Tuition Fee Loans - is it worth doing?

Bengaboy · 4 Sep 2018 at 20:52

I am in about to start my second year of my degree with the OU. I need to pay around £4000 (after work paying for £2000) for the privilege.

Last year, I took out a loan with HSBC to pay for it. I rang the OU to give the certificate that my work will pay money towards this year, and she suggested that I take a Tuition Fee Loan. I never thought I would be elligible, but after doing the necessary checks, it appears I am. Even millionaires are entitled apparently. My loan would be a part time loan - I am doing a full time degree, but because I don't need money for accommodation, it is classed as a part time loan.

Looking into it, it seems like a brilliant scheme, but are there any reasons for not doing it? I would be paying around £15 a month due to my salary, which is fantastic compared to my £400 with HSBC.

Classic if it seems to good to be true syndrome kicking in...

Destination · 4 Sep 2018 at 21:01

How long until it pays off, compared with your HSBC loan?

Bengaboy · 4 Sep 2018 at 21:06

Destination said:
How long until it pays off, compared with your HSBC loan?

If I stayed at my current wage - it would be roughly 44 years (wow)...

HSBC loan would be paid at the end of the year. If I had a loan for £8000 to pay this year and my final year, I could actually pay it off in 4 years at a manageable £180 per month.

I assume you will be able to pay of the tuition loan faster if you wanted to bump up the payments?

Rich1988 · 4 Sep 2018 at 21:14

you'll likely never pay it off and it's written off after 30 years. It also doesnt count as 'real debt'

LuckyBenski · 4 Sep 2018 at 21:36

Rich1988 said:
you'll likely never pay it off and it's written off after 30 years. It also doesnt count as 'real debt'

This is correct. For the normal model of loans at least. I'm paying something tiny like £16 a month out of my salary.

I'm very anti-credit so was wary, and waited until I was 26 to go to uni. Best decision I ever made, including the finance.

trigg_27 · 4 Sep 2018 at 21:41

What is the interest rate charged on the tuition fee loan, and how does it compare to one from the bank?

If it's a lower rate, take the loan and you can always repay extra

platinum87 · 4 Sep 2018 at 22:17

Student loans do not show up on your credit file.

The interest rate is 3.3% - 6.3%, depending on how much you earn.

In my opinion i would take the maximum student loans that you are able, then i would invest them into stocks and shares, or perhaps a IFISA.

If you are doing well and earning a good salary, you can simply pay it back, if not, you will not be required to pay it back and investments will outpace 3% interest.

My example follows the above, at the same time i keep debt on credit cards doing perma balance transfers, i finished UNI in 2009.... Being a hardcore gamer and online poker player, spending almost all of my time on the PC, i'll give you one guess what i invested a little of that available money into a couple of years later

CREATIVE!11 · 5 Sep 2018 at 00:35

Take the student loan, that is what it's there for.....I'm shocked you didn't know this and instead took a loan from the bank.

A loan from the bank is far worse to deal with.

McPhee · 5 Sep 2018 at 07:24

The first year was funded by a bank loan, which you paid off while studying?

The bank loan could be a lot cheaper. IIRC student loans can't be paid off until after graduation. So that means accruing RPI+3% interest for the duration of your studies, then either RPI or RPI+3% (income-dependent) after graduation until the loan is cleared.

With ~£8k of student loan debt, the 30 year clause is unlikely to offer any real benefit unless something disasterous happens.

Normally, a student loan would be the obvious choice. But I'm not sure here. It seems likely you'll be paying a lot less interest with the bank loan and can graduate with no student debt. It may be worth asking the Student Loans Company whether or not it's possible to make repayments while you're studying, as I'm not certain I'm remembering that bit correctly. If you can, then that's likely the best option.

LuckyBenski · 5 Sep 2018 at 11:02

satchef1 said:
The first year was funded by a bank loan, which you paid off while studying?

The bank loan could be a lot cheaper. IIRC student loans can't be paid off until after graduation. So that means accruing RPI+3% interest for the duration of your studies, then either RPI or RPI+3% (income-dependent) after graduation until the loan is cleared.

With ~£8k of student loan debt, the 30 year clause is unlikely to offer any real benefit unless something disasterous happens.

Normally, a student loan would be the obvious choice. But I'm not sure here. It seems likely you'll be paying a lot less interest with the bank loan and can graduate with no student debt. It may be worth asking the Student Loans Company whether or not it's possible to make repayments while you're studying, as I'm not certain I'm remembering that bit correctly. If you can, then that's likely the best option.

Your logic is sound except you're assuming OP would want the debt cleared ASAP. A bank loan is REQUIRED to be paid back within X period, but a student loan isn't. It doesn't affect other credit and doesn't have a deadline, so for all intents and purposes you don't really have any debt.

I understand that you might not want to know that you owe money for a long period, it's what I wrestled with when going to uni. But for me it was huge student loan or no degree, no bank was going to lend me £60,000.

I haven't worked out the total cost of paying student loan repayments for 30 years, I suppose it could end up more than the bank loan. But over that time period it might not matter.