Student maintenance loan

yorktwitcher

My son took the maximum maintenance loan out for each of the 3 years he was at uni. He didn't use much because he lived at home and the money is now in a cash ISA and he also opened a Lisa in April this year. He's now working full time and saving to buy a house. Should he pay his maintenance loan off in full or can he use it towards a house deposit?

Sherlock33

It is now his money and he can do with it what he likes (SFE have no idea that he didn't spend it whilst at uni). Whether or not he should pay his loan back early is complicated and he needs to research what is best for him and his situation.

Worried_fool

Ask him to come and post here: anyone who has a degree and is working towards home ownership can gather information for major financial decisions.

Had he asked me for my opinion, I would have suggested looking at the situation in this way: he has money in an ISA, and he also has a student loan. He could repay his student loan early, or he could use his money as a house deposit. Repaying his student loan would mean that, as his salary increased, he would be able to keep more of it. Buying a home… well, I suppose that means he can get on in life.

yorktwitcher

Thanks for info. Maybe it's a case of doing the maths as to whether he would benefit more by buying a house or paying it off to reduce the interest

Worried_fool

https://forums.moneysavingexpert.com/discussion/comment/82090319#Comment_82090319

It is more than just "doing the Maths", because his loan repayments depend on what he earns.

yorktwitcher

Currently earning £28000 so he isn't paying anything at the moment. He will obviously get to the point where he starts paying but for example if he earns between £30000 and £40000 pa over the next 10 years, would he be better off using money for house deposit or paying it back now

silvercar

Factor in that a bigger deposit will usually mean a lower interest rate.

I’d be inclined to go for the house deposit. There’s something positive about buying rather than spending the money on rent, though I know others disagree.

yorktwitcher

Thanks for your reply silvercar. I am thinking the same as you. He's got about £60000 in savings including his maintenance loan and he's a very good saver. He's been working a year since he graduated last year and he's saved most of his salary. He's intending to buy a house on his own, so he will need a big deposit as he will only be able to get a mortgage for about £120000 and we live in York where house prices are crazy.