Student loan or not

[Bellavida99]

My father in law has very generously offered my daughter £54k for uni to enable her to have no student debt. It’s an amazing offer. I read on Martin Lewis that you should get a student loan even if you have savings so are we missing a trick and she should still get a tuition loan at least? To me it seems that coming out of uni with no debt is a no brainer but are we missing something. He lives abroad and is fairly “hands off” so wouldn’t actually know if she got a tuition loan and invested it but I don’t really understand Martin Lewis’s logic here. If it makes any difference it would literally be a one off payment this summer.

Depends on her earning potential. Interest starts accumulating on day one. I think it’s 7-9% a year. If she is likely to get a job that pays more than £27K a year (please check this figure) she will start paying. Unfortunately in this country around 83% of geaduates never end up earning above the threshold to repay their loan or repay it over 30 years, after which the loan gets wiped out.

I've always encouraged mine to have no debt if at all possible. Who wants to start life with a debt?

But wouldn’t that 54k be better used as a house deposit after graduating?

Student loans are still a good deal. Financial professionals usually recommend foregoing being loan-free and having a deposit to put on a house post-graduation instead.

Being debt free after uni does sound appealing but overall, the money would be better used to get on the property ladder. Even debt free it would still take her a long time to save up.

Either way, it’s a wonderful opportunity for your daughter, OP. Good for her.

Would there be money for a house deposit additionally? If so defo don’t get the loans, they really are not a good deal. At all. But if a house deposit isn’t going to be available to dc then I’d consider investing it wisely and using it for that.

Read the latest advice on this because, while it used to be a bad idea unless you knew you were going to be a high earner, the percentage of future graduates expected to repay is now a lot higher and effectively the cost for most has near doubled, which few people seem to be talking about.

This is because of the lower starting threshold for repayment and increase from 30 to 40 years before it's written off.

If she expects to go into a 'profession' and earn say £50-80k, there's a good chance she'll pay it off. But if she's going to study something like archaeology or conservation and have a career working in a museum for close to NMW then she won't pay much of it off and it will be close to £54k down the drain.

Does she want to be paying anywhere between £150-600 a month to some rip off loan company to the next 40 years. My niece pays loads a month and her loan is just getting bigger and bigger. I don’t think it’s the great deal it’s made out to be if you earn more than minimum wage and you’ll end up paying a lot more than you took out.

Please look at the newest figures not old advice. The interest is just RPI now so it's meant to be just inflation, so whatever the figure for that is each March. And the repayments are low. That said, he's offered it for this alone- take it!

And when that indexing takes place, it's quite gutting to see it keep going up and up and up ....

Has Martin Lewis updated his advice? I know he’s always been a big proponent of student loans.

That advice is supposed to be updated but hasn’t been yet. I’m going to pay for my son’s uni fees. I can’t see any reason not to anymore.

Put some sample salaries into tax calculators and see how much she would pay off a month and how long it would take.
Then put 54k in a compound interest calculator and see how much it could be worth. Then think about how long it would take to save for a house deposit. Will she rent or live at home? Rent cost can be thousands.
Then take that all into consideration.
It isn't a straight forward answer.

Thanks everyone it’s a minefield. I hadn’t heard about interest being just RPI now so do need to get up to speed. She also may possibly want to move to Aus at a later date so need to check if student loan is still payable then (I assume it is!) Also she’ll get the nhs £5k a year while at uni so really need to consider everything. My feeling is the simplest thing to do is spend it as FIL intended and can invest year 2 and 3 money and earn a bit from that for a couple of years. A future house deposit sounds good but if she wants to travel, emigrate etc, buying property will probably be over a decade away. It’s so difficult. I was thinking she could buy a student house with it to rent out in year one and live in and landlord in year 2 and 3 but I’d hate her uni friends to think of her differently

If she is wanting to move abroad then be careful. I moved abroad with a student loan and to repay the loan. If you are abroad you need to have a contract every year. they want a new contract every year so if you have a two year contract or a three year contract isn't acceptable. You have to have a new contract every twelve months.It was way too much hassle iving abroad with dealing with the students loan company I just repaid.

£54k would be good to use to pay for accommodation whilst at university. Grandad can pay it every year/semester etc. Get your dd to apply for a tuition fee loan.

Thanks for the advice about repayments being hassle if you emigrate or work abroad. Moving abroad is fairly likely I feel due to a lot of family in Aus and Canada and her loving both places and to an extent choosing a subject needed there so maybe this is a key reason she should just use the money as FIL intended and not over think it

This was calculated at £30k tuition plus £200 a week for 40 weeks for 3 years for accommodation so I thought should cover both. She’ll have £5k a year nhs fund to live on so we don’t mind paying £1k or £2k towards accommodation if it doesn’t quite cover it. Apart from that we’ll just service and insure her car as she’ll need it for placements so I feel we get off quite lightly with regards to financial support. Or did you mean it’s financially savvy to still get a tuition loan?

100% dont take out the student loan of you dont need it! Once they start paying it back it eats into every bonus, pay rise etc. I've got friends who have student loans and they hate getting bonuses or pay rises as they barely see any of it after tax, ni and student loan

We are paying for DS, with help from a similar sized gift from a relative. It’s working well so far. The current loan system seems far more punitive than previous schemes and we don’t want him to start life in debt.

I think it's absolutely appalling that you think you're completely entitled to use it for reasons not intended. While you might think there are better uses for the money, it's not the reason why he's giving it and would probably be furious if it came out. I would be.

I agree about the current loan system being very punitive. With even basic jobs asking for a degree, a distinct lack of degree apprenticeships and such competition for every role advertised people are being forced to take on massive loans and often then end up in mediocre roles when they leave uni it’s such a difficult situation for everyone.

I think so. Someone was asking the question on his podcast recently and he went through all the 'it depends' saying it could be the right thing to do but that it could also be a waste of money if they spent a long time as a low earner.

Although it will be interesting to see what he does if his DD goes to university as he has more money than he could ever need so you'd think he might as well pay her fees and buy her a house as needed so she's not stuck renting and saving up.

I was thinking she could buy a student house with it to rent out in year one and live in and landlord in year 2 and 3 but I’d hate her uni friends to think of her differently

Only do this if you have the time to manage this. The legislation requirements means the start up time needed is significant and you will need to prepare to hang on to the place post 3 years to make it an investment.

My DC’s dad is paying for them so no debt. Son has a graduate job and will definitely earn enough to pay it all back so no brainer to not get a loan if you don’t have to.

DD and her partner do similar jobs. He has a degree and she doesn’t.
He gets paid slightly more than her, but her take home is higher because she’s not paying a loan off. He’ll be paying his off most of his working life as the debt is increasing rather than decreasing due to the interest rate.

I read an article this week about a nurse who came out of uni with £57k of debt. She’s paying £145 towards it out of her salary each month but her debt several years later is now £77k.

Unless a school leaver wants a career that needs a degree, I’m a strong advocate of apprenticeships, or getting a job in a large business which fosters career development.