Should you take a student loan? Martin’s five things you need to know about student finance

Martin Lewis has his five things you need to know about student finance, including how much it’ll really cost you, why the interest rate might be a red herring, how much parents are expected to contribute and much more. He also has an update on energy standing charges. And Tell Us is all about when you’ve saved a shedload of money… completely by accident! You can get in touch with the team by emailing [email protected] mailto:[email protected] – make sure to send in your burning questions and any successes you’ve had following Martin’s advice!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Martin Lewis?

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• 0:06Speaker 01

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• 1:46Martin Lewis?

  Hello, I'm Martin Lewis and this is the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. Now, usually, much of it comes from my BBC Radio 5 live show with Adrian Charles, but there's also bonus money-saving tips for you lucky, lucky podcast listeners. Today's big topic.

• 2:04Martin Lewis?

  Should you take a student loan? The new academic year is starting and student finance is the most misunderstood money topic. And as big changes have happened in recent years, as well as misunderstandings, many actually have got the facts wrong. So, whether you're a student, a potential future student, a parent or grandparent, I've got the five things everyone needs to know about student finance, including how much it'll really cost you, why the interest rate may be a red herring, the hidden parental contribution you must talk about before going to university, and so much more. Plus, regulator Ofgem's announced that all firms must offer a low standing charge option from January.

• 2:46Martin Lewis?

  You might think I'll be cheering because I've been campaigning for it, but I'm not. I'm pretty disappointed in the way it's being implemented. And a brilliant tellers, when have you accidentally saved money, including the woman who got sent a bottle of bourbon whisky for the price of a bop on biscuit? Play the theme tune!

• 3:20Speaker 03

  Standing charges on your energy bills is something you've been campaigning about, and there was news this week, but I understand you're not what might be called ecstatic about what's been announced.

• 3:33Martin Lewis?

  No, I'm blooming disappointed would be a better way to phrase it, and was incredibly frustrated when I heard. Because ultimately, I mean, the truth is, this is based on my proposal to the regulator. Standing charges are those fixed daily charges that you pay just for the facility of having gas and electricity. In my view, the over £300 a year cost is a moral hazard. It disincentivises lower users from cutting their bills. It means many older people who only use their gas during the winter are having to pay for it in summer. It should have been cut. Unfortunately, it was impossible to get it cut on the main price cap, because for that we needed government to act in concert with the regulator, because to protect vulnerable

• 4:14Martin Lewis?

  users with disabilities, for example, who have to have high usage, to enable the rest of us to have standing charges cut, didn't work. So I came up with this proposal that said, all right, how about we have a dual price cap? You have the normal price cap... And then you have an alternative price cap which has much lower standing charges, accepting that that means they would have to cover the cost on the unit rates, the amount that you pay for each unit of gas and electricity that you use. But it would mean that lower users could be switched to this default, this price cap deal with low standing charges and it would be better for them. And crucially, it meant that vulnerable low users could be switched by default. So what has happened?

• 4:58Martin Lewis?

  Well, the regulator has come out, having gone through that, and frankly, it has smothered it in a pillow of bureaucracy. And it has said, we are not going to put this in the price cap. We're just going to mandate that firms offer a low, note low not no, standing charge option from January. Now, look, I accept that for lower users who engage in the switching market, and there are some of them, this will be an improvement. I mean, my guess, until we have any of the tariff details and that will be up to the companies, my guess is this will be good news for people who pay under, say, £1,200 a year. Everybody else should ignore these tariffs. My problem is twofold, and why I'm really frustrating, why I will be fighting hard to try and turn this around in the consultation,

• 5:41Martin Lewis?

  though I don't hold out much hope at this stage because it's late-stage consultation. Number one, because it is not in the price cap mechanism, there is no limit to what firms can charge. So what they could do is lower their standing charge. And instead of putting a commensurate amount on the unit rate to make up for it, so it sort of averages out for an average user, they can put whatever they like on the unit rate because it's not capped. There's no limit on what they can charge. So all the protections in place that I had wanted have gone. The second one is that those in most in need of this option, which is vulnerable lower users, tend not to switch tariffs. Now, the price cap has unfortunately...

• 6:25Martin Lewis?

