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Student loan or not

93 replies

Bellavida99 · 24/01/2026 05:38

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.

OP posts:
Makingsenseofitall · 24/01/2026 10:14

The loans really are a burden for anyone who has them. Most people have to have them. But for anyone who doesn’t have to get them it will be life changing for them. There are definitely no financial benefits of having these loans and the world is much better for those who have been lucky and not had to have them. The only possible reason is wanting to buy a house and needing the deposit.

Superscientist · 24/01/2026 10:32

I would take the loan and put the money into savings. Once graduated and they know what their career is going to look like and so on they can then decide whether to use the money to pay off the loan or put the money to other uses.

My partners parents gave him the money to match his loan. In the end it made more sense to put the money towards a deposit on a house and the savings he made in the larger deposit were greater than the deduction to his wage from the student loans. Also, the student loan doesn't have to paid if your wage drops... Your mortgage does!

By taking the loan and investing the money it gives you both options and you can then see what the situation is when they have graduated

ConBatulations · 24/01/2026 22:36

Just be aware that current fees + loan are more than £18,000 per year so she will definitely need the bursary as well as the loans aren't enough to live on in areas with high rents. Some university accommodation is £200 per week and that's before food, travel costs, laundry etc.

Investing can work well but only if the interest rate beats inflation. You can always pay back a lump sum at any time if you take the loan and then change your mind. Repayments are based on income not amount borrowed but start at an income not much more than minimum wage. Think ahead to other needs as student loan will probably be cheaper than car finance or a mortgage.

Ventress · 25/01/2026 07:31

This is the current MSE thinking @Superscientist but I just can’t get to this place if the student is likely to pay it off. The 9% starts accruing immediately, not at the end so why wait?

It’s different for my son as he also has a (previous) JISA, now an s&s isa, worth more than a decent house/flat deposit that his wider family paid into for 18 years so has this to fall back on.

berlinbaby2025 · 25/01/2026 07:49

Makingsenseofitall · 24/01/2026 06:01

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.

I agree with this. Getting on the property ladder will be a game changer for her so if you can’t help her with a deposit, then I would invest the money from your FIL whilst she’s studying then she can buy something after she graduates and hopefully gets a good job.

shuffleofftobuffalo · 25/01/2026 08:34

I would spend the money as intended. I hate the idea of my DD coming out of university with a tonne of debt and I don’t like the rhetoric that it’s better to carry a £60k debt about for the rest of your life than to spend cash. I am so glad to have paid off my loans as it felt like a millstone round my neck. You can’t avoid repayment and they change the terms, the interest rate is bonkers.

if she is also getting a bursary she may be able to avoid spending all the money on living expense anyway if she uses that money wisely.

Martin Lewis is not the last word on all these things - he has his own agenda and is there for his own gain disguised as helping others. Do your research rather than blindly following him.

W0tnow · 25/01/2026 08:36

I think in most cases taking a loan is absolute madness if you can avoid it.

Roserunner · 25/01/2026 08:46

I was encouraged to take a loan by my parents over 20 years ago. I borrow less than £5k in total. I didn't really need it, but it did go towards a house deposit after uni with DH but we could have put it off a year and saved up the same amount. My loan is now over £8k, I pay around £1k a year but around the same amount is getting added on in interest so I'll be paying until I'm 65. I decided to pay more over the next four years to try and clear it once and for all to save me money in the long run. I do regret ever taking it out.

Bjorkdidit · 25/01/2026 08:56

What is best for a student who is not yet at university isn't necessarily the same as someone who went 5, 10 or 20 years ago because there are several Plans with different costs and payment terms.

Plus in many cases, if you're talking about a one off lump sum that could be used for either university fees or a house deposit, it might be a good idea to think about which will be best, but in many cases, a 21 YO isn't going to be rushing to buy a house if they don't want to settle down anywhere in particular and they might be better off saving their own deposit, especially if they can live at home for a few years post graduation - they could possibly save £54k in, say, 2-4 years if they get a job, a LISA and don't piss their earnings away.

Makingsenseofitall · 25/01/2026 09:01

@Bjorkdidit but will the £54k be enough for a deposit? Or might they want it to add to the savings they manage. Is say this as someone who has tried very very hard for my own dc to not take out loans so I am absolutelY not advocating taking loans. At all. They are punitive and unfortunately most people
who go to university just have no choice.

ConBatulations · 25/01/2026 14:47

If you borrow the full tuition fee and maintenance loan (away from home outside London) the total amount is £20,620 in 2026-27 paid in 3 installments (25:25:50 for fees, assumed 35:35:30 for maintenance on 1st Sept, Jan and April) then the interest after 1 year would be £593.60 at the current rate of 4.3%.

If you save £20,620 in high interest accounts e.g. Cahoot Sunny day and simple savers you could earn £882.61 in interest.

