2010 Starter - Pay Upfront or Take a Loan?

louisac

Hi guys. I was wondering if I could pool the collective wisdom of the forum and ask for some advice about student loans.

I started university at Oxford in 2010, using all the standard financial support offered to students (taking out the full maintenance and tuition fees loans, with no grant). Since then, I've had to suspend study due to ill health twice (once in 2011 and once in 2012), and am now finally due to return, starting the second year of my three-year course this October.



During my time out, I managed to save around £10,000. Given the low interest rates and high inflation at the moment, and with all the complicating factors of student finance, I'm at a loss to know what to do. I can't work out whether it makes financial sense for me to make use of the full loans which are still available to me, or whether it would make more sense to pay as much as I can upfront, maybe leaving a small contingency (£1500 ish?).



My fees are still at the 2010 levels, as far as I can tell. That means I'll pay £3465 a year, or £6930 over the next two years. I'm lucky enough to have parents who pay my accommodation fees (thank God, because they're very steep), and so all I need on top of fees is money enough to pay for living costs. I don't exactly have a lavish lifestyle and would expect to be alright on £3,000 a year, although I don't know if that would cover the (very long) holidays too. Over all, that means I'm looking at an outlay of at least £12,930, which is obviously above and beyond what my savings would cover, but I have to apply for a loan at the start of next year, too, so I can adjust it accordingly then.



I don’t have a clear idea of my expected starting salary post-graduation, but (I hope this doesn’t sound too presumptuous) if ill-health doesn’t get in my way again, I would hope that it to be decent-ish, and probably above the minimum repayment, once I actually start work. I'm studying English Lit not a science subject, though, and with the jobs market the way it is there's a substantial probability that I might end up looking for work for a while. I start paying the loan back at £15,795, at 9% of my salary, and the it's written off after 25 years.


Can't work out the interest rates, I'm afraid. I know it's inflation + 3% at the moment, but that's for 2012-13, and in the past it was inflation + 1.5%. Don't know if that applies to me now, as a 2010 starter, or if the interest is dependent upon the current date, not when you started.


Sorry if that's all very complicated. If anyone has any knowledge about this sort of stuff, or just has a better head for figures, and could give me any indication as to whether I should be maxing out the loan or trying to pay my own way as much as possible I would be MASSIVELY GRATEFUL.

Thanks!

Lokolo

Not sure what you will be classed as, whether 1998-2012, or 2012+. But it was never inflation + 1.5%. It was the rate of inflation in March, or base rate + 1%, whichever was lowest. So it is currently 1.5% (0.5% base rate + 1%).

louisac

Ah, you see, my ignorance shows itself immediately. Thanks for clearing that up.

It didn't seem like that at first from the websites I found. From the gov. uk/student-finance/repayments website (can't post links as a new user),
I got the impression that you pay inflation + 3% whilst you're studying, and then inflation + up to 3% when you're earning. When I look now, however, it does say 'Different rules apply if you started before 2012'.

Dunroamin

How many years of funding have you had?

Ed-1

louisac wrote: »

Hi guys. I was wondering if I could pool the collective wisdom of the forum and ask for some advice about student loans.

I started university at Oxford in 2010, using all the standard financial support offered to students (taking out the full maintenance and tuition fees loans, with no grant). Since then, I've had to suspend study due to ill health twice (once in 2011 and once in 2012), and am now finally due to return, starting the second year of my three-year course this October.



During my time out, I managed to save around £10,000. Given the low interest rates and high inflation at the moment, and with all the complicating factors of student finance, I'm at a loss to know what to do. I can't work out whether it makes financial sense for me to make use of the full loans which are still available to me, or whether it would make more sense to pay as much as I can upfront, maybe leaving a small contingency (£1500 ish?).



My fees are still at the 2010 levels, as far as I can tell. That means I'll pay £3465 a year, or £6930 over the next two years. I'm lucky enough to have parents who pay my accommodation fees (thank God, because they're very steep), and so all I need on top of fees is money enough to pay for living costs. I don't exactly have a lavish lifestyle and would expect to be alright on £3,000 a year, although I don't know if that would cover the (very long) holidays too. Over all, that means I'm looking at an outlay of at least £12,930, which is obviously above and beyond what my savings would cover, but I have to apply for a loan at the start of next year, too, so I can adjust it accordingly then.



I don’t have a clear idea of my expected starting salary post-graduation, but (I hope this doesn’t sound too presumptuous) if ill-health doesn’t get in my way again, I would hope that it to be decent-ish, and probably above the minimum repayment, once I actually start work. I'm studying English Lit not a science subject, though, and with the jobs market the way it is there's a substantial probability that I might end up looking for work for a while. I start paying the loan back at £15,795, at 9% of my salary, and the it's written off after 25 years.


Can't work out the interest rates, I'm afraid. I know it's inflation + 3% at the moment, but that's for 2012-13, and in the past it was inflation + 1.5%. Don't know if that applies to me now, as a 2010 starter, or if the interest is dependent upon the current date, not when you started.


Sorry if that's all very complicated. If anyone has any knowledge about this sort of stuff, or just has a better head for figures, and could give me any indication as to whether I should be maxing out the loan or trying to pay my own way as much as possible I would be MASSIVELY GRATEFUL.

Thanks!

All the info is on the following site:

http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678408&_dad=portal&_schema=PORTAL

Since you started pre-2012 you're on income contingent repayment plan 1 which has an interest rate of the lower of either base rate + 1% or RPI. The repayment threshold is going up each April by the previous March's RPI until April 2015 so it is now £16365 (up from £15795).

By the way, to answer your question I'd TAKE THE LOAN! Since the interest charged is less than inflation (and is likely to stay that way for a good few years yet) the value of the loan is actually decreasing.

louisac

I've had two terms worth of tuition fee funding. I studied and got myself through my exams at home my last term, and my college were stars and got the university to waive a third of the year's fees. I didn't think to check if there was a limit on how many years funding you could receive. Don't think I'm up to it yet, but something to keep in mind just in case.

Thanks for the advice, Ed-1! It's all starting to make sense, however slowly. Looks like I need to start shopping around for a good savings account, then!

rozmister

You get the length of your degree course + 1 year. So you have 4 years of tuition fee funding available to you and you've used 2 (1 for your first year, 1 for your second first year even though you are only paying two terms of fees back).

I would take a student loan if you are under the old scheme. I graduated last year and have just started paying my loan back (you don't pay in the tax year you graduate in) - with the tax threshold and payment threshold going up each year the amount I pay is minuscule despite earning 2.5k over the threshold. I barely miss the money but it is hard to save now and you will really benefit from the money you've saved so far if you keep it until after graduation. You may be able to buy property under one of the government's first buy schemes or might find you need something like a car for work purposes. Then you'll be glad you kept your 10k