  Become the default tariff that everybody pays, but that was not its intention. It was originally intended to be a backstop tariff for those who don't or can't engage in the market, you know, think people with early onset dementia, living by themselves. So mandating firms to offer a low standing charge switchers tariff outside of the price cap means all of those people who don't engage with the market won't benefit from it anyway. And that was the whole purpose I was campaigning to get this done in the first place. So I am incredibly frustrated. I mean, the whole fallacy of the standing charge is it is designated to pay the fixed costs of energy bills.

• 7:06Martin Lewis?

  But when you go into a pub or when you go into a supermarket to be pub to buy a pint or a supermarket to buy a packet of crisps, they don't say you have to have a subscription to come in here that you pay each month and then we'll charge you for each packet of crisps on top of it, just a proportion to mount or each pint on top of it. They incorporate all the industry's fixed costs into the price. So the idea that all the fixed costs need to automatically be incorporated into the standing charge is a fallacy. It just doesn't need to work like that. And I'm so frustrated that what I think is going to end up happening is they'll introduce this, not that many people would use it because it's missing the main target audience. And then they'll say, see, there was no point in doing it anyway. But.

• 7:49Speaker 03

  So why has this happened then? What's who's is it to do with lobbying or what is there? What is there? What's the logic? Have you had it explained to you?

• 7:58Martin Lewis?

  Well, no, and unfortunately I still haven't had a conversation with them as I have tried to do so.

• 8:02Speaker 03

  I can't imagine why they're not picking up the phone to you, Martin, I must say.

• 8:06Martin Lewis?

  And I normally have very open covers. My thought is this, first of all, they wanted to bring it in by January because they'd promised they'd bring it in by January. And I suspect it was too difficult to do under the price cap structure by January. So instead of delaying, which would have been better, they're bringing it in in January, but they're bringing it in in an incredibly imperfect model. They're also saying that we're looking at the whole structure of standing charges and fixed costs for the long term, and that'll be over the next two or three years. So this is just a stopgap. So I think they didn't want to rock the boat too much. Now, I should say. On a lighter note, next week, we're doing a podcast special, energy Q and A, because it's next week is when the energy price cap goes up by 2%. So if you have any questions on this or anything else on your energy bills,

• 8:49Martin Lewis?

  and you want to get in touch, it's Martin Lewis podcast at bbc.co.uk. We would love your energy questions, anything to do with domestic energy bills. I will do my best to answer them in a Q and A special.

• 9:04Speaker 03

  Okay, let's move on to our big topic for today, student finance. And I understand you've found us a representative parent. Did they apply for this or are you just going randomly sort of sue somebody off the street?

• 9:18Martin Lewis?

  Me, let's break the fourth wall. Producer Matt, producer Matt has got them.

• 9:22Speaker 03

  Okay, we don't know what his methodology was, but we got no reason to believe he hasn't done it.

• 9:28Martin Lewis?

  I think it was very, very sample of let's get a parent who's got a child going to university because actually many of the children themselves or adults as they now are off at university. And let's get someone who wants to ask lots of different questions to represent parents. But this is not a statistically representative sample of parents. It's just one person.

• 9:47Speaker 03

  But he's going to do a fine job. He's in, he's in the Royal Borough of Solihull. It is a royal borough, isn't it, Sanjay? Solihull, rather posh, isn't it?

• 9:57Speaker 04

  It is a good borough and I'm glad to be called a representative parent. So yeah, thank you.

• 10:02Speaker 03

  So can we have your sort of vital parental statistics then? What do Martin, what are the, what do we need to know from Sanjay?

• 10:09Martin Lewis?

  Well, we could do with knowing how old his daughter is and where, because it is a daughter, I believe, and where she's planning to go to uni and what's happening.

• 10:16Speaker 04

  Yes. Hi, Martin. We listen to your show. Thanks for all the tips. My elder daughter, Shreya Sanjay, got her A level results about three weeks ago. She got the, she got excellent grades, three A stars, off to study medicine in Manchester.

• 10:29Speaker 03

  Oof, clever clogs. Did she get the brains from you, Sanjay?

• 10:33Speaker 04

  Mum's brains and dad's looks, I say.

