Student MoneySaving: Funding, Borrowing & Living as a student Article Discussion Area

Broke_Student

Rikki wrote: »

'tuition fee loan' Is the one you pay back at a low interest rate when you leave and earn more than £15,00. Am I right.

Yes you are partly right.
Both the 'tuition fee loan' AND the 'maintenance loan' are paid back at a low interest rate when you leave and earn more than £15,000. The two loans are given for different purposes but are given by the same people and lumped together so they are effectively one 'student loan' when you begin repayments.

The 'tuition fee loan' will never ever go into the students pocket. It is paid directly to the university to cover fees. The student in question will not get a tuition fee loan if the father is paying the fees for him in advance.

The 'maintenance loan' is the loan money that is paid into the students bank account to spend as they wish.

His accommodation cost have to be paid as soon as he starts.

This is very unusual for most big universities. Almost all of them give you the option of payng upfront if you wish but also give the option of termly and monthly payments! Please double check this

My concerns are: his father is paying fees and basic accommodation cost. What I don't want is the University being able to take any grants or bursarys he maybe entitled to directly from my son.

This will almost certainly not happen. The University does not give the grant - it is given to the student as cash in the bank by the government. They can't pull it out of the bank.
The university does however give the bursaries and scholarships. They are unlikely to hold any of this money back unless the student does not pay their fees/accomodation at all for a long time.
The bursary/grant/scholarship/maintenance loan money was never supposed to be for paying tuition fees in the universities eyes so they will not penalise him for his father paying fees in advance.

I also don't want his father to be able to demand the university take them either to reduce his expenditure on accommodation.

Can't happen.

I think basically I want to know is if any entitlements go direct to my son are his alone. He needs something to get him started till he gets a job.

Yes they are his alone.
One of the entitlements is the 'fee loan' which he may not get if the father pays the fees in advance.
Like I said the fee loan is never given to the student direct but a much better financial move would be to take out that low interest loan for the fees (paid direct to the university by the loans people) and then to bank his fathers fee money in a high interest savings account. That way he is getting that extra money he is entitled to but in a round about sort of way (which I think is what you want).

JonN_2

Many thanks for these great articles on Student Loans.
When will the 2007-2008 update be available ?

Psychobot

Hello,

I've noticed that quite a few parents are worried about the financial situation of their student children and seem to have taken over the burden of attempting to chase up loan details for their child(ren).

Now, I'm not meaning to irritate any wonderful parents who are trying to make this academic transition stage in their children's life a little smoother, but really the bulk of the research and understanding about students loans/ finance/ bursaries should come from the child (adult!!!).

I speak from experience, because I have had to run around the houses from the age of 18 trying to understand how the Student Loans system worked and yes it has been a stressful experience - BUT also a worthy experience. I feel very strongly that students have to have a clear idea of how to deal with their finances otherwise they will forever be dependent on their elders.

Without sounding condescending -it's really your 18 year old's job to read the leaflets and forms that come through the door. The information given is actually quite clear, and if it isn't - then at least he/she has attempted to find out what they know they don't know.

Peace

[Deleted User]

Interest rates on UK student loans rise to 4.8%. Surely, if i can afford to, shouldn't i try to repay it now asap?

Broke_Student

animal_magic wrote: »

Interest rates on UK student loans rise to 4.8%. Surely, if i can afford to, shouldn't i try to repay it now asap?

No not necessarily.

Lets say you have £5000 of student loan and £5000 in your current account (no interest). At 4.8% interest the size of the student loan will be £5240 after a year and you will have £5000 in the bank so are £240 worse off.

If you use your £5000 and you pay it off now, the size of the loan in one year will be £0 as it would has been cleared. You will have no money in your bank but no debt either. This seems all good...

However if you put your £5000 in a savings account paying 6% interest (widely available) then after one year you will have £5300 in your bank account and the size of the student loan will have risen to £5240. So if you pay off after a year with your £5300 then you will be £60 better off!

If you do this each and every year, letting them take the minimum student loans from your salary, then you will continue to make a relative profit every year! You will make an even greater profit after 2008 when the student loan interest rates drop back to below 3%. You just need to be strict with yourself and not waste the money you have banked in place on repaying the student loan (or you will be in debt with no savings earning interest!).

Another advantage of doing this is that you will have this pot of money in the bank for a number of years. As a graduate you are at a stage of life where you are likely to borrow money for a mortgage/car loan etc. When this happens it makes financial sense to spend your 'student loans pot' instead over getting a commercial loan at a higher rate.

edit: The above is assuming you are a non-taxpayer. If you are paying tax on your savings at 20% then you will break even by putting your money into a savings account earning 6% - you will start to profit after a year when the student loans interest rate decreases. Alternatively you could still profit by putting your money into an account paying greater than 6% interest (e.g. ICICI, IceSave, Sainsburys Internet) or save your money in an ISA as they do not have interest taxed!

Auchingee

Hi I am new to this thread and wonder if anyone can help. I am disabled, live in Scotland and living on DLA and Income Support, my partner started University last year and she is studying for a Social Work Degree. The problem is the DWP class her student loan as an income and so this money is taken off my benefits. How, if for tax reasons this money is obviously under the tax limit, why is it removed from my benefit? Also concidering the loan has to be paid back by her at the end of the course but I will not get a refund of my benefit deductions, how can the government justify this double payment.
Can anybody help me sort out the problem of me loosing my benefits, whic I need to ensure I can get my extremely large amounts of medication.
Hope this is kind of clear what my problem is, and what help is available.
Thanks, A

student_advisor

Auchingee wrote: »

Hi I am new to this thread and wonder if anyone can help. I am disabled, live in Scotland and living on DLA and Income Support, my partner started University last year and she is studying for a Social Work Degree. The problem is the DWP class her student loan as an income and so this money is taken off my benefits. How, if for tax reasons this money is obviously under the tax limit, why is it removed from my benefit? Also concidering the loan has to be paid back by her at the end of the course but I will not get a refund of my benefit deductions, how can the government justify this double payment.
Can anybody help me sort out the problem of me loosing my benefits, whic I need to ensure I can get my extremely large amounts of medication.
Hope this is kind of clear what my problem is, and what help is available.
Thanks, A

The amount of benefit you are entitled to does not have anything to do with the tax limit. You have an "applicable amount" which is the minimum the government says you need to live on each week dependent on your circumstances: more if you're a couple, less if you're under 25 etc there's also an addition for people on DLA/IB. Any income above this amount each week will be deducted from any means-tested benefit (income support).

If you live with your partner, you will have a joint claim for benefits, so both incomes will be used in the financial assessment.

Even though some of the student finance your partner receives is repayable, it is designed for living expenses which is why it ism counted as income.

Not all of the student income is counted and you should check that the correct deductions have been made (esp. if you claim housing benefit as councils are notoriously bad for this)

The tuition fee loan will be disregarded in it's entirety and a disregard will be applied to the maintenance loan. The maintenance grant and social work bursary are likely to be counted in full as the disregard only applies to one element. Your partner could also apply for the adult dependent's grant through the SLC but this would also affect your IS claim.

If you are no longer entitled to IS, you can claim free prescriptions as a person with a low income, simply get an HC1 form from your doctors.

Probably not the answer you were hoping for.

Yeyinde

Being very confused with advice from my Mother (financial brain that she is) and the related article I'm looking for a touch of extra advice.

So let's assume......

I took my Student loan in 1999, I saved a portion in high interest accounts and used that to pay a sizable chunk off the loan when I left University in 2004.

The SLC (now) take £25 straight out of my pay (it was something like £9 when I first started working) and I pay an extra £100 a month voluntarily (and have been doing so more or less since I started earning).
Noting that i don't have exact figures with me, assume I still owe the SLC around £5000.
My mortgage payments, utilities bills etc are all budgeted and paid for, the extra £100 to the SLC is budgeted in as is £50 to a second bank account (the legendary rainy day fund for insurance, taxes, "stuff").

Should i continue to pay the extra £100 a month, or should I follow the advice of the article and plumb that money (partially or all of it) into the rainy day fund?

If I stop the voluntary payments, it'll give me a touch more in the rainy day fund or extra "me" money (or both, like the sound of that) but I'll still be paying my student loan in 16 years time (not a prospect I like the sound of).
The alternative is to continue to pay the voluntary and have it paid in 3 years time and be rid of it and then have the £125 spare in my budget.


Yours,
A very confused graduate homeowner.

:huh:

Edit: Sorry, only just noticed I've resurrected a somewhat old thread...

sarah99_2

I am about to start paying the higher rate of tax on a small portion of my salary.Is there any way that I can opt to overpay on my regular loan repayments and so avoid this?

Gemmzie

Yeyinde - it's generally not worth overpaying the student loan as it's at such a low rate. You'd get a better return saving the money