Should DC take the student loan if fees are gifted?

[Citygirlrurallife]

We might be in the very fortunate position to have a relative gift the cost of university fees for D.C. in the event this possibly happens, my feeling is great they don’t get the loan for that (we’d still need loan to help pay for accommodation) that’s a huge chunk of debt they don’t have. DH is of the opinion that DC still take the loan as the interest rates are low and then either invest it so it makes more money than the interest as they pay it back and then use it towards a deposit on a home as the interest rate is lower than what a mortgage would be

I just think not having the debt at all is a better idea - thoughts?

all hypothetical at the moment and a few years off.

Take the loan, invest the gift - it could be used for a further degree or deposit on a flat after uni. Or, he could repay the loan immediately on graduation if he wants. It gives him options whilst he sees how life pans out after graduation.

If I specifically gifted someone the money for university fees so they didn't need to take out a loan, and then I found out they had taken the loan out anyway and done whatever they wanted with my gift id be really quite annoyed.

I think you need to talk to the gift giver. They haven't gifted it for a house deposit, otherwise they would have said here's the deposit for a house, they have stipulated what it's for.

The loans are not the “low interest step up in life” that they once were. Check out the details very carefully - you need to see what interest rates are like at the time, compare with investment returns etc.

You don’t need to decide now. And indeed you can’t really as no one knows what changes to the system will be in place in a few years. There is political pressure to improve the offer to students but equally higher education establishments are breaking under the strain of rising costs.

Agree, take the loan and invest.

GP gifted the GC uni fees for tuition, they invested a lump sum for each of them when they were about nine or ten. We paid for uni accommodation and lent our DC the equivalent of the minimum maintenance loan interest free. When they graduated they used the interest made on the original lump sum invested by GP to pay back most of that they owed us, the remainder they paid back from salary over their first year. Both at 23 then had no debt.
We are lucky enough to be able to gift them house deposits when the time comes.

20 years ago I’d say take the loan but god knows how the law will change, or the money will get spent, I’d try to avoid the loan completely these days, or take the smallest possible.

Yes we’ll def be bringing them into the conversation, we both agree on that.

I also think it’s worth laying out the options to D.C. and letting them decide for themselves

Thankyou, we won’t go into it blindly but I agree I feel like DH is basing this on what loans were when we were at uni rather than what’s currently going on

Student loans interest rates are high!!! Don’t take it if not needed! Look at Martin Lewis. The government are ripping off students!!

No because they're just another tax crippling you. Haven't you seen people talk about the loans recently? Martin Lewis was talking about how unfair they are. They scale up with salary so just as DC earn well they get loads took off them and the interest just keeps getting higher.

I believe that it’s against the terms of the loan to not use it for the intended purpose. But that could have changed.

Taking on unnecessary debt is a mug's game.

This. I'm with you OP. There are no guarantees how the loans will be treated in the future.

I'd avoid any student debt that I could. That's what I'm doing with dc who goes to uni this year.

I do also think encourage dc to think about whether uni is necessary for their career. Job market hard right now
Apprenticeships?

Thankyou all - to be honest I haven’t been watching the interest rates etc because it hasn’t been relevant yet but agree with the points that we need more info before making the decision. I think DH’s point is only if interest rates are low but a quick scan on the government website looks like they could be up to 6.2%?!

good gauge a general response though, thankyou

Wow! You’ll be ‘bringing them into the conversation,’ but ultimately ‘letting DC decide for themselves’ how to spend the money that has been generously given to pay their university fees?

I am astonished at the entitlement!

Calm down dear, it’s just semantics! Obviously we’ll carry on talking to them, they are close relatives whose opinions I trust so the whole payment thing will be discussed at length

I know people who invested the loan but this was 20 plus yrs ago. Need to see if it’s favourable now.

If you’re talking about the tuition fee loan you can’t just “take” it, it’s paid direct to the university. The maintenance loan is the one paid to the student and is dependent on your income.

Interesting - thanks I didn’t know that

As pp said, tuition fee loan is attached to the educational establishment you choose, and funds get paid to them. Maintenance loan depends on your income and goes to the student.
Also bear in mind that deadline for applying for student finance is early May (passed for Sept 26 entry) so I assume you are talking about next year onwards. On a 3/4 year degree, if you want finance for fees you have to apply before you start the course ie the May before the Sept first year. You can't change your mind and get a loan later AFAIAA.

We took the loan then used savings to pay it off at the end, which will have cost us some interest but gave us options. Interest starts accruing from the start of the degree.

Please don't take on the student loan if you don't have to. Things are absolutely categorically not the same as they used to be!
You are effectively signing up to an additional tax which most people will be paying back for their working life. The amount you need to earn to actually pay back a student loan is enormous, so it will just continuously erode earnings. Lots of facts and figures online.
If uni is the right option for your child, it sounds like they've been given an amazing opportunity.

Edited to add - serves me right not for reading quickly. The fact that you still need a loan for the accommodation etc might change the calculation on this - definitely something to research very carefully. There will be online calculators that will tell you what future earnings thresholds mean you child is better / worse off for making whichever decision.

Would recommend the Martin Lewis podcast "Should I take a student loan - the five things you need to know"

I assumed you meant you would get the tuition fee loan paid to the uni and invest the gifted money. I agree with pp though - why saddle your DC with student loan debt if you don’t have to. The interest rates are not low!