• 10:38Speaker 03

  I'm sure I'm sure I'm sure a mom's delighted to hear you say that, but okay, so right. So, yeah, go on.

• 10:46Speaker 04

  Yeah, so I think, Martin, my question is, I mean, you know, we we we saved up to fund her university education so that she doesn't carry a financial burden when she comes out. But then when we saw the, let's say, the advantages and disadvantages of having a student loan, we thought maybe it might be more prudent to have the loan for some part of her education. We are both chartered accountants, by the way, so we, you know, we're good with numbers generally.

• 11:14Speaker 03

  Okay, all right, listen, part part that thought, and we're going to come and we're going to answer all your questions.

• 11:19Speaker 04

  Sure.

• 11:20Speaker 03

  So I think first, Martin, you want to do very sensibly, the five things, everyone, students, parents, grandparents, the rest of us, what we need to understand about student loans and maybe clear up some misconceptions.

• 11:33Martin Lewis?

  So, yeah, I'm going to do this is going to take a long time. I want to go in detail. I'm going to split it into five categories. And Sanjay, your question whether you should take a loan is one I want you to listen to all the five points first, and then we will come back to it. Because the the problem is, there's so many misunderstandings, you almost have to have a model in your head of how student finance works before you can answer the question that you're asking, which is one that comes it sort of comes out of the calculator, it's not one you put in, if that makes sense. So let's start with the basics. My first rule on student finance, the student loan price tag may be sixty grand or up to sixty grand, but that is not what you pay. So students, first time UK undergraduates,

• 12:15Martin Lewis?

  don't need to pay the university or higher education institutions directly. The tuition fees, which cost up to nine thousand five hundred and thirty five pounds per year for all students with the exception of Scottish students in Scotland, who don't pay tuition fees, and Northern Irish students in Northern Ireland, where the tuition fees are capped at just below five thousand pounds. Everybody else, so Scottish student in England and England's English student in Scotland, and English student in England, tuition fees are up to nine thousand five hundred and thirty five pounds a year. So over a three-year course, you're talking around £28,000, £29,000 plus you have

• 12:55Martin Lewis?

  the living loan that is combined in with it and add all of that together and at the end, your student loan statement could easily say £60,000 is owed. My big message is don't overly get hung up on that number. The first thing is you only start repaying in the April after you leave university. Worth remembering that while you're a student, there are no repayments. Then you only repay, I'm going to lead on the English system here, it is different for each UK nation. You only repay if you earn over £25,000 a year. In Scotland, it's over around £33,000 a year. In Northern Ireland, it's £26,000. In Wales, it's £28,500.

• 13:37Martin Lewis?

  So you repay if you earn over a threshold and if you're an undergraduate, you repay 9% of everything you earn above that threshold. The loan is then cleared once you've paid it off plus interest or there's a backstop date when it dates automatically. In England, that's 40 years. Scotland is 30 years. Wales is 30 years. Northern Ireland is 25 years from the April after you leave university so that it wipes. Couple of other key points. This is paid via the payroll. So students don't, in most cases, unless you're self-employed, don't actually have to repay the student loan, it is done automatically for them, like tax.

• 14:19Martin Lewis?

  It's collected in the same way as tax and it does not go onto your credit file. So that's my very basics. You have an agglomerated loan of your tuition fees and your maintenance loan. You have all of that that accrues. It can add up to £60,000 but you're only repaying in proportion to what you earn. And I have more to say on that, but I think we've got some more questions Adrian, so I'll pause for a sec. Okay.

• 14:44Speaker 03

  So, if, maybe you've got a question for us, by the way, you've got anything to do with student finance, maybe your kid's just gone to uni, you can always drop us a line, 85058. So, the price tag for someone going to university is about sixty thousand pounds, but that's not what you pay, is that correct?

• 15:01Martin Lewis?

  No, okay, so let's move on. So, look, the biggest complaint I get about student loans, what everybody always says to me, is it's a massive debt burden we are putting onto our young people's shoulders, and I totally understand why people say that, but I, in a way, disagree. My biggest problem with student finance is that for the last twenty years, we have educated our youth into what we call debt, but we have never educated them about debt. Because student loans are called a loan, they're actually called, that was an appeasement by Tony Blair when he set up the system, because he didn't want to set up what is far more akin to a tax, and what's in some countries, they would call a graduate contribution system or a graduate tax.

