Don't need student loan? Get it anyway advice...

Fuzquia

My situation is as follows:

Was made redundant a few weeks ago,
Had meeting with head of course at local university last Friday,
Was verbally accepted to 2nd year of course,
currently applying through UCAS and funding through SAAS.

As I was made redundant I have some cash in the bank (less than 5k), and wasn't going to bother with a student loan. That was until I heard Martins advice to take the loan and put it in a high interest account to earn the interest on it.

However, after reading through the student advice on loans/bank accounts, I am unsure as to where this money is supposed to be placed to earn interest? All the 'best' student bank accounts listed don't seem to pay much in the way of interest and 'normal' accounts, i.e halifax 6%, require you to pay your salary into the account each month? Obviously being a student this rules these out. I don't even have an official ucas offer at the moment to even open a student account!

So can anyone point me in the direction of where this money should go in order to gain the interest on it? I'm sure I am missing a posting or article somewhere but can't seem to locate it!

Blacksheep1979

Don't look for a current account look at the savings accounts. Also open as many student accounts as possible and put the interest free overdraft you get into the savings account as well.

Fuzquia

Ahhh! How stupid of me! Thanks for pointing that out to me.

Obviously to gain the student loan they take into account your personal income, Does anyone know how much cash you can have in your account before they will refuse you a student loan?

christh

Get the student loan. As it is linked to inflation, it is effectively free money.

Then put £3000 of it into a cash ISA:
e.g. NS&I (6.05% tax free and increases inline with the Bank of England rate)
http://www.nsandi.com/products/disa/index.jsp

And the rest into something like ICEsave (paying 5.95% gross, also increases inline with the BOE base rate)
http://www.icesave.co.uk/

There are higher interest paying ISAs but they often come with annoying strings attached. There are also higher paying savings accounts, but ditto again and or they are higher risk. ICICI pays slightly more than ICEsave but I wouldn't recommend them.

One problem looming on the horizon is that the student loan interest rate is set to jump to 4.8% from September. This means that ICEsave's net interest rate for a basic rate taxpayer won't quite cover the student loan interest (net it's 4.76%) . However, this situation is likely to improve as the BOE base rate increases and as inflation decreates in the future.

It's very likely that the BOE will increase the base rate in July, and then ICEsave will increase their rates to 6.2%, and NS&I to 6.3% and we'll all be happy student savers!

Fuzquia

hi christh, thanks for this information.

Do I have to declare that I still have this money in savings accounts when I go to apply for next years loan? If so does anyone know what the max amount of savings are before you will be refused a student loan?

Blacksheep1979

It'll tell you on the application form what you have to declare.

Broke_Student

Fuzquia wrote: »

hi christh, thanks for this information.

Do I have to declare that I still have this money in savings accounts when I go to apply for next years loan? If so does anyone know what the max amount of savings are before you will be refused a student loan?

Hi.
You do not have to declare any savings you have to the student loans company - they do not ask. Your loan is based on your income (or your parents income if dependent).
There is no limit as to how much you can have saved up (whether it be loan money or from any other source) but the interest on your savings counts as income. Your loan/grant entitlement will reduce if your total income from all sources exceeds a certain amount.
Everyone who is eligible for funding is entitled to 75% of the maximum student loan irrespective of their situation (even millionaires can get it). It is only the extra 25% that is based on income so I wouldn't worry about not getting any loan.

As for the loan itself I suggest you always take the maximum available for a variety of reasons including:
- Make money by putting it into a savings account at a higher interest rate.
- Use it in the future for your house, instead of getting a bigger mortgage at a higher rate.

Fuzquia

Thanks to everyone for the information and advice. I think I will put 3k into an isa and the rest, along with my student loan, into a high interest savings account. With another 3k going into my isa each year.

Thanks again to everyone for clearing all the confusion I had in my head! Hopefully others will read this that have the same questions. Too many application forms needing filled in at the moment for my liking!!