If after a year you decide to pay off the loan the net profit = £289

Not taking the loan but keeping the money in savings until the start of each term would net about £263 in interest using the same accounts.

Not much in it and very dependent on attitude to borrowing and interest rates which can change.

My main concern with not taking the loan would be running out of money before the end of the 3 years. Ignoring house deposit, a car loan if needed could well be more expensive than the student loan. The student loan rates are capped to prevailing market rate. How likely is she to take a career break, work for a charity or not earn enough to pay the loan back?

Whatever strategy you choose I would review it every year rather than consider it fixed.

Superscientist · 25/01/2026 19:53

Ventress · 25/01/2026 07:31

This is the current MSE thinking @Superscientist but I just can’t get to this place if the student is likely to pay it off. The 9% starts accruing immediately, not at the end so why wait?

It’s different for my son as he also has a (previous) JISA, now an s&s isa, worth more than a decent house/flat deposit that his wider family paid into for 18 years so has this to fall back on.

The interest rate isn't 9% for one, it is currently 3.2% you pay back 9% on salary over a certain amount.
The interest rate is only important to those that will pay it back in full before the 40 years are up.

Say you take out the £9500 per year tuition fee plus £5k a year minimum maintenance loan and you do a 3 year course. At the end of uni you owe ~£45k plus interest.

You graduate you do ok and get a fairly average job at £30k a year with average wage growth of 4% a year over the 40 years you are eligible to pay off your student loan you will pay back £45,000 and the rest would be wiped. The interest could have been 1% or 1000% and the amount you paid back would the same.

Say you do a bit better, you earn £35k a year with average wage growth of 4% over the 40 years you are eligible you pay back £75,000 back which is the same as 3% interest on the £45,000 you initially borrowed, the £30k remaining is wiped off. The interest rate of the loan isn't going to make a huge difference to the amount you repay and there is a good chance that you can make better use of the lump sum in savings or towards a property

All of this assumes no gaps in employment and earning above the £25k. I'm on one of the older student loan, I earned under the threshold the first year as it took a while to find a graduate job so I was waitressing in between. I had a short contract at one employer and decided I wanted to do a PhD. I then did a 5 year PhD. This was funded through a stipend so didn't have to pay back my student loan. I then started a post graduate job after finishing and did 8 years with them before being made redundant whilst pregnant last year. My sector has seen a loss of £2 billion of investment in the last year and job are scarce. I now am looking at 18 months of work and then will be looking at retraining and potentially taking a longer break because of the benefit me being at home has had on the family. I'm probably looking at part time work and stepping off the career ladder for a bit.

Aside from one of the loans the interest rate is capped at inflation so it's not necessarily helpful to think of it as a debt that is growing. The interest rate in terms of how much you are paying back is less important than the time you have to pay the loan back for. The plan 4 loans were RPI +3% over 30 years students paid back 56p in each £1 borrowed with ~1 in 4 paying back in full. The plan 5 loans are RPI again but paid back over 40 years and the students pay back 81p to the £1 with 1 in 2 students likely to pay back in full.

There are absolutely concerns about the cost of university that absolutely need to be considered but the repayment of the loan is not where I would be starting. Currently it is very difficult to get the full maintenance loan, the threshold for the reduction in maintenance loan starts at £25k household income, that is a single full time wage at minimum wage and hasn't been increased in 20 years. It is household not parental, if a parent with no income at all and moves in a partner as their child starts uni with an income above the threshold the loan amount gets tapered even though they would have no obligation to provide the uni child with financial support. The minimum maintenance loan in the UK is insufficient to cover the student accommodation costs in many halls of residence. Many student accommodation outside of halls are all year rents which then cause issues with costs over the summer holidays. The increase in the number of students needing to work to fund university is increasing so there are more students looking for jobs with less jobs available with the struggles in hospitality and retail industries are having.
The cost of living is having a real impact on students budgets during uni. There is a currently a £5k deficit between the minimum maintenance loan and the cost of living at university in many university cities. Students are leaving university not just with their student debts to be paid back based on earnings but actual debts too. Entering into a jobs market saturated by graduates with massive grade inflation it used to be that ~15% of students were getting 1st class degrees it's now 30-40% at some universities. Positions that were needing degrees now need high class degrees, jobs and courses that previously needed high class degrees now need Masters or PhDs. It used to be that you could get on to PhDs with a first class degree now you are looking at having to do a masters first so students are having to find another £10k to complete their studies plus living costs for 1-2 years whilst they get qualifications whilst they enter a jobs market saturated by very able and competent applicants. There's a lot of competition out there.