• 15:35Martin Lewis?

  So, we called it a loan, and that's been absolutely devastating for the UK, in my view, because it has scared many people off going to university because of what we call a debt burden. It has also inured young people into getting debt, because when we mandate them to get debt when they go to university, then they're much less worried about getting other forms of bad debt, and it has been absolutely horrendous for society. But let me get on and explain why I say it is what we call a loan. Now, I'm going to do a maths question, I think. Sanjay, are you still with us?

• 16:07Martin Lewis?

  Is that, yeah, I see. Can we turn your sound up?

• 16:10Martin Lewis?

  There we go, I've got you. Yes, I'm with you. So, here we go. Let's just do this, it's a maths one, I'm not going to get, Adrian, I'm letting you off this, we're going to do this with Sanjay, okay?

• 16:18Speaker 03

  Okay.

• 16:19Martin Lewis?

  This is the most important thing that everybody needs to understand about student finance. Once you get this into your head, everything changes about the way you think about it. By the way, I'm not saying it's cheap, I'm not saying it's easy, I'm not saying you shouldn't look at it because it's very, it is very expensive, it just doesn't work the way you think. So, okay, Sanjay, you repay nine percent of everything earned above twenty-five thousand pounds. So, let's say you have a total student loan debt of thirty grand, yep? Yep. You earn thirty-five thousand pounds, how much do you repay in a year?

• 17:00Martin Lewis?

  You repay nine percent of everything?

• 17:02Speaker 04

  Nine, nine hundred?

• 17:03Martin Lewis?

  Nine hundred, because you earn thirty five, that's ten grand above twenty five. Nine percent of ten grand is nine hundred pounds. You repay nine hundred pounds a year. Question two, Sanjay. Your student loan debt is eighty thousand pounds. You earn thirty five thousand pounds a year. How much do you repay a year?

• 17:25Speaker 04

  Ooh, uh, still nine hundred, right?

• 17:28Martin Lewis?

  Correct, because what you repay depends on what you earn. Let's go to the ridiculous. Tuition fees have just been put up to a million pounds a year. Your daughter is leaving university with three million pounds of student loan debt. She, uh, she earns thirty five thousand pounds a year. How much does she repay?

• 17:47Speaker 04

  Still nine hundred.

• 17:48Martin Lewis?

  Still nine hundred pounds. Just take a moment, everyone. That's the crucial point. The amount that you repay each year is dictated solely on what you earn. Not the amount of borrowing you have. So how much you borrow does not impact your monthly repayments. The impact of the amount that you borrow is whether you will clear the loan before it wipes or not, which in England is forty years, in the rest is twenty five years or thirty years. So the borrowing amount, in some cases, certainly for those who are going to be lower earners

• 18:30Martin Lewis?

  when they leave university, is completely irrelevant. Because the truth of what is going to happen for many people is you are simply going to pay nine percent, and let's call it a tax. It isn't a tax, it's not hypothecated, it isn't a tax. But in all practical purposes, it's taken through the payroll. It feels like a tax, it smells like a tax. You're going to pay nine, nine percent higher tax each year until you clear the loan. Now, that may be the thirty years or forty years for lower earners. It may be slightly before that if you're a higher earner. So let's just work in this, Sanjay. We'll do a bit more, I'm liking the double, like, much better than my usual. Um, right, so here we go. So, Ajin had a wry smile on his face there.

• 19:11Martin Lewis?

  You're an accountant, I don't even need to give you the figures. If you, how much tax do you pay if you don't go, if you don't go to university and you earn up to £12,570 a year? How much tax would you pay? Zero. Correct, because it's the personal allowance. If you earn from £12,751 a year to £25,000 a year and you don't go to university, what's your marginal tax rate?

• 19:35Martin Lewis?

