what to do for student loan

hi123

hi i am a high rate tax payer and daughter has got an offer to study medicine
i am in position to pay about 10k per annum to fund her
can i have some guidance as to what will be best for me to do for her
get student loan or maintennance loan or both and repay early
thanks in advance
mods if this needs to be in other forum please move

robpw2

how will you pay for the tuition fees. and accomodation costs etc

she will need to get the tuition fee loan at the very least

hi123

thanks
looking at rough estimates,the uni reckons she will need about 10k subsitence per annum
going thru martins guide it appeared paying tuition fees is better and taking loan for maintenance
i wasny clear on this issue thats why the question

robpw2

hi123 wrote: »

thanks
looking at rough estimates,the uni reckons she will need about 10k subsitence per annum
going thru martins guide it appeared paying tuition fees is better and taking loan for maintenance
i wasny clear on this issue thats why the question

i would take the tuition fee loan because all students are entitled to it regardless of their parents finances where as maintenence loans etc are subject to parental income ...

purpleheather2810

Personally I would encourage her to take up all loans available and invest your 10k p.a. until she needs to repay. Your money will work harder that way.

hi123

thanks
i thought the rate of interest is fairly high with rpi and tiered rate
i am not sure i can get a lot as interest in saving accounts

malcolmffc

But if you pay the fees upfront you will be wasting your money unless she pays off her loan in full. Unless she's in a £60k plus job by the time she's 30, chances are most of the loan will be written off.

TAWhite1994

malcolmffc wrote: »

But if you pay the fees upfront you will be wasting your money unless she pays off her loan in full. Unless she's in a £60k plus job by the time she's 30, chances are most of the loan will be written off.

Medicine? Probably be an SHO/Reg by 30 or at least most undergraduate entry students are so maybe around £40,000-£50,000 a year at that age. Nearly all medicine candidates who qualify and go on to foundation training pay off their loans in full.

My advice, as I'm in a similar position to the Op's daughter, will be simply to take out all loans available to her through student finance and allow her to take some of your offered funding, say 25% to account for her in budgeting and the remaining 75% should be invested in an easy access account to allow for withdrawal should she run short on money which as a student, is quite likely so long as she doesn't become dependent on "emergency" money.

shocky_2

Don't pay off the loan. These are the reasons -

1) The government has set up the new system so that most students will not pay for their student loans in full before it gets written off. If your daughter does not end up staying in a very well paid role for a few decades she will never have to repay the full loan.

To give an example, repayments are taken direct from salary like a tax at 9% of salary above £21,000. If we say that your daughter will pay tuition fees of £50,000 over the 5-year medicine degree and we say that she gets earns 40k a year, by my calculations it would take 29 years to repay the debt before interest. With interest it would never be repaid in full before being written off.

2) At some point she will need a deposit to buy a house. This is the real difficulty for young people today, not student loans. I am in my mid-20s and found it difficult despite making six figures, for most of my friends from uni it is almost impossible. A lump sum which can be used as a deposit will make it much easier for her to get a mortgage and may get her a better rate.

3) It is very likely that the interest she will pay on any other borrowings (e.g. a mortgage) will be greater than the interest she will pay on her student loan. My understanding is that the maximum interest payable on loans taken out from 2012 will be the RPI measure of inflation plus 3%, which is higher than before but it is still very cheap debt.

4) Paying the loan means you lose flexibility. You can't get that money back. If your daughter later becomes a high earner and wants to repay the loan, she can still do that when the time comes.

5) For now you can get get much better rates in a high interest savings account than she will pay on the loan. Interest rates for new student loans are tiered to earnings, they start low and increase once she is earning more than £21k. She can make a decision about repayment when she reaches that point, there is no need to pay now.

The only situation where paying the loan is a good idea is if you are worried that your daughter will waste the money. Even then you are better off holding onto the money yourself for the time being. I strongly recommend maximising the loan and paying into a high interest account, keep that money handy for a deposit.

CLAPTON

youngsolicitor wrote: »

Don't pay off the loan. These are the reasons -

.

5) For now you can get get much better rates in a high interest savings account than she will pay on the loan. Interest rates for new student loans are tiered to earnings, they start low and increase once she is earning more than £21k. She can make a decision about repayment when she reaches that point, there is no need to pay now.

The only situation where paying the loan is a good idea is if you are worried that your daughter will waste the money. Even then you are better off holding onto the money yourself for the time being. I strongly recommend maximising the loan and paying into a high interest account, keep that money handy for a deposit.

Student pay inflation plus 3% so about 5.7%; impossible to get a savings a/c paying that.

rob404uk

I would definately take all of the loans avaliable. Why tie up all of that money for years when your daughter might want the money saved for something like a deposit on a house. Medicine is 5 or 6 years I believe. 50K + interest would be an amazing start for her.

Make it clear this is not money for going out and having a laugh! Very easily done when you are young and learning about life!