Student Loans: Martin's 'Halfway House'

MarcMarc

MSE mentioned the ‘halfway house’ option for Plan 5 student loan repayment (ie: take loan, clear in full once future earning potential is established). I’d now like to consider what I refer to as the ‘quarter-way-house‘ and ‘three-quarter-way house’ student loan options for our son starting University in September 2023, given that he continues living at home during the course. While both options would reduce the overall student loan repayment, given his increased likelihood to have to pay back the full loan over 40 years, what would be the advantages/disadvantages of each?:

1) The ‘quarter-way house’ option: While - exclusively for this year - the Student loan rate will be based on the unusually high March 2023 RPI rate of around 10.7%, might it be worth using the savings we had specifically put aside – as parents – to pay upfront for our son’s first year tuition fees? For subsequent study years – assuming he continues with the course – he would take out – and subsequently repay - the student loan based on the projected RPI rate of only 2% – 3%.

2) The ‘three-quarter-way house’ option: Were our son to take out the student loan for tuition fees only for the entire course, would it be worth our using the savings we had specifically put aside – as parents – to cover all of our son’s maintenance costs instead?

While the prospect of a change in Government might subsequently alter respective student-government contribution rates, the assumption is this would not apply before the current Student loan repayment threshold increase in 2027.

Ed-1

MarcMarc said:

MSE mentioned the ‘halfway house’ option for Plan 5 student loan repayment (ie: take loan, clear in full once future earning potential is established). I’d now like to consider what I refer to as the ‘quarter-way-house‘ and ‘three-quarter-way house’ student loan options for our son starting University in September 2023, given that he continues living at home during the course. While both options would reduce the overall student loan repayment, given his increased likelihood to have to pay back the full loan over 40 years, what would be the advantages/disadvantages of each?:

1) The ‘quarter-way house’ option: While - exclusively for this year - the Student loan rate will be based on the unusually high March 2023 RPI rate of around 10.7%, might it be worth using the savings we had specifically put aside – as parents – to pay upfront for our son’s first year tuition fees? For subsequent study years – assuming he continues with the course – he would take out – and subsequently repay - the student loan based on the projected RPI rate of only 2% – 3%.

2) The ‘three-quarter-way house’ option: Were our son to take out the student loan for tuition fees only for the entire course, would it be worth our using the savings we had specifically put aside – as parents – to cover all of our son’s maintenance costs instead?

While the prospect of a change in Government might subsequently alter respective student-government contribution rates, the assumption is this would not apply before the current Student loan repayment threshold increase in 2027.

I wouldn't take tuition fee loan and not maintenance loan as it appears that tuition fee loans will count towards the upcoming "lifelong loan entitlement". https://www.gov.uk/government/consultations/lifelong-loan-entitlement

If you, for example, take 3 years tuition fee loans then you'll have entitlement to a further year tuition fee loan for upskilling. If you take 2 years tuition fee loans it looks like you'll have access to 2 further years tuition fee loans for upskilling.

It's also worth bearing in mind that the loan interest rate is capped at prevailing market rate (currently 6.9%). So if RPI is higher than prevailing market rate, the interest rate won't go higher than the latter. RPI for March 2023 is expected to be around 13.5% to 14%. Prevailing market rate is expected to be around half that.

MarcMarc

It looks like the LLE won't become available until Sept 2025 earliest (in what will be the third year of our son's degree course) and reads as though it is aimed more towards encouraging study at Level 4 and 5 qualification. 

Can you please clarify what you mean by "I wouldn't take tuition fee loan and not maintenance loan..". Many thanks about the capped interest rate information.

Ed-1

MarcMarc said:

It looks like the LLE won't become available until Sept 2025 earliest (in what will be the third year of our son's degree course) and reads as though it is aimed more towards encouraging study at Level 4 and 5 qualification. 

Can you please clarify what you mean by "I wouldn't take tuition fee loan and not maintenance loan..". Many thanks about the capped interest rate information.

The below is the Government's response to the consultation:

https://www.gov.uk/government/consultations/lifelong-loan-entitlement

The LLE will replace the current student finance system and will apply to all students commencing study at levels 4-6 (including PGCEs and integrated masters). It's effectively a lifelong limit on tuition fee loans.

A residual entitlement will be made available for returning students. Details of how this will be calculated will be made available in Autumn 2023. But a fair assumption would be that taking less tuition fee loans now would result in a bigger entitlement under LLE later.

silvercar

Ed-1 said:

MarcMarc said:

It looks like the LLE won't become available until Sept 2025 earliest (in what will be the third year of our son's degree course) and reads as though it is aimed more towards encouraging study at Level 4 and 5 qualification. 

Can you please clarify what you mean by "I wouldn't take tuition fee loan and not maintenance loan..". Many thanks about the capped interest rate information.

The below is the Government's response to the consultation:

https://www.gov.uk/government/consultations/lifelong-loan-entitlement

The LLE will replace the current student finance system and will apply to all students commencing study at levels 4-6 (including PGCEs and integrated masters). It's effectively a lifelong limit on tuition fee loans.

A residual entitlement will be made available for returning students. Details of how this will be calculated will be made available in Autumn 2023. But a fair assumption would be that taking less tuition fee loans now would result in a bigger entitlement under LLE later.

What happens to students who had some years of study before fees were introduced?

Ed-1

silvercar said:

Ed-1 said:

MarcMarc said:

It looks like the LLE won't become available until Sept 2025 earliest (in what will be the third year of our son's degree course) and reads as though it is aimed more towards encouraging study at Level 4 and 5 qualification. 

Can you please clarify what you mean by "I wouldn't take tuition fee loan and not maintenance loan..". Many thanks about the capped interest rate information.

The below is the Government's response to the consultation:

https://www.gov.uk/government/consultations/lifelong-loan-entitlement

The LLE will replace the current student finance system and will apply to all students commencing study at levels 4-6 (including PGCEs and integrated masters). It's effectively a lifelong limit on tuition fee loans.

A residual entitlement will be made available for returning students. Details of how this will be calculated will be made available in Autumn 2023. But a fair assumption would be that taking less tuition fee loans now would result in a bigger entitlement under LLE later.

What happens to students who had some years of study before fees were introduced?

That's an important question.

According to FE week they'll look at how many years of prior government-funded study you've had but I've no idea how part-years (e.g. a small 30 credit OU module) will be treated etc.



https://web.archive.org/web/20230307233132/https://feweek.co.uk/lifelong-loan-entitlement-maintenance-loans-in-and-elq-rule-out