  10%. 20, 20. 20, yeah. 20%, and if you go to university, it's also 20%. Here's the difference, this is the practical way it works, the repayments. If you earn from £25,000 to £50,270 and you haven't gone to university, your tax rate is 20%. But if you have gone to university, under the new system, this is the 2023 starters in England system, before that it was different, in other UK nations it's different, different thresholds, then your effective tax rate is 29%. 20% income tax, 9% repaying the student loan. You earn above £50,270, non-university goers it's 40%, university goers it's 49%.

• 20:16Martin Lewis?

  If you earn above £125,000, 125, 140, non-university goers your marginal tax rate is 45%. University goers your marginal tax rate is 54%. People focus on this, they talk about the debt, the burden of debt sitting on my child's shoulders. In a practical sense of the way you repay it, it doesn't go on your credit file, it's repaid in proportion to what you earn. If you don't earn enough, you don't repay it. This works much more like a tax. I would rename the whole system a graduate contribution system, if we did it would all make more sense. I would say your graduate contribution is equivalent to an extra 9% tax above £20,000 until you clear what you owe, or 40 years in England, whichever is longer.

• 21:00Martin Lewis?

  For many people it'll be getting on for the full 40 years. And conceptually, that is the way to think about it. That is a lot of money. 9% extra tax is a lot of money, it is expensive. It is well worth anyone who is going to university thinking about, will what I gain from my degree, both in earnings and in life skills and in broadening my view, is that worth the fact that I'm going to have to pay a higher effective tax rate substantially when I leave university? For many it will be, for some it won't be. I'm not trying to say... People shouldn't worry about student finance and the cost. I'm trying to say you should not conceptualise it as a debt and a burden of debt because in almost all practical ways,

• 21:44Martin Lewis?

  it works far more like a tax. Does that make sense?

• 21:50Speaker 03

  It does to me. I'm sure it does to Sanjay. You still there, Sanjay?

• 21:54Speaker 04

  Yeah, I'm still here. Martin, I completely understand the tax burden and the prolonging of the whole debt burden. But I had one similar line. I always view that the cost of the borrowing is much higher on the student loan than it is on the normal loan. So is there a reason

• 22:13Martin Lewis?

  that the banks charge? No? No, no, that's absolutely... Well, let's do it. Shall we do interest? Which I... Interest, so, under the current starters' student loan system, and I just need to reiterate, there will be people listening to this who went to university five years ago and some 15 years ago and some 20 years ago and some even longer. You were under a different system. I'm currently talking about Plan Five loans. Those are loans that are only for English student starters who started in the 2023 academic year and beyond. Before that, the

• 22:53Martin Lewis?

  system was different. The current interest rate on student loans is RPI. So it is set at the rate of inflation. It changes every September, usually based on the prior March's rate of inflation. It uses the slightly higher RPI rate, not the CPI rate. So I just want to explain to everybody listening what that means in practice. I'm going to use an economic term here. Don't take it too seriously. There is no real cost to the interest on student loans. Now, real in economic terms means it goes up above inflation. So the best way I can describe this...

• 23:31Martin Lewis?

  If you borrow enough money now on your student loan to buy 500 shopping trolleys worth of goods, you will only repay what 500 shopping trolleys worth of goods cost in the future. Now, that may be a higher amount because of inflation, prices go up, but earnings also go up. And all money, that's inflation. The price of everything goes up, doesn't mean the value of it goes up. So the fact there's no real cost is because you borrow 500 trolleys worth of goods, you have to repay 500 shopping trolleys worth of goods in whatever future, in whatever future money that we have. And that was one of the big changes in 2023. I mean, the 2023 changes were absolutely diabolical

• 24:14Martin Lewis?

  to students. They started people repaying at a lower level, so people would repay more each year. It went from around 27 grand to 25 grand. They extended the repayment terms from 30 to 40 years. Again, absolutely enormous cost that burdened. The one good thing is the cut the interest rate. I mean, just to put this in perspective, everybody is, everybody's so happy that the interest rate's been cut because that's always been demonized, the interest rate. Actually, even though they cut the interest rate for 2023 starters, for those who started university in England in 2022, the state paid 44 pence per pound on average for the cost of education. For those who started in 2023, it's estimated

• 24:54Martin Lewis?

  they will pay 19 p per pound. So the pendulum was swung quite substantially towards the individual paying more. So, but, but the interest rate is lower than most commercial debt. That's very important to understand, the new interest rate. So it's only going up with the rate of inflation.

