Would you take out Student Loan to put in an ISA?

Andy C · Tree Seeking Missile Joined: 26 Apr 2005 Karma :

Hi,

Basically I'm going on placement next year so technically will be a student but on placement and it is paid and enough to live on.

However, loans are hard to come by at low interest these days and a part of me is tempted to take out the loan (~£3k) which is currently 1.5% interest and put straight into an ISA which can be up to 3.5% (providing you dont touch it)

This would also mean that since it is paid back at 7% of anything you earn over £15k when you graduate which is better than any loan (e.g. if you lose your job you dont have to keep paying) so would be money available to me to use instead of getting a loan and I would also be making a small amount each year on.

From what i understand the rate of interest on the loands if in line with inflation or BoE base rate +1% (whichever is lowest) so therefore it should always be lower than an ISA, surely?

With the current rates I stand to make ~£60/year (which will change each year) but means I would have money available without having to take out a loan at a much higher interest rate.

Can anyone see any downsides to this? Also, if you had three grand you didnt want to touch 3-5 years where would you put it to get maximum gains? (without any risks so wouldnt invest in shares)
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cagiva gezzer · World Chat Champion Joined: 17 Mar 2003 Karma :

Go for it, but £60/yr is bugger all in real terms.

Moneysavingexpert says "borrow as much as they'll give you"

https://www.moneysavingexpert.com/health/student-loans

You'll NEVER get a loan so cheaply again.
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Andy C · Tree Seeking Missile Joined: 26 Apr 2005 Karma :

Yea this is what Im thinking, and if I put the money in a hard to reach account and sit on it for a few years making a tiny bit each year then think it cant be a bad idea!

Does anyone know anything better than an ISA if I dont plan to touch the money for 3 years or so?
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cagiva gezzer · World Chat Champion Joined: 17 Mar 2003 Karma :

Buy the times or Mail on sunday (or is it a saturday?) and the financial section will cover all the best current deals for ISAs and medium term investments.
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Tonka · World Chat Champion Joined: 11 Jun 2008 Karma :

Clanger · Stirrer Joined: 27 May 2004 Karma :

Yeah go for it...Martin Lewis is saying CASH ISA's all the way...I think it's £7,200 you can invest in one for this year, all tax free...perfect!!!
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Suitor_Stu · Could Be A Chat Bot Joined: 19 Jun 2006 Karma :

My flatmate is a bit of a tight-arse Laughing

and is extremely careful and knowledgeable when it comes to dealing with money. To this end, he is keen to 'make his money work' and does what you suggested despite it only being a small amount of cash he gets from it. He also has taken his overdraft facility to it's fullest and has added this to it too.

Fair play to him and all that, but if you really don't need the loan to live from, why not just enjoy yourself (within reason) with it? My friend took his loan a couple of years back and purchased a 1981 Porsche 924 turbo with it. It was our pimp mobile for that summer and we had some amazing fun driving it round the roads where we lived, trying to balance the revs with the throttle so that the turbo didn't kick in before the apex of a coastal road corner and give you the brown trouser moment as the back end stepped out close to the edge (this did happen rather too frequently in the first few weeks!). He sold that car at the end of the summer before going back to uni for £50more than he paid for it (admittedly fuel and insurance, even through it was insured as his mum's second car and the 'any car 3rd party' loop-hole of our own policies allowed us to drive it Laughing

, were extra but meh) so it was well worth it!

Stu (not a saver!)

Irezumi aka Reuben · Carrot Top Joined: 28 Sep 2004 Karma :

If your going to put as much money away as possible and don't want access to it then don't necessarily restrict yourself to straightforward cash ISA's.

Investment ISA's which have the investment guaranteed can earn you up to 50% depending on who it's with. That ISA you showed never works out at 3.5% btw, read the terms carefully. As I understand it about 2.5% is the max you will get.

I'd even consider going the whole hog and putting it in to shares if you can put it away for the next few years, it will definately go up.

Clanger · Stirrer Joined: 27 May 2004 Karma :

MarJay · But it's British! Joined: 15 Sep 2003 Karma :

1.5% while you are at Uni. Mine was 1.5% when I was at Uni. Now mine is charged at 8% APR and I barely pay off the interest each year. Being that I'm only getting 0.1% or something stupid from my instant access savings account, I'm actually thinking about paying it off.

