage rather than their student loan due to the fairly low interest rates on the student loan which are actually set at the rate of inflation. I’m just wondering how others have come to different conclusions. I didn’t do maths at A level so may be wrong but there are quite a few on this thread who are prioritising paying off student loans over mortgages and pensions.

Those scenarios are very different to taking out a bank loan (which would generally be a worse debt than a student loan).

The person who said they were planning to take money from their pension probably meant from their private pension pot, which may be very large, and surplus to what they need for their own retirement. They can take out a tax-free cash lump sum when they turn 55 up to a certain amount. If they don't spend their full pension pot then it may be subject to inheritance tax when they die, so it makes sense to give it away any surplus sooner rather than later.

For the person who said they'd pay uni fees but not a house deposit, that sounds like a personal choice rather than that they couldn't afford to help with house deposits if they wanted to. She didn't elaborate. Some people are able to do both. If she hadn't spent all that money on private school fees she could almost certainly have done both. Horses for courses!

"My own conclusion was that it would be much better to put any spare cash you had towards your child’s mortgage rather than their student loan due to the fairly low interest rates on the student loan which are actually set at the rate of inflation."

If you can only afford one, and your child is on a plan 5 loan (not a plan 2 loan) that is probably a wise decision. Other people have different circumstances to you so make different decisions.

My dc1 would have had a plan 2 loan, with much higher interest than plan 5, so I'm glad we were able to help him avoid that. My dc2 would have had a plan 5 loan, but we wanted him to have the same as his brother. In both cases we will be able to also fund deposits for future homes too - putting them in the same position DH and I were in in our early twenties - debt free and able to buy our first flat.

There is both a quasi gambling element to this and a cash flow one. We could have afforded private school for our dcs but put the money into flats instead, so they already have that covered (full disclosure eldest child with disruptive Sen would not have been accepted/kicked out of private school, middle one would probably have thrived, third would do well wherever they went). Now thinking about university fees for the second and third, am still thinking about taking the loan for both tuition and maintenance and investing the 15k each year in an isa stocks and shares for them and then seeing what they want to do when they are finished? There may be an advantage to having a cash pot they can use to eg set up a business in their twenties, or they may prefer to pay off the loans in full early on. I can see the advantages of both the pay upfront approach and the wait and see one. It basically comes down to the risk/benefit of having that money gone but no interest accruing versus having that cash available with interest being paid on it but then having a longer term debt to pay off.
The Masters issue is an interesting one. My dc who is about to go to university will
probably need one for the field he wants to go into - and maybe that one is worth paying off in full upfront as if you don’t do it as an msci it’s crippling.
also if you can pay into their pension pots early on and get the 25 percent tax uplift then maybe that maybe that takes some of the pressure off of having potentially a bit more tax in their income.
in any event for those who can afford to pay upfront these are probably nice problems to have. The main take away now is that university loans which no longer actually cover the costs of university for students who live away, and for whom better paying graduate jobs are no longer guaranteed, increasingly feels like an even greater tax on those who can least afford it.

If I’d had a crystal ball & knew how university fees were going to be introduced, then escalate, then student loan interest rates were going to sky rocket, I’d have put savings into a university fund for DCs. As I didn’t (when I did my degree, students got a grant, which if they were careful they could live off, particularly if they worked during the holidays, or had part-time jobs) DS1 had a student loan, which he is still paying off. His younger brothers felt that a degree wasn’t worth that amount of debt, so did apprenticeships instead.

Some one earlier said that foreign students cannot get a student loan. I think this is incorrect:

One in five student loans goes to foreigners

https://www.thetimes.com/article/32d82504-9a87-479a-8b5e-2e18e7d594b0?shareToken=13304b33bbde6091a535d2d12b1c9636

International students can't get UK student loans.

Students whose families originated from abroad but who have lived in the UK long enough to have settled status can get UK student loans. If that's what you mean by a 'foreign student' then it is different to most people's interpretation of the phrase.

Anyone with a student loan who leaves the country still has to pay it back, though I don't know what the debt-chasing procedures are like.

Apparently it’s what The Times means too. The title of their article is, “One in five student loans goes to foreigners.”

University fees and associated costs will be significantly less than the school fees many parents have paid so it is inevitable that some families will not require loans. My eldest son graduated four years ago and now pays well over £400 per month in student loan repayments so I’m very aware of the benefit of minimising borrowing wherever possible. The vast majority of students will have loans but not all.