• 25:14Speaker 03

  Okay, I mean, Liz has asked a question, and you kind of covered it, but it's so important, I think it's worth reiterating. It says- Liz wants to understand more about paying back all the money owed. Want to avoid racking up huge additional interest. Likely to earn just over the threshold. Don't want the loan sitting there for years and years accruing interest when pay is low. Just to end up paying back a fortune when salary picks up.

• 25:40Martin Lewis?

  Okay. So we've done the first point everybody needs to understand about interest, which is the interest rate. And I should probably do it for the other UK nations. So it's based on RPI in England. It's RPI or the lower of RPI or base rate plus one percent in Scotland. Same in Northern Ireland. In Wales, it's RPI plus RPI plus up to three percent, depending on what you earn. So it is above inflation in Wales currently. It Wales didn't go with England to move to Plan Five. They stayed with the Plan Two loans, which will work out cheaper, though the interest rate is higher. But they will work out cheaper because you repay on a higher threshold. And because it only it wipes after thirty years, not forty years. But I'm not going to go into those minutia. So let's just go into this.

• 26:24Martin Lewis?

  So again, hopefully people are starting to have this brain change. So here's the thing you have to understand to get your you first got your head around that even though this is called a loan, it works a bit more like a tax, a nine percent extra tax. Here's the next thing. The interest added to your account is not the same of the amount of interest that you repay. The interest added to your account is a nominal amount of interest added. Whether you repay it or not, again, depends on what we earn. So to try and make this simple, I'm going to put this into imaginary different cohort groups of students. Adrian, you're going to work with me on this one if you don't mind.

• 27:01Speaker 03

  Go on.

• 27:02Martin Lewis?

  So if somebody never earns over the threshold, so twenty five thousand pounds in England currently, how much would they repay back?

• 27:11Speaker 03

  None.

• 27:11Martin Lewis?

  None. Okay, so they're not repaying any capital, they're not repaying any interest. If somebody earns just over the threshold for their forty years before it wipes, they will probably not repay enough to repay just what they borrowed in the first place. So they won't be paying any interest because they won't have repaid what they borrowed on top. Someone who's a little higher earner. May repay enough to borrow to repay what they borrowed in the first place and a little bit on top. So they will be paying some interest, but they won't be paying anything close to the full interest that's been added. The only people who will repay the full interest

• 27:52Martin Lewis?

  that has been added is those who earn enough to repay the loan and interest in full before it wipes in the 30 or 40 years, depending which system you're on, whether you're in England or whether you're in one of the other nations or 25 years in Northern Ireland. So what we do by adding interest to the statement, and I work with universities, the main body of universities UK on this to try and redesign the statements, but it wasn't accepted, is we scare the pants of graduates by adding this interest each year on top on their statements without ever explaining. And certainly for those who went before 2023, many of them will not come close to paying all the interest because it'll just wipe after

• 28:35Martin Lewis?

  30 years and it'll be gone. But they see it being added and then some of them are pushed into overpaying because they're so scared of the interest, an interest they would never have had to repay. Oh God, I've got stories. A disabled girl who was never going to work again, who came to me petrified. And you know, she, I'm never going to work again, but I'm worried about this interest racking up. What do I do? Do I pay it off? I was like, no, you, I'm sorry, you're never going to work again. You're never going to have to repay this. Why would you clear the interest? It is going to wipe for you. So the interest rate for English starters is set at the rate of inflation. There's no real interest. And even with that, unless you're a mid to higher earning graduate, you will probably not repay all the interest because you won't repay everything in full. Now, I'm not saying that's

• 29:19Martin Lewis?

  great. I mean, I would love university to cost students a fortune because that means they will have earned a fortune. Because if you're earning more, you're going to repay more apart from some really bonkers stuff where the curve changes. You know, if you're Mark Zuckerberg, you'll repay less because you'll pay it off in one year and there'll be no interest. But, but in general terms, the more you earn, the more you repay. So the interest is falsely scaring people.

• 29:44Martin Lewis?

  Now I'm overloading you with information on student finance at the moment and I've got a lot more that we need to talk about on it, but let's just have a quick break because we had a fantastic tellers this week.

