When is it best to pay off Uni fees

Scousedad

Hi guys, I was wondering if this 'financial plan' is feasible. 

 

June/2024:  My son, currently living in Surrey, is taking his 'A' level exams this month and hoping to go to Queens Uni, Belfast to study physics from Sept/Oct  2024🙏. 

Given that timeline I am assuming he would qualify for the 'Option 5' student loan to cover the current Uni course fee of approx £9,250.00 p/y x 3 years which should total £27,750 to cover his degree course  providing the Gov don't increase the max fee....

I am aware that should he complete his course in June 2027 then he will NOT BE LIABLE to repay any of his Uni course fee loan back till after April 2028 and only then if he was to be employed and earning in excess of £25k p/a, then he will have to pay (currently) 9% of what he earns annually over and above an annual salary of £25k to start repaying the initial loan from the 'Students Loan Company', taken at source from his salary by his 'employer' via their PAYE system.

If he then decides to repay his total initial Uni loan of £27,750 in, say March 2028, would he have incurred any interest on his initial Uni loan or is the interest added from day 1, say Sept 2024, so in fact his loan would consist of £27,750 + any daily interest from day 1 ? 

If no interest is added before April 2028 then it would make financial sense to take the Uni loan in full and pay it off in full in March 2028.

If on the otherhand, if interest is added from day 1, Sept 2024, then it would make sense to pay each year's course fee in each Sept ahead of the coming educational year ensuring that he doesnt incure extra payments.

What are your thoughts as to what he should do. Is this idea feasible ?

 

I look forward to hearing back from you.

silvercar

Interest is charged from when the loan is paid to him for maintenance or to the university for fees. So by the time he graduates he will already have incurred interest.

You should also consider the maintenance loan. To take one without the other won't influence the amount he has to pay back, until he is at the point where the fees loan is cleared. If it never gets cleared then it is written off and he would have been better off taking both loans. If you were intending to subsidise his time at university by paying his living costs for him, consider whether it would be better to use the money for a future house deposit or even a pension.