Uni maintenance loan

[imtiredandiwanttogotobed]

DD has recently started uni. She is living st home so hasn’t taken out the maintenance loan.

Should she get the maintenance loan anyway for this year so she can put it into an isa to have some money set aside for when she finishes uni?

I can’t work out if it’s better to have less debt or use the money to save as it will likely be a while before she had to pay it off and even then minimal cost. She would save the money for a house deposit.

I advised ours to take out the loan and invest it. Obviously it is their choice, and depends on their will-power too as some might just spend it.

I figured this way it gives them options. So long as they are getting at least the loan interest rate back from the investment, they could at any time change their mind and pay it back.

I thought the interest on new loans now was so high they wouldn’t be able to make the loan interest back? 6%?

In the past yes - take the loan and invest it. Nowadays I wouldn't as the interest rate is so high AND the interest starts accruing from the date you take it out rather than when you graduate which used to be the case. Interest rate is currently at 4.1%.

Dont take it!! Its very hard to "make money" by borrowing & investing, the interest rates stop you.

God no!
get a part time job and save that money up!

Thanks for your replies. I think I was thinking if she will be paying back her fees for the course and that’s going up and she is unlikely to pay it off does it even matter having more debt cos the amount she pays will be the same?

I am generally averse to any kind of debt so my gut is for her to not take on more than she needs but I just wondered if she was missing a trick by not taking it out and having the money there to use for a house or similar? Rather than making money on the money if you see what I mean?

Current interest applied to loan 4.1%
Best buy 1 year fixed rate ISA or bond 5%
So no issue taking the loan and she should make a small profit. If the numbers reverse she can always pay it back.

Remember the goverment adds 25% to a LISA

25% added but also a 25% penalty if the money is taken early. LISA interest rates are generally a bit lower too.

Thanks for the replies

I think I’m thinking of she doesn’t earn enough to pay the loan back then it is essentially ‘free’ money which she would be silly not to take if that’s the case. By the time she’s paying anything significant back (earning around £50k) the £30k loan she has to take for fees will be so high that she might as well have the extra maintenance on top cos it won’t cost any more to pay it back?

obviously if she does go into a higher paying career sooner she will be paying more back

im just thinking how helpful circa £12k would be just out of uni for buying a first home.

So you will repay 9% of your wage over £25k until the loan is repaid. For context £24,700-ish is full time minimum wage so almost everyone now starts paying it back. You're right that most people don't pay it back in full because you need a high salary in order to be repaying the capital amount rather than just the interest accrued, but in essence it becomes an additional 9% out of your pay slip until it's written of which is now 40 years the April after you graduate (so 61ish for most people). I would strongly advise against taking it out if you can avoid it, definitely not free money.

Won’t she need it for her living expenses? DS lived at home for the first year, his maintenance loan covered his bus pass, society fees, lunch/ coffees when at uni. He also had a part time job to earn extra money for going out, gigs, holidays, etc.

She gets some money from her dad and some from me too. She is also trying to get a job. She lives at home so no real expenses and she doesn’t go out loads etc

But that 9% will be the same amount regardless the amount of debt soooo is it not worth considering taking the maintenance loan and saving for a house?

Absolutely no criticism of you here OP but this post really sums up how farcical the student loans system can be.

Bad thinking. You really notice it coming out of your wages when it almost inevitably does. It’s not a good plan to potentially be paying it back forever.

And when getting a mortgage, student loan repayments are factored into affordability, so this is false economy in more ways than one.

Much better, if she’s living at home and being supported by you, to just get a job and save. The maintenance loan isn’t a huge amount - she could easily save it under those circumstances, and once saved be earning interest rather than accruing debt.

Artificially creating debt is called stoozing. Some people do it with interest free credit cards. As long as she can earn more interest than the interest accrued on the debt then she's better off.

The affordablity point is only relevant if she has no debt at all and presumably she has taken out the tuition loan. If she's likely to be a very high earner, no career breaks etc then may not be sensible. Also consider if she may want to do a masters degree as the loan terms for that are much less favourable.

We made a spreadsheet for how long it took to pay back 'just' the tuition fee loans or tuition fee loans and maintenance loans and basically in lower paid scenarios the total repayment was the same as you just paid back 9% of your salary over the threshold for your whole career either way. I think i remember that you has to get to 60k to start actually paying it off in a meaningful way and in that scenario we found things like hed be paying it back 5 years longer if he stuck at that level or 10 years at different salaries. But those years are at the end not the beginning if that makes sense so youd get the same mortgage implications with a smaller amount of loan as at that point your both paying 9%.

Its the sort of thing AI could help you work out to get a real picture of how much more for how much longer in a few different scenarios.

We were trying to work out whether to stay home and not take the loans, or go to a better uni for his course and take the loans so it waa a different thought process. He ended up taking the maintenance loans.

Thanks I have tried Ai and it seems to suggest she is best taking the loan as her career choice is likely to top out at £50k ish - obviously she may change careers and earn more but that’s an unknown

I just don’t want to suggest she takes the money and saves it and it cost her more in the long run but at the same time don’t want to miss an opportunity to have some savings which won’t cost her any more to get if she doesn’t earn over £50k

If she saves in high interest fixed rate accounts then the money is not available. She sounds quite frugal. Wouldn't recommend for a spendthrift.