Should I take a student loan if I don't need it?

mksofa

spadoosh wrote: »

Dont the tuition fee loans and the bursaries get paid directly to the provider? Ie the money will never see your account, the uni will get two lots of payment and presumably refund the tuition fee loan.

I think the bursary is paid to you tax-free - guess I better check!

JayRitchie

mksofa wrote: »

I will leave uni with about £45K of loans, if I borrow the max for the PGCE then my total will be about £60K. Part of me thinks that I owe so much that I might as well borrow more. I will be paying 9% extra tax for the majority of my career whatever I borrow.

Just as a bit of a clarification - if you take the postgrad loan (£10,906 - assuming you are in England) you repay at 6% of gross salary above £21,000 a year. This is a lower salary limit than for the repayment of undergrad loans, and if you repay both undergrad and postgrad loans you pay 9% plus 6% = 15% of gross income.

This differs from the decision about whether to add an extra year of undergrad loans (for example for an intercalculated year) where you would still pay back at 9% - and as you've noted it would probably make no difference at all to the amount you would repay.

Ed-1

JayRitchie wrote: »

Just as a bit of a clarification - if you take the postgrad loan (£10,906 - assuming you are in England) you repay at 6% of gross salary above £21,000 a year. This is a lower salary limit than for the repayment of undergrad loans, and if you repay both undergrad and postgrad loans you pay 9% plus 6% = 15% of gross income.

This differs from the decision about whether to add an extra year of undergrad loans (for example for an intercalculated year) where you would still pay back at 9% - and as you've noted it would probably make no difference at all to the amount you would repay.

PGCE is funded on the undergrad system even though it's a postgraduate course.

JayRitchie

spadoosh wrote: »

RPI + 3%.

So 5.7%

Ive got a mortgage thats 2.19% and you can get a £12k loan for less than 3%. Obviously depends on personal situation. But even at the lowest rate of interest charge at just RPI theres conventional products cheaper.

My student loan was lowest of RPI or bofe base rate + 1% so currently 1.75%

Of course it completely depends on whether youre actually pay it back or not, but its probably not a great outlook to assume that you wont.

Well, we don't know about the OPs circumstances but lets assume that she doesn't have any huge level of savings (say - over £20k) and will - of course - be new to the workplace when she completes her course. Lenders do strange things but I'm not so confident that she would be able to get a really great rate on a personal loan or that she would necessarily benefit from the best mortgage rates.

The huge benefit of student loans if taking them or not is an option is that you don't need to repay if you are out of work, sick, looking after children, taking a round the world trip or whatever. That's a massive amount of security - I would pay a bit of a higher interest rate for that.

The situation with mortgages gets interesting. Lets say the OP gets a first job paying £25k but likely to increase, looks a buy a flat for £105k and has £6k for the deposit. The rate for a 5 year fixed rate mortgage with HSBC would be 3.34% - so repayments for a £99,000 mortgage come to £5,844 a year on a 25 year basis.

Now, if she had borrowed £10k from student finance and used this to improve the LTV she could get 2.24% on £89k - £4,656 a year - a saving of £1,188 a year. Against this she would incur interest on the student loan (I think at 5.4% - so £540, and make actual payment of 6% of £4,000 - £240).

JayRitchie

Ed-1 wrote: »

PGCE is funded on the undergrad system even though it's a postgraduate course.

In that case maxing out the loan is absolutely the smart thing to do.

mksofa

Thanks - I think I am going to take the loans as it adds onto my undergraduate loan and that way I can put the bursary which is tax free into savings.

Spoke to parents - said if I get a place near home I can live rent free while I train and use the maintenance loan (which I've worked out is £3400) for spending if I can't get a part-time job.

Their view is if in 15 yrs I'm earning enough to worry that I would have been better off not taking the additional loan then it means I will be on very high earnings so won't notice the loan payments as much as I would notice trying to save £9000 on £25K when I start out, and the one thing I know now is that I won't be on much more than the threshold for a while as teachers salaries are fairly fixed.

fred246

I sat down with my student kids and we played around with calculations. Unless you pay everything totally upfront they have to borrow a fortune anyway. They then had to have massive salaries just to keep up with interest payments. So they have borrowed to the maximum. I am supporting them fully so they have loads of money. They are just saving it for house deposits. It will be 20 to 30 years before they would ever have any regrets and then it would be because they were on very large salaries. I think the whole system is crooked so you just look at it and do whatever is best for you.

fred246

I was talking to somebody recently about a teenager who had just received a £200K inheritance. They were due to go to university so they asked an IFA to analyse whether she should use the money for University or take out a student loan. The IFA said keep the money and max out on loans. Admittedly it was before the election and there was talk of Jeremy Corbyn erasing the loans.