With the changes to student loans coming in 2023, is it worth my child deferring applying for loan?

Treesandmoney

Hi all,  my young adult will be starting uni this year (2022) on a six year course (medicine so likely to have good job security/earning progression)... obviously thinking now about applying for a tuition and maintenance loan. We'd only get the minimum maintenance. 

I'm uncertain whether long term it's be better for her if we pay the tuition fees etc for her for this year only, and then she applies for a student loan for 2023 and onwards as long term this looks like it could save her quite a bit of money? I thought MSE had written about this but I can't find anything!

Any advice/thoughts would be great!

Ed-1

Treesandmoney said:

Hi all,  my young adult will be starting uni this year (2022) on a six year course (medicine so likely to have good job security/earning progression)... obviously thinking now about applying for a tuition and maintenance loan. We'd only get the minimum maintenance. 

I'm uncertain whether long term it's be better for her if we pay the tuition fees etc for her for this year only, and then she applies for a student loan for 2023 and onwards as long term this looks like it could save her quite a bit of money? I thought MSE had written about this but I can't find anything!

Any advice/thoughts would be great!

The changes to the system coming in next year only apply to students starting courses from September 2023. So even if you don't take out a loan this year, if you start a course this year and apply for a loan in 2nd year, you're still on the Plan 2 loan.

As to whether the Plan 2 or the new 2023 repayment system is better will depend on long-term earnings. Plan 2 requires repayments over a much shorter period (30 vs 40 years) and much less per year in repayments (9% of earnings over £27,295 vs £25,000) but a much higher interest rate (RPI to RPI+3% vs RPI). However, with the prevailing market rate cap in force, the interest rate in the short-term is likely to be equal for both systems as it'll be capped with RPI being so high.

Treesandmoney

Thank you Ed-1, this is exactly the information I have been trying to find out so your response is much appreciated!