Should our daughter use inheritance for university or still take loans?

[YesIDoKnow]

Firstly. I just want to say I understand the absolute priviledge of this situation and we are eternally grateful for the position we are in as it has made life considerable easier in the short term. However, it is difficult to understand what to do for the best.

Our 2 DC inherited around £40k each from a relative. it was totally unexpected and more money than any of us have ever dealt with and skipped a generation. We have held this money for them till they were 18 and it has been mutually agreed that it was for university fees/maintenance.

Eldest (22) has the Plan 2 loan for tuition and some maintenance. With support from us and a a jon at college, she dipped into the inheritance relatively little, but has come out with a large debt (£30k+), high interest, but some savings. She is going on to use the money she didn't use as an undergraduate to pay for a (very expensive) masters. At 22, this is all up to her and I respect her decision not to take the additional graduate loan (she will be living at home rent free which will be our contribution). Just to say she has worked this entire last year and continued to save.

Youngest (18) has £50k now and is heading to uni. She does not want to get a loan at all - but will be Plan 5, I think. We will again make a contribution, but she will end up with no money and possibly some loan at the end of a four year degree.

So, I am struggling with what best to advise as the money is now hers to do as she wishes. I think she should still take the tuition loan (9k x 4(language degree) = £28k) and perhaps not take the maintenance loan (I think she will get 5k per annum so that would be an additional £20k). So she could end up with a loan of £28k and £22k savings or take all the loans and have £2k and a loan of £28k on graduating. We expect her to try and get a small job and work in holidays, as even £40 a week makes a massive difference.

There are many other possible combinations of course, but I just don't know what to advise her for the best. Any thoughts about this most wellcome. The Martin Lewis advice still seems to be take the loans. And then I guess we could advise her to pay off as much as she wants at the end?

But also is the eldest just stuck paying off the ever increasing interest on her plan 2 debt for the rest of time?

What have others done? Should they get financial advisors? Should they borrow or spend?

Do we know if Martin Lewis still believes student loans are the best policy, if you have alternative financial possibilities. I am raising this question in the light of the current higher interest rates, that he had been advised would stay capped, by the government committee sorting the student loans system, and was instead reneged.
I know he felt betrayed as he had freely advised students to take the student loans, and he gave this advice in good faith…

MSE current advice for plan 5 loans is as most PP ie take loan for most people especially if savings rate are higher than RPI. There is no extra interest above RPI on plan 5 but repayment threshold is lower and write off only after 40 years. Terms are not fixed and almost certainly will change in the 24+ years between starting university and the loan write off.

blog.moneysavingexpert.com/2025/09/five-student-need-to-knows/#pay

I vote keep the money and get a loan for 2 reasons…

1. a job + student debt + a deposit = can buy a house, but a job + no student debt + no deposit = can’t buy a house until they’ve saved up again which could take years
2. The sooner a person learns about money, loans, savings, debt, pensions etc the better. An option where you end up with none of the above just delays that understanding and it’s really time in the game that matters.

i get that is a massive oversimplification…

I agree with this. The value of having a lump sum is massive. That provides options in a way that just wouldn’t be there if she clears her savings to replace the loan.

Take the loans. Such a large lump sum of money will be useful elsewhere.

Language degrees do not provide a career path in the traditional sense. Chances are she will be working in a lower paid sector and working her way up in life. Take the loan. She may not pay anything for years.

I would say take the loan. May never pay it back.
Video about student finance and why student loans are not like other types of loan:
https://m.youtube.com/watch?v=4tMl2sfGC4w&t=5s&pp=2AEFkAIB0gcJCWQCo7VqN5tD&ra=m

We’re in a similarish position, although less money and in Scotland so no fees.

My eldest has applied for the loan. The money from inheritance will be roughly split 1/3 for long term future (LISA); 1/3 mid-term towards Masters/car; 1/3 to support university years now.

We have also been saving for university years so will get approximately £16000 over the 4 years from us. Hopefully the inheritance money earmarked for the university years won’t all be used (there is also money saved from a part time job) and can be used for post university savings.

We’re following the Martin Lewis advice re:loan but appreciate it’s different in Scotland.

@Newbeginningsandhappythe division of thirds sounds really great and sensible (I have been nagging about LISAs for months now "just put in £1 as ML says!) - but I am not sure that it will cover whats needed for Uni with those divisions. And this remains the issue - the most effective distribution, but thank you for that.