Hypothetical student loan scenario 15 December 2022 at 2:37PM edited 13 January at 10:19AM in Student MoneySaving 4 replies 238 views

AliceKS

This is my first post here so let me know if there's anything I've done wrong or any conventions I need to follow pls

This is a purely hypothetical scenario that I'm just curious about - as a current student I'd love to be in this position right now

If my parents were earning enough in stable jobs to be able to pay my maintenance loan in full (about £9000/year) would it make more sense for me to:
1. ask them to just pay me the 9 grand over the year in full or
2. to take maintenance loan and have them make up the difference as the government intends (about £5000)

Pros of first case: don't have to repay maintenance loan to the government with interest on top but would still have to pay back the 9 grand I essentially borrowed from my parents
Pros of second case: my parents take the 4 grand they save by using the maintenance loan and stick into a high interest account (either S&SISA or fixed rate account for the duration of my degree)

Does it then matter how long my degree is (I'm a med student so 5/6 years with/without masters compared to the average 3/4 years) or is one clearly better than the other?
As a med student, I am highly likely to start earning over the threshold as soon as I graduate/start work so does this impact whether I repay all of the loan or not?

As I said above, completely hypothetical and very complicated but just genuinely curious as to how it would work. Any answers/discussion I would be interested to hear as well as any additional pros/cons that I may have missed

kaMelo

Which option makes sense depends upon who you are. Your parents giving you £9000 a year makes great sense for you as you've not borrowed it in the form of a student loan but what benefit is this arrangement to your parents?
Assuming they're going to give you the money anyway, which I infer from your post is what will happen, what would you prefer? Paying for your living costs at uni or giving you a substantial amount towards a house deposit?

As for repayment, there is a calculator on this site here 
https://www.moneysavingexpert.com/students/student-finance-calculator

silvercar

Remember that you will have a student loan for the fees, even if you don’t take the loan for  maintenance. This means that for many years you are likely to be making student loan repayments. These are a fixed calculation based on earnings rather than size of the loan. So you won’t be making any savings, by having a total smaller loan size, until you get to the point where you will have paid off in total the smaller loan size. At which point your repayments will cease. Even with a lucrative private practice, this could be well into your 40s. 

If your generous parents are offering to help you out, over and above your student needs, it may be more beneficial for them to help with a deposit on your first home.

silvercar

I should add, welcome to the MSE forum, I hope you find it useful.

There is a separate board for student matters that you can find here:

https://forums.moneysavingexpert.com/categories/student-money-saving

Many discussions on the benefits of taking a student loan.

Herzlos

It's almost always better to take the student loan - it's a low rate and doesn't go against you for stuff like mortgages - and keep your parents cash for a deposit or car after graduating. If you really need to, you can pay the student loan off early.