MSE News: £6,000 or £9,000 uni fees? Is it an irrelevant decision?

PaulW1965

tyllwyd wrote: »

As I understand it, Martin's advice is that parents shouldn't try to help their children with fees, let them borrow it all on the student finance scheme and keep your money for yourself.

http://www.moneysavingexpert.com/family/student-loans-tuition-fees-changes#17

I don't think that is his advice.

is it worth taking the loan? Some students with savings (or their parents' savings) who may be able to fund some of the tuition fees themselves are asking whether it's worth simply not taking the tuition or living costs loan, or taking a smaller one?
Certainly it's a bad idea if you're struggling, borrowing elsewhere or pushing your finances to try and avoid it. Yet even if the money is there, for most not taking the loan is a relatively bad strategy from a purely financial perspective (ethically it's your own affair) though there are still some uncertainties.
To explain this, I'm assuming you understand how the system works; if not, do read the rest of the guide first then come back to this. Here are the key issues…

• You may not need to repay it. To use cash in the bank to repay a liability that may never occur is a big risk. If you used savings now to repay the loan but then, as an extreme example, never earned over £21,000 you'd have effectively lost the cash. A less extreme example would be if you used money from parents to reduce your borrowing, yet while you repaid you don't clear the debt within thirty years anyway. So reducing the borrowing wouldn't reduce your repayments in any way - you'd have been far better to put the cash in the bank.
  
  Therefore a simple strategy is to put the cash aside in a top savings account until after graduation then once you're working you'll have a much better idea of your earning potential (and by then we'll have our full calculator on repayment costs up and running).
• The interest cost in the intervening years is not too heavy. You pay RPI inflation + 3% while you're a student. While this is a real cost as it's only for the short term, weighed up against the risk that you end up repaying the debt unnecessarily it's not too large so putting the cash away until you know your earnings strategy does have a cost but not a huge one.
  
  However if you're absolutely sure you'll earn a big salary on graduation, and have the cash now, then it may be worth avoiding this interest cost.
• There may be early repayment penalties. The one spanner in the works is if the government adds penalties for clearing debts, or overpaying – so the 'put money aside and wait and see' strategy would be affected by this.
  
  This decision hasn't yet been made, and is likely to go out for consultation (see my seven deadly sins of early repayment blog).
  
  If these penalties were to be added, it would shift the bias somewhat more to erring on the side of not taking the full loan – though even with the penalties, if you're unlikely to ever repay it you're still better off taking the full loan.

PaulW1965

tyllwyd wrote: »

Yet if we'd called this system a graduate tax, would you still feel compelled to prevent your child paying a higher tax rate? Of course there is a balance to be had but it's worth thinking this through to judge your own reaction."

Yes most of us would tyllwyd/Martin and I for one don't think ML's children will be taking these loans :cool:

tyllwyd

PaulW1965 wrote: »

Yes most of us would tyllwyd/Martin and I for one don't think ML's children will be taking these loans :cool:

Oh, don't attribute that opinion to me - I was just quoting the bit of Martin's article that was relevant to the OP's question to point her towards Martin's advice as published on this website. I've edited my post to try to make that clearer.

Occams_Razor_2

Oldernotwiser wrote: »

Whilst I appreciate that you're being humorous to make a point, it's worth pointing out that UEA is a respected, established university.

oh c'mon, lighten up.

yes its an established university, no its not the worst - and no its not exactly a tier one institution either.

Occams_Razor_2

Oldernotwiser wrote: »

I like your thinking but I don't think that politicians are that bright to be able to come up with such a scheme deliberately.

It is the thinking, it is not an opinion.

It is an economic solution, the same way the congestion charge is an economic incentive driven scheme.

that doesn't mean it will work (see CC scheme) but that is the approach.

Occams_Razor_2

I wouldn't take Martin's advice on any financial matter, he's a journalist not a financial expert.

melancholly

Occam/s_Razor wrote: »

oh c'mon, lighten up.

yes its an established university, no its not the worst - and no its not exactly a tier one institution either.

well it's in the top 20 in this list:
http://www.guardian.co.uk/education/table/2011/may/17/university-league-table-2012

27th here:
http://www.thecompleteuniversityguide.co.uk/league-tables/rankings

according to the breakdown by subject, it's 14th in the UK for Biosciences, 11th for English, 11th for History etc etc

it may not be top 10 but it is certainly better than most. if you think it's an institution that you can mock, then you shouldn't be giving out advice on unis - it's a great place to go with a well thought of degree. it may have only been started in the 60s, but it is doing better overall than plenty and better than places like Imperial or Warwick for just a few of the subjects i looked at.

PaulW1965

Occam/s_Razor wrote: »

I wouldn't take Martin's advice on any financial matter, he's a journalist not a financial expert.

Yup everyone should do their own research. I'm sure he'd say the same.

JimmyTheWig

I agree that UEA is a well enough respected university. But its name does sound a little like a joke institution.
Plus the fact that, when we were at university, they elected Gonch from Grange Hill as their union president.

Occams_Razor_2

melancholly wrote: »

well it's in the top 20 in this list:
http://www.guardian.co.uk/education/table/2011/may/17/university-league-table-2012

27th here:
http://www.thecompleteuniversityguide.co.uk/league-tables/rankings

according to the breakdown by subject, it's 14th in the UK for Biosciences, 11th for English, 11th for History etc etc

it may not be top 10 but it is certainly better than most. if you think it's an institution that you can mock, then you shouldn't be giving out advice on unis - it's a great place to go with a well thought of degree. it may have only been started in the 60s, but it is doing better overall than plenty and better than places like Imperial or Warwick for just a few of the subjects i looked at.

that's just in the UK, and you're boasting about how it came in 27th in one survey. in the UK????

that's not exactly proclaiming its tier 1 status now is it? or the fact that the guardian survey, mysteriously has a jump all the way to the lofty heights of 18th this year, when previously the Guardian has it:
2010: 35th
2009: 40th
2008: 46th in the UK.

tell me again, how this is a Tier one school? I can't quite follow your non sequitur.

PS. My Global top 10 MBA says I can mock it all I want. :beer: