How much masters sfe loan should I take out?

mulch2

I'm a masters student offer holder in data at a London Uni. I currently have 12k in savings which is just enough to cover all of my 10k rent for the academic year. This leaves me with 2k savings. I got a partial scholarship which leaves me with 5k left of tuition to pay. How much SFE loan out of the 12k maximum should I borrow without getting into too much debt with additional costs such as interest on top of the repayments. This is assuming my salary after graduating from is roughly 35-40k. I should also mention I am currently on plan 2 for my sfe undergrad payments. 

silvercar

Details of how much you will get, the repayments you will make etc are here: https://www.gov.uk/masters-loan

Assuming you are eligible and in England, you will get £12,471. 

You will repay 6% of your income above £21,000 see here: https://www.gov.uk/repaying-your-student-loan/what-you-pay (This is in addition to the repayments you are making for your existing student loan).

So those are the facts, now you need to decide if it is worth taking. Your post grad loan would get written off 30 years after it becomes repayable, normally the April after you complete the course.

I thought that jobs in data pay very well, so you may expect your income to increase a lot in the few years after graduating, but no one knows how your career will develop.

Taking the average of your expected salary, you are repaying about £1,000 a year to start. Your loan will increase by interest but hopefully your income will increase by inflation/ promotion/ experience (and people I know in data, earn big money). So with both the loan increasing by interest and the repayments increasing by salary growth, it looks like you will repay the loan in say 15 years.

In that case, if you can’t get more interest on your savings than you can on the loan (currently 6%) and you haven’t got a need for the savings, then minimise what you take. However, if you need the savings for a rainy day or have a better use for them (eg a car to get to work, deposit for a home, pension) then consider carefully - once you’ve lost the opportunity it’s gone.

Voyager2002

My advice would be to take the maximum loan now, and put any spare money away earning as much interest as possible.

Once you have completed your course and graduated, there will inevitably be set-up costs for your first job. The loan money might prove invaluable if you need to move house; buy office clothes; equipment; perhaps a car or even season ticket.

You can of course make repayments at any point, Yes, you would face interest charges but if the loan makes the difference between being able to start work or being stretched financially by the transition from study to work then it will be worthwhile.