'Don't pay your kids tuition fees upfront' Discussion Area

Kiirk

melancholly wrote: »

just to clarify, as it sounds like you're already a student, are you already at uni? if so, you're under the existing system, not the new one. so your total will be lower and your repayment threshold lower. plus there are no early repayment penalties. if that is the case, then it's much simpler - take the loan, keep your savings earning interest at as high a rate as possible (which at the moment, might mean locking it away for a period of time), then decide after graduation whether to pay back slowly or all at once (remembering to consider interest rates for the life of the loan rather than just on what they are now). it's probably best to just pay back on the standard terms, at least to start with, then use your savings on a house deposit, or as a buffer in case you don't get a job immediately after graduation. you're in a great position to have these savings that could be a support blanket - in the current economic climate i'd be reluctant to get rid of that.

I am already at uni in my first year. My reasoning at the time of not taking a loan this year was that if I took any money out, it would loose value because there were no interest rates that beat inflation. I did not know you could repay the debt early, I have not seen this stated anywhere

Furthermore if I don't get the job I want, I would have jobs to fall back on, which would be enough to live off for a few years. Also I think I should have enough to put down a reasonable deposit on a house within a couple years.

Lokolo

Kiirk wrote: »

I am already at uni in my first year. My reasoning at the time of not taking a loan this year was that if I took any money out, it would loose value because there were no interest rates that beat inflation. I did not know you could repay the debt early, I have not seen this stated anywhere

Furthermore if I don't get the job I want, I would have jobs to fall back on, which would be enough to live off for a few years. Also I think I should have enough to put down a reasonable deposit on a house within a couple years.

You should perhaps read more on the rules of the student loan. There are no early repayment charges. Not only that but you seem to think that you would lose value because interest rates are below inflation.

The current student loan will not be above the base rate + 1%. No matter what inflation is at. So currently a loan will cost 1.5% (as the base rate is 0.5%, even though inflation is ~5%). You can get 3.05% ISA with TheAA. So interest you will owe, will be half that what you can earn.

melancholly

Kiirk wrote: »

I am already at uni in my first year. My reasoning at the time of not taking a loan this year was that if I took any money out, it would loose value because there were no interest rates that beat inflation. I did not know you could repay the debt early, I have not seen this stated anywhere

Furthermore if I don't get the job I want, I would have jobs to fall back on, which would be enough to live off for a few years. Also I think I should have enough to put down a reasonable deposit on a house within a couple years.

time for a very dull evening going through all the paperwork and T&Cs, either with what you have on the directgov student finance website. learn as much as you can before making a decision. i think you've got the interest rates bit the wrong way around (plus interest rates now are very low so it can help with student loans to think longer term).

if it makes you feel psychologically better, then pay the fees. in pure financial terms, it's better to take the loan.

manoverboard9

Really useful information on student finance. However anyone know on what date the RPI rate is taken to calculate the interest rate on the loan as this could mean a substantial addition to the first year of debt for new students if you are also adding another 3% on top (based on RPI rates this year)?

atypical

manoverboard9 wrote: »

However anyone know on what date the RPI rate is taken to calculate the interest rate on the loan as this could mean a substantial addition to the first year of debt for new students if you are also adding another 3% on top (based on RPI rates this year)?

The RPI figure in the previous March is used e.g. for those starting in September 2012, the RPI figure in March 2012 will be used.

The RPI figure in March 2011 was 5.3%. If it were similar again we'd be talking about an interest rate of 8.3% which would certainly raise eyebrows.

setmefree2

manoverboard9 wrote: »

Really useful information on student finance. However anyone know on what date the RPI rate is taken to calculate the interest rate on the loan as this could mean a substantial addition to the first year of debt for new students if you are also adding another 3% on top (based on RPI rates this year)?

atypical wrote: »

The RPI figure in the previous March is used e.g. for those starting in September 2012, the RPI figure in March 2012 will be used.

The RPI figure in March 2011 was 5.3%. If it were similar again we'd be talking about an interest rate of 8.3% which would certainly raise eyebrows.

Plus the tuition fees themselves wil rise by inflation. So at RPI 5.3% year 1 fees will be £9000, year 2 £9477, year 3 £9979 = £28,456. Plus interest year1 £747, year 2 £1596, year 3 £2556 = total interest £4899. Total cost of Tuition £33,355.

And that doesn't include maintenance - add another £20k.

The government really ought to get a grip on inflation

amiehall

I've never had my fees rise with RPI. Or at least not March RPI as the loan rates are taken at. There's been years where I've had 4.8% interest rates on my loan but the fees rise with 2-3% It could be CPI but it looks too low even for that maybe....

sophiekingscott

Hi all,

I had a read of the thread and have to say there are some valid opinions floating around in there. I have just graduated uni this summer with a debt of about £10,000. I was lucky enough to find a good job after uni. My parents were unable to help me out with my fees whilst at univerisity so I took out a loan. The loans repayments are very managable considering the relatively high amount of debt. Mine is about £30 per month, that less than my phone bill!

I really dont think parents should be preasured to pay their childrens fees upfront or at all when the repayment schedule is so managble! Of course student debt should be kept to a minimum but its not something to work yourself up over really.

setmefree2

amiehall wrote: »

I've never had my fees rise with RPI. Or at least not March RPI as the loan rates are taken at. There's been years where I've had 4.8% interest rates on my loan but the fees rise with 2-3% It could be CPI but it looks too low even for that maybe....

This is what I found on Bristol Uni's website

What will tuition fees be in 2012?

With effect from 2012 the University of Bristol will charge an annual tuition fee of £9,000 (increasing annually in line with inflation) for all UK and EU students on full-time undergraduate programmes, as approved by the Office for Fair Access (OFFA).

setmefree2

manoverboard9 wrote: »

Really useful information on student finance. However anyone know on what date the RPI rate is taken to calculate the interest rate on the loan as this could mean a substantial addition to the first year of debt for new students if you are also adding another 3% on top (based on RPI rates this year)?

Just thought I'd add that the RPI + 3% figure applies until the April after graduation. That will add (yet another) £1.5k to £2k to the total owed.

But if you really want to know what the cost of a degree is, use the student loan calculator here

http://www.moneysavingexpert.com/students/student-finance-calculator

Strip out all the inflation by setting all RPI options to zero and (restrict average UK earnings to RPI) then just play with the salary increases and starting salaries.

So for example borrowing £43.500, with a starting salary of £19,000 and a salary inflation rate of 4% ( your son/daughter will be earning £61,630 in 30 years in today's pounds) will make the cost of the degree £57,650 in todays pounds. If you think your son/daughter will be earning £82k in 30 years time - this is a 5% salary inflation rate and will make the cost of the degree £57,650 in today's pounds.

Simialrly, borrowing £43,500 with a starting salary of £25,000 an a salary inflaton rate of 4%(earning the equivalent of £78k in 30 years), will make the degree cost £69,880 in today's pounds.