Going to university now means that you will be paying a 9% tax on your earnings for most of your working life. It absolutely needs careful consideration. It is a lot of money if you aren't able to make a benefit from the course. The "student loans" get a lot of the headlines especially the tuition fees, it is a lot of money but on many ways It is also not enough money particularly from a cost of living perspective and also from the perspective of what a parent is expected to contribute. It has never been a loan in the commonly understood use of the word loan. It is more akin to the schemes in other countries know as "graduate contribution scheme".

Well done if you got to the end!!

DemonsandMosquitoes · 25/01/2026 20:13

FIL invested a lump sum for our DC when they were about ten. They used it to pay tuition fees at uni and we lent them the equivalent of the maintenance loan interest free. On graduation the interest on the original lump sum over the years was sufficient to pay back to us most of the maintainance loan we had lent them and they paid back the remainder from salary. Their degrees ultimately cost them about £2-3k of their own money.
We ignored ML advice as it never sat right. And have females who are more likely over the lifetime to pay back the loan than females. We didn’t see the need for them to pay interest if they didn’t have to. We will also be able to give them money for a house deposit and appreciate we are very lucky to be able to do this. I read today that if starting work on full time on minimum wage you will now start paying back the SL straight away. And remember interest is calculated from the day you took it out.

DemonsandMosquitoes · 25/01/2026 20:14

*And have males

Marylou2 · 25/01/2026 20:31

My DPs pay DDs tuition fees and give her a monthly allowance. We cover her accommodation. It's a fortunate position as she's an only child and grandchild. I would accept your DFils offer with warmth and gratitude. Spend it as he wishes and hopefully he and your daughter will become closer through this generosity.

JWR · 25/01/2026 21:44

DD is less than 3 years post graduation. If she had a loan she’d be repaying approx £500pcm. EVen on her excellent salary this would be a big chunk after tax and pension.

Ventress · 26/01/2026 08:56

I’m all confused again now! Thank you @Bjorkdidit, and particularly @Superscientistreally interesting and I definitely got to the end! Thank you for taking the time. I will go back to the drawing board.

DS is financially a very lucky young man. He wants to go to university in London (UCL) so rent etc will be expensive. I think perhaps I will pay the first year (rent and tuition) and then decide for the subsequent years. DS does have a good s&s isa which made somewhere north of 30% per year when it was a jisa. He could put the loans into this and let it make money then pay it off if required.

achangeofnameisasgoodasarest · 26/01/2026 10:07

OP, if your child is getting the £5k bursary because it's a healthcare degree, have you considered that if she went to a Welsh uni and did the degree there she wouldn't pay tuition at all?

She'd probably end up with more in the end of what her grandad is paying - could use some for maintenance and then put the some into a Lifetime ISA each month for a 25% bonus.

2016NotATeen · 26/01/2026 10:43

JWR I hope you don’t mind me asking but what is your offspring’s annual salary that results in them paying £500 pcm on their student loan?

LeTourEiFFEL · 27/01/2026 13:46

@Rosygoldapple why that way around please

FloridaCheese · 27/01/2026 15:45

I don't understand Martin Lewis position on student loans.

they are 7-9% interest from day one

it seems poor advice to tell someone to get into debt "because you might never need to pay it back"

income tax and NI is enough to be suffering when you're trying to get on your feet in your twenties. Without the compound student debt to have to think about too

if you never expect to get a job good enough to earn over 30k, what are your intentions with even going to uni?

Superscientist · 27/01/2026 16:17

FloridaCheese · 27/01/2026 15:45

I don't understand Martin Lewis position on student loans.

they are 7-9% interest from day one

it seems poor advice to tell someone to get into debt "because you might never need to pay it back"

income tax and NI is enough to be suffering when you're trying to get on your feet in your twenties. Without the compound student debt to have to think about too

if you never expect to get a job good enough to earn over 30k, what are your intentions with even going to uni?

The interest rate on the student loans is 3.2% not 7-9%

Martin Lewis speaks about how the loans aren't a useful way to look at student finance and the amount you borrow and the amount you pay back is independent of the amount you borrow and the interest rate applied. What dictates what you will pay back is your earnings and it works more like what other countries call a graduate contribution system. Rather than thinking about the cost of student finance being a £60k loan think of it as a 9% tax for 40 years and make decisions about whether university is worth it based on that and not a fear of large debt.

For those that are interested this is an article of his on the topic

www.moneysavingexpert.com/students/student-loans-england-plan-5/

Hotchocolate4 · 27/01/2026 16:25

I have the old student loan, came out with 18k ish got it down to 12-13k but with the interest rate going up a few years ago, I now pay off less than what the interest is so it now back up to 16k. I pay off something like £100 and they add £200 interest.

I would jump at this opportunity if I was you

Bellavida99 · 27/01/2026 16:53

achangeofnameisasgoodasarest · 26/01/2026 10:07

OP, if your child is getting the £5k bursary because it's a healthcare degree, have you considered that if she went to a Welsh uni and did the degree there she wouldn't pay tuition at all?

She'd probably end up with more in the end of what her grandad is paying - could use some for maintenance and then put the some into a Lifetime ISA each month for a 25% bonus.

oh no we didn’t know this for some reason thank you. Just read it. How annoying her UCAS form is submitted and interviews all underway. I’ve just googled it - graduates are only tied to 2 years working in Wales once they graduate too. Sounds good we should have done more homework. I’m surprised college didn’t tell them things like this too!

OP posts:
Bellavida99 · 27/01/2026 16:56

Superscientist · 25/01/2026 19:53

The interest rate isn't 9% for one, it is currently 3.2% you pay back 9% on salary over a certain amount.
The interest rate is only important to those that will pay it back in full before the 40 years are up.

Say you take out the £9500 per year tuition fee plus £5k a year minimum maintenance loan and you do a 3 year course. At the end of uni you owe ~£45k plus interest.

You graduate you do ok and get a fairly average job at £30k a year with average wage growth of 4% a year over the 40 years you are eligible to pay off your student loan you will pay back £45,000 and the rest would be wiped. The interest could have been 1% or 1000% and the amount you paid back would the same.

Say you do a bit better, you earn £35k a year with average wage growth of 4% over the 40 years you are eligible you pay back £75,000 back which is the same as 3% interest on the £45,000 you initially borrowed, the £30k remaining is wiped off. The interest rate of the loan isn't going to make a huge difference to the amount you repay and there is a good chance that you can make better use of the lump sum in savings or towards a property

All of this assumes no gaps in employment and earning above the £25k. I'm on one of the older student loan, I earned under the threshold the first year as it took a while to find a graduate job so I was waitressing in between. I had a short contract at one employer and decided I wanted to do a PhD. I then did a 5 year PhD. This was funded through a stipend so didn't have to pay back my student loan. I then started a post graduate job after finishing and did 8 years with them before being made redundant whilst pregnant last year. My sector has seen a loss of £2 billion of investment in the last year and job are scarce. I now am looking at 18 months of work and then will be looking at retraining and potentially taking a longer break because of the benefit me being at home has had on the family. I'm probably looking at part time work and stepping off the career ladder for a bit.

Aside from one of the loans the interest rate is capped at inflation so it's not necessarily helpful to think of it as a debt that is growing. The interest rate in terms of how much you are paying back is less important than the time you have to pay the loan back for. The plan 4 loans were RPI +3% over 30 years students paid back 56p in each £1 borrowed with ~1 in 4 paying back in full. The plan 5 loans are RPI again but paid back over 40 years and the students pay back 81p to the £1 with 1 in 2 students likely to pay back in full.

There are absolutely concerns about the cost of university that absolutely need to be considered but the repayment of the loan is not where I would be starting. Currently it is very difficult to get the full maintenance loan, the threshold for the reduction in maintenance loan starts at £25k household income, that is a single full time wage at minimum wage and hasn't been increased in 20 years. It is household not parental, if a parent with no income at all and moves in a partner as their child starts uni with an income above the threshold the loan amount gets tapered even though they would have no obligation to provide the uni child with financial support. The minimum maintenance loan in the UK is insufficient to cover the student accommodation costs in many halls of residence. Many student accommodation outside of halls are all year rents which then cause issues with costs over the summer holidays. The increase in the number of students needing to work to fund university is increasing so there are more students looking for jobs with less jobs available with the struggles in hospitality and retail industries are having.
The cost of living is having a real impact on students budgets during uni. There is a currently a £5k deficit between the minimum maintenance loan and the cost of living at university in many university cities. Students are leaving university not just with their student debts to be paid back based on earnings but actual debts too. Entering into a jobs market saturated by graduates with massive grade inflation it used to be that ~15% of students were getting 1st class degrees it's now 30-40% at some universities. Positions that were needing degrees now need high class degrees, jobs and courses that previously needed high class degrees now need Masters or PhDs. It used to be that you could get on to PhDs with a first class degree now you are looking at having to do a masters first so students are having to find another £10k to complete their studies plus living costs for 1-2 years whilst they get qualifications whilst they enter a jobs market saturated by very able and competent applicants. There's a lot of competition out there.

Going to university now means that you will be paying a 9% tax on your earnings for most of your working life. It absolutely needs careful consideration. It is a lot of money if you aren't able to make a benefit from the course. The "student loans" get a lot of the headlines especially the tuition fees, it is a lot of money but on many ways It is also not enough money particularly from a cost of living perspective and also from the perspective of what a parent is expected to contribute. It has never been a loan in the commonly understood use of the word loan. It is more akin to the schemes in other countries know as "graduate contribution scheme".

Well done if you got to the end!!

Thanks so much for such a clear and detailed response. I finally feel like I’ve got the whole picture. Still lots to think about…

OP posts: