Student Loan while on University Work 12 month Placement

StudentHelpPls28

Hi, I was looking for advice on the Student Loan. I am a university student starting a work placement in September, being paid above minimum wage with which I will be able to live off. However, I was wondering if I should take out a maintence loan, and use it anyway - to put in my stocks and shares ISA. Ive been adviced that becasue of the intrest rate, and the cancellation of the loan, it is worth it to take it out, but I am looking for advice.

For context, I am on Plan 5, from England. And the max student loan while on placement is £3,281 while not living at home.

silvercar

welcome to the forum @StudentHelpPls28.

An interesting question. If only we could see the future, to advise you fully. Failing that, consider what you think your future career and income path will look like. If you see a situation where you will earn enough over your full career to pay off your loan in full, then the interest rate on your loan may make you consider that the returns you will consistently need to yield on your S&S ISA may make this a risky bet. If on the other hand, you see yourself in a lower earning role over the next 40 years, and so your loan eventually reaches write off, you may think it make sense to take the money!

Plan 5 write off only occurs after 40 years, so you have a lot of time paying back a loan before you reach that point.

On pure numbers, the interest on plan 5 is currently 3.2%. That will be charged from when you get your loan, even though repayments aren’t required until the April after you finish your course. Many people will think that over the long term a S&S ISA should beat that rate, though of course opinions vary on whether shares are overpriced at the moment. Also consider, what else you could use that money for eg a house deposit. Once you decide not to take the loan, you lose access to that opportunity.

No easy answer I’m afraid.