New student to invest loan in HI account

Lara

We've told our son to take out the Student Loan BUT the money is to be put in a high savings account so he doesn't touch it and earns interest. It's our way of helping him later on when he finishes Uni and goes out to work.

I've looked through the student thread and this one but can't see any threads re something like this. My instinct is he opens an online Egg account and puts the money in there - has anyone else any suggestions please? Thanks.

HGLTsuperstar

If he wont touch it, then a fixed rate bond or an ISA. Alternatively the best rate is with the much-slated ICICI, but their main problems have involved money transfers to/from linked account. If he's not after true "instant access" then stick it there, make sure he fills out the R85 and let the interest tick up!

muddyfox470

Also bear in mind that you won't earn that much interest.

The Student loan has an APR of 3.2%, and is paid termly, the best savings account is probably about 5%, so that gives a 1.8% difference, plus you have the hassle of transferring it, and that the total loan wont be earning interest, only what is in the account, so that means that the first £1000 or so will earn the full 5%, but the latter payments 3or4 months down the line, so the most u will be looking to benefit is about £60 a year.

So it won't help loads, as i don't see how much benefit it will bring 'after uni' as he will still have to pay the loan off plus interest, and then have a small difference left.

You can try it, but don't expect massive returns.

Ian

barginboyrob

i'm putting it in my online savings account ingdirect. I don't expect to gain "profit from it", i'm just trying to stop making a loss because my current account pays like no interest, and i won't need the loan anyway

masonic

muddyfox470 wrote:

So it won't help loads, as i don't see how much benefit it will bring 'after uni' as he will still have to pay the loan off plus interest, and then have a small difference left.

The main advantage is he will only have to pay off the student loan very gradually (depending on his salary). I would think apart from the interest, there is a big benefit in having a lump sum like this to put down as a deposit for a house etc. Earning interest through 'stoozing' the loan money is probably secondary to that.

Midas

He can boost the return by sticking some of the momey into a monthly savings account each month - e.g. Halifax currently paying 7% on regular saver.

stockmarket-diva

I'm interested. Why won't you be needing the loan? How are you financing your student life?

Slim

The student loan interest is the RPI rate. Currently this results in about a net 2% extra interest being received on the loan. Based on three years loans at the outside London, non income-dependent rate this would give a total loan of £9,435 and result in a net gain of about £280 (tax free, unless the student earns more than their personal allowance)

One other consideration is that some employers give graduates a golden hello by paying off their student loan. Unless there is a cash alternative anybody without a loan could lose out?

Lara

stockmarket-diva wrote:

I'm interested. Why won't you be needing the loan? How are you financing your student life?

We don't want him to use the loan. We didn't allow the eldest to take one out and he came out with £2 credit and soon learnt all about budgetting. We realised that we should have let him but you always learn through the eldest.

The middle one went overboard! Mind you he's paid it all off now.

We shall be financing the youngest one's student life with a modest monthly "salary". He will work during the Uni breaks to get extra cash for top ups i.e. partying etc! and learnt how to budget during his gap year. We feel and he feels he can manage to do the same at Uni. It will be good for him as well.

masonic wrote:

The main advantage is he will only have to pay off the student loan very gradually (depending on his salary). I would think apart from the interest, there is a big benefit in having a lump sum like this to put down as a deposit for a house etc. Earning interest through 'stoozing' the loan money is probably secondary to that.

.

You've hit the nail on the head masonic - our thoughts exactly.;)

Thanks to everyone else for their help:). Halifax looks good and he has an account with them already but not a regular savers one. Shall look into that one tomorrow aswell as the ingdirect.