Really just depends on the difference in interest rate between loan and yield.

I tend to think going with monthly payout by our with full principal of loan socked into interest earning will yield you more if, as you say, loan is close to zero in interest. But I don't know your taxing system so I've no idea what you would pay in tax on the earned interest ... which may not be so nice.

Good education is expensive, believe me I know. *Sigh* Damn debts. Anyway, even an average education is usually expensive, but the benefits far outweigh the costs in my opinion.

Dawg - *Frowns* I don't understand; why would I be jealous?

The interest rate on the Student Loan is at inflation (apparently)

Originally I am sure it was at a fixed very low percentage, but within 2 years they put it in line with inflation, so that is 3% (which is what my interest was this year). I can't back the change in policy up with anything though, I just remember a load of us finding out interest was charged at some rate and were pissed off!

The actual rate was variable as you'd expect - 2004/05 was 2.6%, 2005/06 was 3.2%, and from Sept '06 its supposed to be (it says) 2.4%. Whether that changes again I won't know for a few months yet

My problem was that with my wage (when working) barely keeping ahead of inflation, I knew i would realistically not be paying it off very quickly... so it was stupid. Furthermore, I made payments even though i was below the thresh-hold for payments - which was strange.
Anyways, checking that out reminds me i am owed a tax rebate, gotta go find out what to do Funny, they can send me letters when they think I owe them money, or trying to get Nat Ins out of me when I was a student... but when they owe me money they don't do a damned thing about it

Esky's only jeaous because there's no call for his BA in the Social Dynamics of the 13th Century Common Rabbit Warren in Northern Bohemia, in which his final year thesis consisted of recording himself sitting in a hole underground with only an old 386 for company... hmm, sounds strangely familiar?

Chips/Ed, yes it's at the going rate of inflation, which has been "reasonably" stable for these past few years (omg I just said something positive about Blair and "Noo" Labour, I must go and wash my mouth out with hydrochloric acid) As the tax rate on ISAs is exempt, that's what we'll be putting the student loan money into; obv I still have to fork out almost 1000 dinars every month <pain pain oh I feel so ill just writing it down, all that lovely schamoola just vanishing away from me> but at least at the end of three years there's a nice little nest egg waiting and no debt for young Miss Taw.

Mike - will you ever actually be forced to pay it back? Can they take it at source like IR and NI do? Back in my day as a young Mullah at madrasseh we didn't have student loans, we still had proper grants and travel awards. My time at Bamiyam University and Technical College was, in comparison to today, relatively carefree financially, and my folks really didn't have to stump up anything. Not that they would have anyway!

Aye, goes straight out of your pay packet - do not pass go, don't collect 200 kinda thing. You only start paying after (supposedly) earning 15k per year, but lets face it, you don't earn a degree to dodge the payments for the rest of your life by never getting more than 15k as an income! (strangely enough, this idea gets suggested far too often, always makes me smile ).

If i leave the country i have to inform them... dunno if I can start dodging it elsewhere
The WORST bit is that foreign (EU) students can also get this, but they're special. You see, if they don't declare their earnings and manually pay it back to us when they go home, we don't actually bother chasing them down and taking them to court to claim it back (they also often don't check details, so they couldn't find them anyway).

So we are, effectively, giving money away to foreign students, whilst buggering our own. Feels good to be British I tell you!!


Edited by - Chips on 1/6/2007 11:26:19 AM

Hmmm.

If inflation stays in that ball park, 2.5% to 3%; .... since you actually want to be conservative and assure yourself that the principal lump and most of the interest will be payable on graduation, you'll want to go with top end savings instruments. Don't know what they call them over there but we call them CDs... certificates of deposits.

You might check to see if you can put loan out on commercial paper. They tend to earn eve better interest and are relatively safe ... but the loanable amount often is a higher wad. Don't know if 10,000 dinars will be sufficient.

Also, you say ISAs are not taxable but... don't know about those other kinds of interest earning accounts.

over 3 years it's T30,000 dinars, if there ain't no price rises, which I'm sure there will be. I'm budgeting for up to T40,000 dinars (at an exchange rate of 1:1 with sterling, which is better than you gave me on a back-street off Broadway!)

and this is all assuming she doesn't take a year out. The ISAs do seem the best bet for a medium term investment with no/little tax and decent return. Also i realised today that we have shares (stocks to you) and other investment funds that we'd quite forgotten about! plus if we really need to there's currently about T130,000 dinars equity in the house, so the money's covered. it's just finding a way of doing it with least pain and getting a bit back as well, if we can.

Well, she can work over the summer holidays - that's a good 3k or so right there

I'd strongly suggest that idea, tis perfect for students - keeps em from spending too much money as they have nothing to do/plan extra holidays to fill in time, and gets them good experience (especially if in their sector).

How do those loans work? Are you only to take out the year's worth at one time? If so, it fairly much is a wash except that you stand to gain a few percentages in yield, possibly, as against the insterest owed.

But if you can borrow the full projected 3 years' cost up front, you've got a better nut to massage with yield earning strategies ... obviously.

Well, you get it in installments per term. I don't think you can have a lump sum for the whole year in one go, so you generally get (these days I imagine 1200 per term is the standard, so 3.6k per year).

You have to apply to the students loans company for it, I think there is some means testing on how much they can receive, and then once cleared (and enrolled at the uni) you receive the funds in Oct/Nov time (terms got to start, and proof of being on the course etc), then January and finally again in April.

It rolls over each year (you need to apply every year again as well), so it's possible to graduate with a large debt, which lots of students are now doing. You don't really think about it while there until you leave, and then it's a lot of money.
If you've got money lying about, then it's best to just invest that where you would have invested the loan. Let it build, and then pay from that - with the student loan as a top up. More money generating interest and for longer too. Tuition fees can be paid in installments, so instead of paying (for example) 5k, it's possible to use the Student loan to pay (in first installment) 1.2k of the tuition fees, and then chip in £600 on top to make it up. Keep the other 4.4k invested, generating interest.

However, my money knowledge is pretty crap, but that's what we figured when I went. Course, instead of saving my cash, i went and blew it on getting completely caned instead. Hence why i personally believe it's best to keep the funds out of the students reach, and make them live by having to budget and limit. If I hadn't personally had the cash in the bank (i did), then I would not have gone out as much, not bought as much junk as i did etc. Not seen a student yet who didn't complain about being hard up, but was happy to blow £50 a week on alcohol alone.


As for hardship funds, The university has those set up for students who can't match the costs - but the full student loan must have been taken out first. You have to prove how much your shortfall will be (EASY if paying her own fees), and present it to them when you are there. Most think there is some form of stigmata or something applying for these funds, and so don't bother - but the funds are provided just for folks that are having trouble affording the full wad of cash. There is no repayment of these funds, they are literally given away to those who are hard-up enough to require support. Hence, spend that loan on the fees, tot up the bills, food at £25 a week (acceptable living cost they see that as) and then present it all and apply for a hardship fund.

Helps ease the financial pressure.