Student loan loophole?

Kirkmain

Is the student loan and maintenance calculated based on wealth or income? If the latter, what is stopping a multimillionaire businessman deliberately taking less in dividends in the years around and during their child's time at university. Thus their child parental "income" will be assessed to be low, whereas they might have loads of savings and live in a very big comfortable home? Have the student loan company accounted for this?

dil1976

You do realise that the loan has to paid back (admittedly only after you earn over so much) don't you? So not sure what your point it.

silvercar

Nothing, other than the wealthy business man being able to live off a low income for the whole time their offspring is at university.

Same way as separated parents can choose for their student child to live in the home with the lowest income, even if both parents could pay to help with the costs.

Kirkmain

dil1976 said:

You do realise that the loan has to paid back (admittedly only after you earn over so much) don't you? So not sure what your point it.

Oh I thought it was a non-repayable grant. Still the money that is loaned is at dirt cheap rate, better than any bank can offer.

D924

Kirkmain said:

dil1976 said:

You do realise that the loan has to paid back (admittedly only after you earn over so much) don't you? So not sure what your point it.

Oh I thought it was a non-repayable grant. Still the money that is loaned is at dirt cheap rate, better than any bank can offer.

Wouldn't call 6-7% dirt cheap. It's unlikely you'll pay off your student loan unless you're a very high earner so it's essentially going to be a 9% extra marginal tax on income above £25,000 until you're 65.

My personal opinion, although I did a degree, is that university is simply not a sensible financial decision. You lose four years of earnings (even if they were at minimum wage) and potentially have to take on a lot of debt. If you graduate at say, 24, you will only catch up in overall earnings at 38 (assuming £20k starting salary for the non-uni path with a 2% annual growth, and £30k starting with 4% annual growth to reflect better career options fo the uni-path with a 4 year study and £20k loan).

In that simulation the loan is only paid off at 58 years old after a total of £120,000 in repayments!

The only way it makes sense is if you just go to university to party and never intend to earn more than £25k, which is not actually unrealistic. In that case, it's free money!

400ixl

The student loan is made up of 2 parts, the university fee which is not means tested and everyone gets the same upper limit. The maintenance loan for living costs is means tested but is still a loan and not a grant.

So either way they have to pay it back when they earn over the limit.

One way to avoid the limit is to salary sacrifice, so pension payment, salary sacrifice car etc which will at least extend up your earning potential.

Kirkmain

I have spoken to colleagues who said they got non-repayable grants, and then some Oxbridge student got extra, eg. Cambridge has a £3000 a year Isaac Newton Bursary which is also non-repayable. But I guest they scrapped those.

Kirkmain

Kirkmain said:

I have spoken to colleagues who said they got non-repayable grants, and then some Oxbridge student got extra, eg. Cambridge has a £3000 a year Isaac Newton Bursary which is also non-repayable. But I guest they scrapped those.

Yeah this is still a thing. Just rebranded as the Cambridge Bursary and now worth £3500

https://www.cambridgestudents.cam.ac.uk/cambridge-bursary

So someone who is actually very well off can deliberately save up loads in reserve, then only pay themselves <£60k whilst their child is at Uni, and their child becomes entitied to this bursary?

400ixl

Next to no one is going to go to all the trouble of fiddling their income on the off chance they may be able to qualify for a bursary which has many more qualifying criteria.