This thread is cracking me up, it’s so skewed. The ‘it’s cheaper that school fees’ brigade - only 7% of kids go to fee paying schools, so this affects very few people. Dd is at Durham which has the biggest proportion of private school kids but even so, most of her friends are living off loans and not mum and dad (she is in one of the hill colleges where most of the kids were from ‘normal’ family backgrounds where finding 20k a year to pay for uni is not the norm)
OP nearly everyone takes both loans out - this thread is full of wealthy people.

The Times article has a clickbait headline which taps into people's emotions. The article gives more context - it is talking about (mainly European) migrants with settled status in the uk. Only people who have the staying power to read to the very bottom of the article will see this quote from the DfE...
"A spokesperson for the Department for Education said: “We have strict eligibility requirements for student loans — nobody who lives outside of the UK can apply for or receive a loan. Anyone leaving the UK must continue to repay what they owe. The Student Loans Company can take enforcement action and uses debt collection agencies. The public rightly expect these debts to be paid, and we are working with them to go further. We are also cracking down on abuse of student finance at its source, closing loopholes in regulation and preventing misuse of the system.”"

People don't tend to talk about paying their fees in real life or on social media. Mumsnet gives that insight because it is more anonymous.

My kids didn't go to private school. A series of life events meant we have been able to afford to pay the fees and fund house deposits - inheritance, redundancy packages, a sharesave scheme that did well, me going back to work full time after 18 years of working part-time. I know we are fortunate - and that most students have loans. But I also see more families understanding that the loans are burdensome, so they are starting to save earlier for their children and/or encouraging them to do apprenticeships instead of uni.

But it has clearly been a worthwhile investment for your son if he is earning over £80,000 four years out from university.

DD's housemates were very vocal about not having any loans. "We don't need a part time job like you because parents are paying tuition and rent and granny gives me spending money." Not said in a mean spirited way really.

DD was thinking "have some self respect and get a job ffs."

Again, not in a mean spirited way!

Having settled status doesn’t mean they are not foreign it just means they have lived here six months a year for five years (or four years if they have an important reason for a year out), and whilst they are required to repay even if they go home very large numbers do not. There are billions of pounds of student debt that is not being repaid by people who have returned overseas since graduating.

Not sure what you point is?

Decades ago my parents paid for my studies/accommodation etc because they wanted me to be able to focus on my school work without having a job alongside, I was grateful and it didn’t prevent me from becoming self-sufficient once I entered the workforce. But according to your DD I should have felt ashamed?

No it’s not normal but many years ago when I was staff and working at a University with a very high percentage of privately educated students and times were less tough a lot were helped far more than these days. I remember one lads parents had bought him a flat in Canary Wharf.

Working as a student was uncommon in my day and even now is really about need. Universities have had to adapt to the idea of students working but the courses are meant to be full time. I believe Oxbridge strongly discourage term time working. But also suitable part time jobs are not always easy to find. Many of my DC peers have really struggled to find work in their university town and once found have been unable to return home in holidays for fear of losing the job (big chains do sometimes transfer you if there are jobs where you are moving to) and being unable to find another. So your DD should be grateful those who don’t need to work are not doing so and not competing for jobs with those who do.

Not sure what you point is?

I'm refuting the claim - made several times on this thread - that those who don't take out loans keep quiet about it. Some do, some don't.

DD doesn't care how you feel. She thinks her housemates would benefit from at least trying to find a job. They certainly don't spend more time studying or socialising than DD does.

So your DD should be grateful those who don’t need to work are not doing so and not competing for jobs with those who do

She doesn't need to be grateful to anyone - she can hold her own in the job market. It is true that lots of students/young people struggle to find work - it's tough out there. Her housemates have never had a job or tried to find one at uni, at school, in the long holidays.

Lovely girls, they just rely on granny for beer money.

Perhaps your DD’s flatmates might want to consider finding a less judgemental flatmate.

The fact that they're 'foreign' is less relevant than the fact that the Times states they are not 'planning' to earn enough to pay back any of the loan. That puts them in the same category as many UK-born students who take the loan but aren't 'planning' to earn enough to ever start paying it back.

There is no checkbox on the loan application to ask "Do you plan to earn more than minimum wage after graduating?". In many/most cases they might aspire to earn more but can't.

Perhaps your DD’s flatmates might want to consider finding a less judgemental flatmate.

No need. None of her huge friendship group throw a strop and go no contact like rabid Mumsnetters. And she doesn't actually tell them to get a job, she doesn't understand why they don't want to.

Edited to quote pp.

85-90% of students take out a student loan so it’s more than normal.

The real question is whether loans should be given out in the first place. If someone has picked a subject that means they will never pay back what they’ve borrowed they should have to self fund or not go to uni at all.

This would bring tuition fees down for STEM and medical students who are likely to pay it back.