Take out a loan or use savings to pay for Master's degree?

tartancushion

I've also posted this in student money saving. Hope it's okay to cross-post here.

I'm thinking about doing a part-time MA while I work. I have a small amount of savings, enough to cover my MA fees, and I would still be earning and saving while studying for the MA. I think I would feel more reassured leaving my savings untouched and taking out a postgrad loan (or other loan) instead, but is that a stupid idea considering that I'll be charged interest on the loan? I wouldn't need the full amount of the loan as my course is cheaper than £11k and I suppose I could just borrow half of what I need for fees and then use savings to cover the rest. 

Shakin_Steve

Only you can answer that question. We don't know anything about your circumstances. 

DCFC79

Could you even get a loan at a rate you would be happy with.

tartancushion

I have a small safety net of savings and it feels safer to me to take out a loan which I gradually pay back, especially as postgrad loans are dependent on income. So if I lost my job, it wouldn't be like a regular loan where I have to keep paying. I was just seeking some advice about whether it's a bad idea to borrow money in this situation when I've got it sitting in the bank.

DCFC79

tartancushion said:

I have a small safety net of savings and it feels safer to me to take out a loan which I gradually pay back, especially as postgrad loans are dependent on income. So if I lost my job, it wouldn't be like a regular loan where I have to keep paying. I was just seeking some advice about whether it's a bad idea to borrow money in this situation when I've got it sitting in the bank.

Why borrow money when you have some saved up ?

end of the day its up to you though.

MinuteNoodles

DCFC79 said:

Why borrow money when you have some saved up ?

I can borrow money at a lower rate of interest than the returns I get on my investments. Therefore borrowing money is cheaper than using the investments.

Interest on savings/return on investments greater than interest on loan then get loan.

Interest on loan greater than interest on savings/return on investments then use savings/investments.

tartancushion

DCFC79 said:

tartancushion said:

I have a small safety net of savings and it feels safer to me to take out a loan which I gradually pay back, especially as postgrad loans are dependent on income. So if I lost my job, it wouldn't be like a regular loan where I have to keep paying. I was just seeking some advice about whether it's a bad idea to borrow money in this situation when I've got it sitting in the bank.

Why borrow money when you have some saved up ?

end of the day its up to you though.

It would mean spending almost all of my savings, which feels risky, especially in this current climate of financial uncertainty

noclaf

Just another perspective, not all may agree with this but this just my opinion. If the masters course would give me better job security and/or a high chance of increased earnings potential (Vs not having the masters) then I would happily borrow or fund it from my savings. If however the Masters was unlikely to make a difference that would be a deal breaker for me. If on the other hand you simply want to do the masters to follow your passion then that's your call to make.

Mickey666

I’d think very carefully about doing a masters degree at all, unless it is absolutely necessary for the career you wish to follow because as an investment it will likely turn out to have a poor return.
I was fortunate to gain my degree at a time when there were no fees to pay and the student grant was enough to live on - and that was in London - so I graduated without any debt.  This set me up well for a good career and buying my first home just a couple of years after starting work.  Today, all that has changed and a degree costs a lot of money.  In many (most?) cases, more money than will likely be recovered during a lifetime of work.   Of course, education has its own reward - just don’t rely on it being a financial one.

Another consideration is the degree subject.  I have a science degree but has no relation to my subsequent career.  In fact, none of my formal education - O-levels, A-levels, B.Sc(Hons) directly helped to qualify me for my subsequent career.  By the time I was 30, MBA’s were all the rage and many of my colleagues took them, at significant cost to their time and wallet.  I declined to jump on that bandwagon and it didn’t seem to hold me back in the slightest as I ended up as European MD for a US public tech company, from which I retired well over a decade ago before I was 50.

I post this, not to boast, but to point out that paper qualifications are not always necessary for a successful career, a good income and financial or job security.  So many posts on MSE are about debt management and dreams of being mortgage-free, yet so many people are handicapping themselves right from the start of their working lives by taking on huge debts for a few letters after their name.  

I know someone in their 20s about to start a PhD in a subject very unlikely to ever lead to a high salaried job.  They expect to be around £120k in debt by the time they finish it at age 30 if they are lucky.

If I was 18 today, I would be thinking very, very hard about whether a degree was really worth £50k of debt by the time I was 21.

I know I have been fortunate, but perhaps I have also been very lucky.  Lucky because I have never slavishly followed ‘the norms’ and have always questioned the status quo.  It seems to me that’s where the real opportunities lie, going a little against the grain, not conforming to standard expectations.  Not being one of the herd.

tartancushion

Mickey666 said:

I’d think very carefully about doing a masters degree at all, unless it is absolutely necessary for the career you wish to follow because as an investment it will likely turn out to have a poor return.

I'd be doing it more out of interest and, potentially, as a route to a PhD and a change of career to academia. I don't expect to earn more because of it as it isn't related to my current career, which provides a comfortable income, but because it's an area of research that I love. 

£120k sounds like an extortionate amount to do a PhD! I know several people who are doing/have done one and don't have anywhere near that amount of debt.

MalMonroe

DCFC79 said:

Could you even get a loan at a rate you would be happy with.

Student loans have the lowest interest rate of any other loan so that would be plain daft.