Universities in Britain were always free to attend and local education authorities offered big grants to help students pay for accommodation and living costs. Having been to university in the late 1980s, the award felt quite generous. One of my friends used it to buy a motorbike and then had to eat baked beans potatoes every night for a year as he had no money left.
Student loan history
In 1990, the government set up the Student Loan Company (SLC) to help students who got into financial difficulty but the credit was initially very modest – the average loan that year was £390 ($510). It all changed in 1998 when the Higher Education Act was passed, asking students for £1,000 towards their tuition fees and loans replaced maintenance grants.
In 2004, student contribution rose to £3,000 and has been on the rise ever since. It now sits at £9,250 per year meaning students doing a three-year course will typically owe over £50,000 (including maintenance costs) by the time they graduate.
Parents and student loans
It seems like a staggering amount of money to repay and I was initially determined that we would try everything to pay the tuition fees each year and so not go into debt for our daughter’s education.
I have heard of parents borrowing money themselves just so their kids are not in debt. However, Martin Lewis, head of financial website www.moneysavingexpert.com believes that parents or anyone helping out financially could end up wasting money if they don’t take out the ‘loan’. He reckons the student loan is the ‘best form of debt you’ll ever get’. The interest is relatively low and crucially you only need to repay it if you earn over £25,000. After 30 years, anything still owed is wiped off so graduates who do not have high-earning jobs may end up repaying hardly anything. As it stands, the student loan sounds like a safe bet, or at least the best way to finance studies.
…to be continued