I got a letter from the student loans company saying that they had gone bust and that they had sold my loan to another company. Despite me still getting statements from The Student Loans Company every quarter and saying I pay 8%.

I'd be wary of taking out 1.5% loan from them...
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Andy C · Tree Seeking Missile Joined: 26 Apr 2005 Karma :

carvell · Scuttler Joined: 05 Sep 2003 Karma :

When I was on placement I only got a 50% loan (and paid 50% fees). I'd check that first if I were you!

But yes, I would put every penny you can get from the student loans company into an ISA. I even had most of my free overdraft maxed out at uni and had that in an ISA too, made a couple of hundred quid. There are rules which mean they can only charge a set amount of interest on the student loans (it's basically inflation).

Another thumbs up for Martin Lewis by the way, do whatever he tells you to!
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iooi · Super Spammer Joined: 14 Jan 2007 Karma :

Suitor_Stu · Could Be A Chat Bot Joined: 19 Jun 2006 Karma :

GhostRider · World Chat Champion Joined: 31 Jan 2008 Karma :

Hmmm, the 1.5% interest thing is a load of horse shite. I borrowed about £10,200, and as of the last letter recieved from the SLC, I owe just under £13k now. Im paying it off at the standard amount they take out of your salary, which is about £22 a month, I don't even think this is paying off the interest, but even if it was and then paying some off the loan, it will take 49 years to pay it off at that rate, so I'll be 74 when that's settled.

But I don't miss £22 a month, so don't see the point in volunteering to pay more off just to be able to say I've paid it off at 35 or something, with no other benefit at all.

Hopefully somewhere in the next 49 years they'll absolve it or something. I think they should, since I don't see why I'm lumbered with a debt for getting an education when a number of people I know have earned free degrees and other qualifications which would have cost money and free time , whilst in prison and are laughing all the way to the bank, although this time not with a shotgun in their hands and a bally on their head.

GhostRider
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carvell · Scuttler Joined: 05 Sep 2003 Karma :

The interest rate varies. It's not a load of shit, it's just lower now than it was. It's not fixed at 1.5% for life.

https://www.moneysavingexpert.com/loans/student-loans-repay#special that gives you the hostory of the rate.

You'd be mad to pay it off early - put any extra money you'd overpay it with into an ISA.

Also, the amount you pay back is based on income. It'd only take until you're 75 or whatever to pay back if you stayed at your current salary for the rest of your life.
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Itchy · Super Spammer Joined: 07 Apr 2005 Karma :

There is also something called zopa ,

This place offers 5-15% lending rates

HOWEVER

Think about as to why they have to offer such 'high' interest rates , in effect it is risk premium something we all do ie dodgy dave wants to borrow £20 and is at high risk of not paying back hence you ask for £30 back. Etc etc...

Ie as with Lehman bros in HK they were offering 6% interest savings bonds while everybody else was offering 2.25% about half a million people lost everything as they forgot the higher the interest rate the higher the risk, thats not to say I haven't known people making money on junk bonds.
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GhostRider · World Chat Champion Joined: 31 Jan 2008 Karma :

carvell · Scuttler Joined: 05 Sep 2003 Karma :

That's what I'm saying, it's not beneficial to add to it.

The loan gets written off at 65 by the way, so it's not all that bad. Wink

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carvell · Scuttler Joined: 05 Sep 2003 Karma :

Itchy · Super Spammer Joined: 07 Apr 2005 Karma :

Its a little known fact that you can put more into an ISA than stated 3600 limit, HMRC sends you a letter alerting you to this fact and tells you not to do it again.
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Irezumi aka Reuben · Carrot Top Joined: 28 Sep 2004 Karma :

Drew · Banned Joined: 09 Aug 2006 Karma :

For NatWest you can't transfer online more than the £3600 (I tried last year).
You also have to have another NatWest account as well as the isa, for if you pay in over the £3600 limit over the counter, the excess is transferred into your other account

Drew · Banned Joined: 09 Aug 2006 Karma :

Itchy · Super Spammer Joined: 07 Apr 2005 Karma :

At the same bank no , but many of my clients put 3000 (Was an earlier year) into an ISA , then put it into another bank account and another at different banks.

They were just sent a warning he had saved too much and not to do it again, and yet strangely the status remained.
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Spain 2008France 2007Big one 2009 We all die. The goal isn't to live forever, the goal is to create something that will. In the end, your life will flash before your eyes. Make sure it is worth watching.