Should my daughter take out a student loan

Foxredlab

My daughter is starting 1st year at university in Scotland so I believe her student loan will be on plan 4. She has been lucky enough to receive a scholarship which will more or less cover all her expenses over the next 4 years, she will still take a small amount of loan to make sure she isn’t struggling financially.

We aren’t in a position to help her out much financially and so I’m wondering, would she be better to take her full loan out over the next few years and save it for if she may need it after finishing uni? She hopes to go on and do a masters after her undergraduate years. She is very reliable with money so no worries when it comes to her spending too much.

sheenas

If you live in Scotland there is no loan element, so I guess your based in England? The question you have to consider is taking on a life long debt worthwhile (well working life). You didn't say what subject, a doctor or lawyer it's mandatory, but for something like IT its more a nice to have. So it's up to you to consider the value the education offers relative to the cost.

In terms of applying for a student loan, its going to better applying up front and maybe not using it. Applying for the loan in an emergency would be a slow and painful process.

kaMelo

Where does your daughter reside, Scotland or England?

A Scottish resident's student loan would be Plan 4 but an English resident studying in Scotland would have a Plan 5 loan.

Foxredlab

She resides in Scotland so will be Plan 4.

silvercar

Would the masters degree be fully funded (fees and maintenance)? If not, then she could use some of the plan 4 loan to fund it.

Is she likely to have a career where she earns reasonably well throughout her working life? If so, then she will repay the loan so consider the interest rate. If she is likely to be a low or average earner/ have career breaks/ periods not working then her loan will eventually be written off, so it makes more sense to take as much as you can, ignore the interest rate and only consider the repayments.

Could the money be spent on a house deposit, which would save money in the long term, both in terms of getting on the housing ladder and not paying out on rent.

All this is difficult to consider when they haven’t yet started university, which is why I would say at least take the max you can while studying and you can consider paying it back one a career path is chosen.

Foxredlab

https://forums.moneysavingexpert.com/discussion/comment/82068728#Comment_82068728

Thanks this is helpful, wasn’t sure if I was being ridiculous by suggesting she still took the full loan. She’s going to study psychology and then specialise with a masters so aiming to be a high earner but as you say it’s hard to tell the outcome at the moment. The masters won’t be fully funded so makes sense to cover that with her plan 4 loan. If her future goes to plan, which again is very difficult to tell at the moment, then she knows she’d like to have a career break at some point to have a family and also would like to get on the housing ladder as soon as she possible can after university.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82068979#Comment_82068979

If getting on the housing ladder is important to her, she will need a deposit to secure a decent mortgage rate. If you aren't in a position to be the 'bank of mum/ dad' then the student loan could help fund that.

MeteredOut

https://forums.moneysavingexpert.com/discussion/comment/82068979#Comment_82068979

I'd not assume any degree nowadays (even with a masters) will result in someone being a higher earner. Have you checked the specific stats for psychology? I believe top paying psychology jobs have a lot of competition, though someone's got to get them!

Foxredlab

https://forums.moneysavingexpert.com/discussion/comment/82069186#Comment_82069186

Absolutely, no guarantee she’ll be a higher earner, however, nothing to say she won’t be either. The type of jobs she’s aiming for would make her a higher earner but again, will she be lucky enough to get to where she wants to be? She is a very determined young lady, no high school education due to lack of support, managed to get all top grades by self studying with very little tutoring and then went onto receive a scholarship due to all her hard work and determination. Can only really go on what her ambitions are and hope she’s successful.

kaMelo

Given what you've said about your daughter wanting to purchase a home at some point and hopefully having a family I'd tend to echo @silvercar and say take the loan. A larger deposit means a smaller loan, also if she does take time off for a family whilst any mortgage is always repayable, if her income dropped during that time off so would any student loan repayments.