We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Should I take a student loan for a small amount of tuition fees?

Options
georgiehorgan1
georgiehorgan1 Posts: 1 Newbie
edited 7 September 2023 at 4:53PM in Student MoneySaving
I am starting a 2 year part time course which costs £4,300 a year in tuition fees (£8,600 in total). I am working part time to support myself so as not to take out a maintenance loan and qualify for a student loan to pay the tuition fees. However, the interest rate on repayments is currently 7.1%. I am training to be a counsellor and wages are not that high when I qualify, so I'm concerned this loan could cost me a lot of money in the long run if i don't meet the repayment criteria for sometime- interest could accumulate quickly on what is a relatively small loan.

 I am 43 and with the current plan it doesn't get written off for 40 years, so I would still be liable at pensionable age which could affect my pension, as I assume ill have to make repayments from this. I have some savings and could afford to pay the tuition fees up front. With the interest rate at 7.1% on repayments should i pay upfront myself or take the loan? I am unsure financially which way forward is best 

 

Comments

  • MSE_ForumTeam5
    MSE_ForumTeam5 Posts: 1,276 Community Admin
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    We've moved this to the board that deals with student finance 
    Official MSE Forum Team member. Please use the 'report' button to alert us to problem posts, or email forumteam@moneysavingexpert.com
  • silvercar
    silvercar Posts: 49,524 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    Personally, I would either take all the loan I could get for maintenance and fees or don't take any.

    Reason being that if some of it is going to get written off when you are 86 (!) then not taking the full amount means you have just gifted the government some money.

    What else could you do with your savings, if not used to pay the tuition fees? And what else could you do with the money if you took the maintenance loan also?
    I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • QrizB
    QrizB Posts: 18,154 Forumite
    10,000 Posts Fourth Anniversary Photogenic Name Dropper
    edited 7 September 2023 at 9:26PM
    silvercar said:
    Personally, I would either take all the loan I could get for maintenance and fees or don't take any.
    I agree with this.
    I am training to be a counsellor and wages are not that high when I qualify, so I'm concerned this loan could cost me a lot of money in the long run if i don't meet the repayment criteria for sometime- interest could accumulate quickly on what is a relatively small loan.
    An example calculation follows. I've had to make up a lot of numbers. If you have a better idea, you can copy my method with your numbers and see what you get.
    ------
    Let's imagine you make £30k per year once qualified. Your loan payments will be 9% of whatever you earn over £25k -  that's 9% of £5k, or £450 per year.
    Let's imagine your income remains £30k per year for 23 years, until you're 68 and retire. You'll pay a total of £10350.
    Let's then imagine that, once retired and a pensioner, your income falls to £20k per year. You won't pay another penny towards your loan.
    At 86, whatever is left is written off.
    If you have only taken a loan for the fees, that £8600 has cost you £10350 over 23 years. That's a pretty good deal, an effective interest rate of just under 2%.
    I don't know how much living loan you would qualify for, but I'm going to assume it's at least £4k per year - £8k total.
    If you also take the maintenance loan, your total loan of £16600 will still only cost you £10350 over 23 years. That's an amazingly good deal, you get more money out than you pay back.
    N. Hampshire, he/him. Octopus Intelligent Go elec & Tracker gas / Vodafone BB / iD mobile. Ripple Kirk Hill member.
    2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 34 MWh generated, long-term average 2.6 Os.
    Not exactly back from my break, but dipping in and out of the forum.
    Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs, Best kettle!
  • Ed-1
    Ed-1 Posts: 3,956 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 8 September 2023 at 12:16PM
    There is an incorrect assumption here that pension income is subject to student loan repayments. It isn't (as it's not subject to National Insurance Contributions).
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.9K Banking & Borrowing
  • 253.1K Reduce Debt & Boost Income
  • 453.5K Spending & Discounts
  • 243.9K Work, Benefits & Business
  • 598.8K Mortgages, Homes & Bills
  • 176.9K Life & Family
  • 257.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.