Worth it to avoid taking out third year of student loan?

[Grottoscraper]

DD has just finished first year university. Currently on student loan scheme of 9K+ for fees and another 9K+ maximum maintenance loan. So would finish degree with c.60K debt, plus interest.

Has had some money come in from unexpected sources, we sat down and looked at her expenses over the year, and worked out that she could choose to not take out the loan in her third year.

This would mean graduating with 40K debt rather than 60K. I know there is a received wisdom (Martin Lewis etc.) that the amount doesn't actually matter because the repayments are based on income and most people will never pay it all back. OTOH I worry about this enormous burden of debt we're saddling this generation with, how its going to affect their ability to get on and live, raise a family etc. when they DO get into proper jobs and own houses. And the fact that while the interest on the current scheme is capped at the rate of inflation, the govt could change that any time they want and start charging an interest rate that makes it all balloon.

Owing 40K rather than 60 just seems like a significant hedge to keep it at a level that could conceivably be paid off if that's what's best, either via inheritance (will happen, but not riches) or gradually via earnings.

Thoughts?

No it can’t - if that was the case there’d have been no reason to bring out plan 5, they’d have adjusted plan 2.

However if you continue to believe they will abandon the link to RPI for plan 5, then that should seal your decision to take the loan because it would be even later in her life that not taking it would have any effect. Possibly even beyond the 40 years. At which point you’d have wasted your money.

It doesn’t make any financial sense to forfeit year 3 loans when you have taken out year 1 and year 2 loans. As I said before, if she had no loans at all, that might make a difference. But you’re not in that position.

Right now you’re saying ‘Sorry you didn’t have quite enough money to buy a decent flat in your 20s, but when you’re 50 you’ll save a few quid a month.’

So, a lot of kids we know do not qualify for the full maintenance loan because their family’s income is above 25k. Therefore, she is very lucky to qualify for it DESPITE no longer needing it. It is quite unfair really for people to take it who have lump sums and do not need it. We know lots of young people who have no choice but to use up all savings and some have to take a gap year to save up. I think it is a privilege to have the choice!

Also as the Government have shafted an entire generation for 40 years with 9 per cent extra tax - that means basic rate is 29% for them and higher rate is 49% - future governments won’t be able to put up income tax for them. It will have to be other forms of taxes. It is almost 50% at uni now looking up to age 25. Note you qualify for the state pension with less than 40 years contribution.
Lots of students have even more debt as they did longer degrees like medicine or architecture.
As it operates more as a graduate tax and so many are in the same boat now, it sounds like a lot but it is basically a graduate tax. Nobody can say for sure, but most likely buying a house or flat earlier being a middle to higher (but not too high earner) in a cheaper part of the country is going to make the most sense for her personally.

Why is it unfair? They signing up to pay 9 % orwhatever if they earn enough . They not stopping anyone else taking the loan

Everyone qualifies for the student loan for tuition and the maintenance loan for 5k.
After that, only the supposedly poorest qualify for further maintenance loan. Students who get inheritances or have substantial savings - I do not think it is fair they qualify based on their parents’ low income.
Like I said, there are plenty of families whose kids do not qualify for full maintenance loans who cannot top up and are having to do all sorts to afford uni.

It’s always been that way though. At least now there is a minimum loan which everyone is entitled to.

No it can’t - if that was the case there’d have been no reason to bring out plan 5, they’d have adjusted plan 2.

SIGH You're wrong.

https://www.gov.uk/government/publications/student-loans-a-guide-to-terms-and-conditions/student-loans-a-guide-to-terms-and-conditions-2026-to-2027

"The regulations may change from time to time, which means the terms of your loan may also change. This guide will be updated to reflect any changes, so you should make sure you have the most up-to-date version."

And according to Google AI:

Yes, the UK government has the legal authority to change your student loan terms retroactively, which includes the power to decouple the interest rate from the Retail Prices Index (RPI). Unlike standard commercial bank loans, UK student loans are not governed by standard consumer credit protections. Instead, they are governed by statutory regulations that allow the government to unilaterally amend the contract at any time.

Right now you’re saying ‘Sorry you didn’t have quite enough money to buy a decent flat in your 20s, but when you’re 50 you’ll save a few quid a month.’

No, that's not what I'm saying, because we should be able to manage helping her buy a flat as well.

I don’t understand your thinking at all. Money is better to be invested and used to get on in life.