[Atheism]

I'll be starting uni in September 2013 (At normal age, 18). I'll have enough money to afford it without loans, but the research I've been doing says that the interest on student loans is 3%; but I can easily get 3.5% interest on a savings account. As far as I can see, I can just take out the maximum loan and stick it in a 3.5% interest account, effectively making 0.5% on the loan.. Or is there something I'm missing?

[StacFace]

It's 3% + inflation, but only whilst studying. The current rate of inflation is around 3% and therefore you will be charged around 6% interest. After that if you are earning less than £21k it will be the rate of inflation (currently around 3%) and if earning more it goes up on a sliding scale until it reaches inflation + 3% again.

However, that doesn't mean it's not worth doing.

For a start, the student loan is most likely the cheapest borrowing you will ever have (bar borrowing a bit of money from friends and family). If you will be getting a mortgage or any other form of more expensive borrowing then it is worth taking out the loan and using it to reduce that borrowing. You will pay less interest on a smaller mortgage with a student loan than you will on a larger mortgage without one. Plus if you lose your job you still have to pay the mortgage, whereas you don't have to keep paying the student loan.

Secondly, you may not earn enough to pay the loan back. In which case you have got yourself some free money because it does get written off eventually (after 30 years I think).

Thirdly, you may still be able to get a savings account paying more than 6% if you are willing to lock the money away for sometime. If you were not planning on taking out the money anyway then there is no harm in locking it away to get higher interest. Though bear in mind inflation may go up and then you may be losing out. However that would only mean you were losing out if neither of the above points apply to you, as the savings made on a mortgage/the fact that you never get round to paying that extra interest would mean you're actually not losing out at all.

[OU Student]

If you take, it means you can use it as a back up if you do run out of money / don't find a job over summer.