Financial Advice: Student Loans

Financial Advice Kevin Clancy Student Loans

Kevin Clancy looks at the realistic costs of education for today’s students

This week will have seen many students receive the results of their A levels and thus confirming what university places they will obtain. Now is the time to realise what the costs of further education will be and how those costs need to be paid.

These costs will not only be the tuition fees of up to £9,000 but also the living costs for three years of study.

It is an excellent way of Inheritance tax mitigation if grandparents can help pay towards their grand children’s expenses. The same would apply to parents dependant on affordability.

Previous generations would take a year off before starting their studies, not for a round the world trip to Australia, but to earn money in order to save for their future studies.

The government does provide loans to help cover student costs. It is important to know what the implications of these loans are as many are concerned that they will be building up debts of up to £70,000.

The loans do not have to be repaid until the April after their course finishes.

A further consideration is that it will also not be liable to repayment until the student is working and earning over £21,000 a year. Anything over this threshold will incur an interest payment of up to 3% over the inflation rate RPI to a maximum of 6% taken from their monthly salary.

This student debt will be written off after 30 years. Many will be concerned that this high level of debt will effect their credit rating and their ability to obtain a mortgage. As it is a government loan your credit rating will not be affected.

Obtaining a mortgage is based on your ability to repay the loan so student loan repayments are part of the equation between income and expenditure.

Providing your net income is sufficient then a mortgage offer need not be affected.

There are some students who on leaving university obtain highly paid employment.It would be in their interest to over pay the loan so that their liability is reduced earlier.

There are other options that are available to students.

Those that do not want to build up a debt might wish to consider a modern apprenticeship. It is not that long ago that those who wished to study for professions such as accountancy or law used to take articles during which they were employed but learnt their future profession whilst earning. Many other large companies are now offering this choice.


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