Student Loan advice

Yeokay

I'm currently applying for student finance and have a question regarding the student loan (covering tuition fees - £9000 per year) and maintenance loan (covering living costs ~£8000).

My parents are able to give me ~£650 per month during my 3 year course. I think it's essential to take the £9000 student loan to cover the tuition fees, however would it be worth not taking a maintenance loan and instead using this money in order to decrease the amount I have to pay back?

Or would it make more sense to take both loans, keep the money each month in a savings account and use it once I leave uni?
Not sure if this is an appropriate question - just not sure which is the best option here.
Any advice appreciated,
Thanks.

TadleyBaggie

If you don't need the maintenance loan, then don't take it.

Superscrooge

Student loans are a cheap form of debt. If you don't earn enough you don't have to pay anything back and after 30 years any amount still outstanding is written off.

If you definitely don't need the maintenance loan, then don't take it. But what would be daft is to refuse the maintenance loan and then take out another more expensive loan later.

Pixie5740

Student loans aren't as cheap as they once were. The interest on that maintenance loan will be 3.9% (still not bad though). If you can beat that with a savings rate then take the loan and save the money. It could come in handy when you graduate and need to locate, get a car, whatever.

CLAPTON

Yeokay wrote: »

I'm currently applying for student finance and have a question regarding the student loan (covering tuition fees - £9000 per year) and maintenance loan (covering living costs ~£8000).

My parents are able to give me ~£650 per month during my 3 year course. I think it's essential to take the £9000 student loan to cover the tuition fees, however would it be worth not taking a maintenance loan and instead using this money in order to decrease the amount I have to pay back?

Or would it make more sense to take both loans, keep the money each month in a savings account and use it once I leave uni?
Not sure if this is an appropriate question - just not sure which is the best option here.
Any advice appreciated,
Thanks.

take it for the first year and see how you get on (if you don't need it then save it in the best interest rate you can find

then review for the second and subsequent years.

Yeokay

Thanks for the replies.

The issue is that I have no concept of how much I will spend per year, and I worry the money from my parents each month won't be enough - so as you say it probably makes sense to take the loan for the first year and then see from there.

ThePants999

Back when student loans were silly cheap, it was an absolute no-brainer to take the maximum amount whether you needed it or not. Now it's higher at 3.9%, that's not true any more.

However, a student loan is still very different from other forms of finance, because of the unique way repayments are handled. With repayments being directly linked to your earnings, they're essentially guaranteed to be affordable. And if you wind up not earning all that much, it may eventually be written off.

My advice is that if you're confident you're going to earn a substantial amount after graduating, and perhaps get a signing bonus with whoever you join, you probably shouldn't take more than you need unless you can earn more interest than you're paying. However, if you're not particularly sure what you plan to do after uni, taking extra loan (and avoiding spending it!) will give you a helpful buffer with which to start your working life, e.g. paying for the deposit, rent and furnishings on a flat.

Just try to avoid overspending at uni simply because this money's in your account :-)

Clive_Woody

Yeokay wrote: »

Thanks for the replies.

The issue is that I have no concept of how much I will spend per year, and I worry the money from my parents each month won't be enough - so as you say it probably makes sense to take the loan for the first year and then see from there.

Sounds like you need to start looking at doing a budget to get an idea of how much you will need to live on as a student.

Rent
Bills - gas, electric, water, phone, broadband, insurance, and so on
Books
Travel
Food
Booze
Etc.

rtho782

Take a look here:

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

Assuming you take only the tuition fee loan, and start on £29k, which would be pretty good for a new graduate, with regular pay rises of 2% a year, being higher than the average UK payrise....

You won't pay it all off after 30 years and it will be wiped.

So you may as well take the larger loan, and have some free money, as it will still be wiped after 30 years.

Unless you are going in to a specific profession where it's likely you'll earn a lot more, then take all the money.

Becoming a solicitor could be an example of this I guess?

Yeokay

Thank you so much for the advice all - will look at budgeting. Might be hard to know so will probably take full loan for first year at least.