Taking out student loan only to put it in savings account... Is it worthwhile?

I'm fortunate enough to currently have a job which allows me to pay all my rent, bills and other expenses without dipping into my loan and still have a little bit of money for myself.

Last year I didn't take out a loan at all because I still had the full loan from 1st year in reserve which I hadn't touched.

But I'm debating whether or not to take out a loan for 3rd and 4th year, purely for the purpose of having them sit in an ISA account or something and gather a wee bit interest (which perhaps may be a little less than the interest rate of the loan itself - so I don't think I can make a profit from it), which I can later use for a deposit on a house when I graduate.

Anyone have any advice on this sort of thing?

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Reply 1

bittr n swt

Probably best to stick it in a high interest account like TSB or nationwide

Not sure about the deposit but I guess so

Reply 2

Mathlover123

I guess you are free to, little bit greedy really.
Also if you are a fulltime student and your job is fulltime you are breaking the law and could be arrested.

Reply 3

claireestelle

it wouldnt be worth it, the interest on your loan is around 5%, you re not going to find a savings account with a high enough interest rate to make it worth while.

Reply 4

HygieneTherapy15

Original post by claireestelle

it wouldnt be worth it, the interest on your loan is around 5%, you re not going to find a savings account with a high enough interest rate to make it worth while.

This

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Reply 5

username457532

Original post by Mathlover123

I guess you are free to, little bit greedy really.
Also if you are a fulltime student and your job is fulltime you are breaking the law and could be arrested.

Pretty sure this is untrue. OP would need to be paying taxes and if they're here on a student VISA there would be restrictions on number of hours they can work and most unis have a recommended maximum number of hours that a student should work to be able to cope with the course.

Reply 6

ConnorBR

I'm in a similar boat to be honest. I've decided to take the loan this year purely to feel "comfortable". If I ever needed to spend a lot of money... e.g if my car broke/need a new one/ etc etc I'd have plenty left to cover me.

The interest rate is so small on the student loan that its definitely worth having in my eyes. Just my opinion though!

Connor

Reply 7

Chrisruptor

Original post by Mathlover123

I guess you are free to, little bit greedy really.
Also if you are a fulltime student and your job is fulltime you are breaking the law and could be arrested.

Original post by claireestelle

it wouldnt be worth it, the interest on your loan is around 5%, you re not going to find a savings account with a high enough interest rate to make it worth while.

The interest rate on student loans (in Scotland) anyway is "RPI or England Base Rate + 1% whichever is lower" which I believe makes it around 1.5%. It's not meant to be much higher than inflation. I could be wrong though but 5% sounds too much.

Reply 8

Mathlover123

Original post by Chrisruptor

I was wrong about legality but your uni have the right to expel you if you are over a certain number of hours of work during term time.

Reply 9

Paulwyn

TSR Group Staff

ISA rates are so balls at the moment that there is no real point putting it in there, I would suggest setting up Premium bond with NS&I, a far more efficient way of making your money work for you while interest rates are so low.

Reply 10

schmuur

Original post by Chrisruptor

I think it depends on what job you are looking for later in life. If you will be on a high salary and likely to pay off your loan in full then its not worth it. but if you are going more towards a mediocre-ly payed job then you have nothing to lose, it won't change the amount you must pay back each month and the debt gets wiped out after thirty years anyway. Just check what you are doing is legal, as other people on suggest it may not be

Reply 11

scrotgrot

Original post by claireestelle

it wouldnt be worth it, the interest on your loan is around 5%, you re not going to find a savings account with a high enough interest rate to make it worth while.

There is no interest added until the April after you graduate. At 3% pa in the Santander current account, even the basic non income assessed loan at £3600 per year would accrue as follows, assuming the loan is uprated with inflation:

Y1: 3708
Y2: 7527
Y3: 11461

which represents a total of £661 interest over three years. Not going to set the world on fire (though there are higher-interest vehicles on the high street for amounts of a few thousand) but I guess it's most of a month's rent for each year.

Reply 12

claireestelle

Original post by Chrisruptor

It's not greedy - just a financial decision. If I am entitled to take out the full non-income assessed loan and it would benefit me in the future then I don't see the issue.

I don't work full time (at least not during term time) but earn enough to mean I can cover my living expenses without a loan. I've never heard of taking out a student loan being illegal. If you could link me to a source that would be appreciated.

The interest rate on student loans (in Scotland) anyway is "RPI or England Base Rate + 1% whichever is lower" which I believe makes it around 1.5%. It's not meant to be much higher than inflation. I could be wrong though but 5% sounds too much.

england goes off rpi + 3% which is currently 5.5% (http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678755&_dad=portal&_schema=PORTAL).
RPI is currently, 2.5% so if its going off that it makes 3.5 interest for scottish loans.
To be honest even if you re interest rate is 1.5%, you could struggle to find savings above that unless you put it in a stanander 1,2,3 or other loyalty current account with benefits. I get 1.75% on my savings and that is in a fixed rate isa with withdrawal charges on it. You d be lucky if you even made say £50 pounds profit potentially none at all so realistically do you really feel its worth it for an amount of money that low.

Reply 13

Quady

Original post by Mathlover123

I was wrong about legality but your uni have the right to expel you if you are over a certain number of hours of work during term time.

No they don't.

Some uni's do. And its very much open to appeal/challenge.

Does the OP's?

Reply 14

Quady

Original post by Paulwyn

How come?

The value of prizes is 1.35%... which is no better than an ISA.

Reply 15

Quady

Original post by scrotgrot

There is no interest added until the April after you graduate.

errrr yes there is (and always has been).

Just repayments aren't made until then.

Reply 16

Soldieroffortune

I would advise against ISAs theyre there for tax benefits which student loans don't come under and thus they offer no tangible benefit, the interest is so pathetic it may as well not be there last time i checked the figures you're still technically losing money they're so low compared to inflation etc. etc.
If you want to actually make money on it you need to invest in risk, you don't make money without a downside.

Reply 17

Chrisruptor

I'm not looking to make a profit really (in saying that I don't want to make a massive loss either).

But I'm potentially looking at having it in reserve as a source of finance for a deposit on a mortgage when I graduate.

Reply 18

SmashConcept

Original post by claireestelle

To be honest even if you re interest rate is 1.5%, you could struggle to find savings above that unless you put it in a stanander 1,2,3 or other loyalty current account with benefits. I get 1.75% on my savings and that is in a fixed rate isa with withdrawal charges on it. You d be lucky if you even made say £50 pounds profit potentially none at all so realistically do you really feel its worth it for an amount of money that low.