Student Loans

In this article we will look at the impact of changes to student loans, and how you may help your children out with the costs associated with university.

With the recent changes to student loans, the decision to help pay your childs university costs is becoming increasing complex.

For doctors with children starting or already at university, any loans they have taking will accrue interest of RPI + 3%, this could lead to them accruing £5,800 of additional interest before they have begun to start paying off their loan. Whilst the amount of interest accrued may appear to be a large amount, graduates will only start paying this off once they earn over the threshold of £21,000 at which point they will pay 9% of any earned income over the threshold.

For graduates who go on to earn around the threshold, it is unlikely that they will ever pay off their student loans. They will benefit from the government cancelling any outstanding student debt after 30 years. In this situation it does not make sense for parents to pay their child(s) university costs, as there may be better alternative methods to helping your children financially after they graduate.

However for higher earning graduates, those earning over £41,000, their lifetime repayingments have increased by almost £40,000 in today's money. In these cases it may make financial sense to help with the university costs, to stop the debts accumulating.

It is also worth noting that Government legislation with regards to the repayment of student loans may change in the future.

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