• 29:54Speaker 03

  So, one of you, one of you saved a fortune by pure accident. Go on, you start us off.

• 29:59Martin Lewis?

  So I had, Shaystella, I once had my bank account drained by a fraudster. I had to borrow a small amount of money from parents so I could afford travel for the rest of the month. When the stolen money eventually got deposited back into my account, I realised I'd been so frugal, I'd saved a fortune.

• 30:15Speaker 03

  Jane ordered bourbon biscuits on her online shop, but when it was picked, there were no bourbon biscuits. So they substituted it for bourbon whisky.

• 30:24Martin Lewis?

  Brilliant.

• 30:25Speaker 03

  Paid 50p for the bottle.

• 30:28Martin Lewis?

  Oh, that's a win. That's a great accent. Helen, when I was told the price of my lens replacement surgery, my sister jokingly asked if they take the blue light card, which is the discount card for health and care workers. Turns out they do. Over £900 saved.

• 30:44Speaker 03

  Matt once misspelled something he was searching for on eBay, found a listing of an item no one else had because the seller had made the same spelling mistake. That's beautiful. Probably saved about £400.

• 30:55Martin Lewis?

  There's actually a website called Fatfingers, I think it's dot com, it might be dot co.uk, where you put in what you're searching on eBay and it looks for as close spellalikes that are much cheaper for that reason.

• 31:05Speaker 03

  Ah, brilliant.

• 31:07Martin Lewis?

  Abdul, I took a one-off mystery shopper job and the task was to ask my bank for advice on my existing mortgage. I was paid £120 fee for my trouble and discovered in the process, I could refix my interest rate and save £150 a month. This was a saving that went on for several years. Although, go to a mortgage broker and go across the whole of the market. Go on, squeeze one more in Adrian.

• 31:27Speaker 03

  Jackie, by putting things I like in the online basket and leaving it there, nine times out of 10, when I go back, when I go back, I delete it. Usually just don't like enough to buy where I used to just buy it and often ended up being put in a cupboard anyway. So, give them their own cooling off period.

• 31:44Martin Lewis?

  One of my big pre-Christmas tips, go into shops where you have a registered, put what you want in the online basket and then walk away. Give them two or three days, you know, we've seen it at Amazon, we've seen it at ASOS, I've got a full list on my site of all the different places that tend to do this. And they tend to send you a voucher because they're going, what, they haven't completed? They were so nearly there. We need the sale. How do we close the deal? Give them a discount. It can work really well. What's next?

• 32:09Speaker 03

  One more. Go on, do a quick one.

• 32:10Martin Lewis?

  After trying for a baby for two years, we were due to start costly fertility treatment. The day before we started, we had to submit a pregnancy test in order for the clinic to release the, I know where this is going, the fertility drugs to start treatment. Unbelievably, the test came back positive and our little miracle, who saved us a fortune on fertility treatment, is now an eight-month-old. What a beautiful way to finish.

• 32:36Speaker 03

  We're busy clearing up lots of confusion about student loans and Sanjay, our parent in Solihull, I mean, it just, it just occurred to me, Martin, when you're talking about how much you have to pay ends up on how much you earn. It is, you know, Sanjay's daughter is obviously very clever, going off to study medicine, you know, doctors aren't necessarily paid a fortune, but one would have to assume she'll end up paying the full whack.

• 33:02Martin Lewis?

  No, very, very important, we don't assume that.

• 33:06Speaker 03

  Right.

• 33:07Martin Lewis?

  And, and this is going to come on to, I think, where we're going next. Sanjay's daughter may go and work for Medicine Sanskrit Chair, it's a charity all across the world on a very low salary for the rest of her life.

• 33:17Speaker 03

  Yes, true.

• 33:17Martin Lewis?

  So, so it's important to understand, and, and one of the things I'm going to come on to, and I think it's the next batch of questions you've got for me, is important to understand there is uncertainty about what happens afterwards. And, and nobody knows what their child is going to do, and no child knows, and, you know, they're not children, no student knows what is actually going to happen with their life plan afterwards. So, we, we must not assume that. We can say it is the most likely outcome, but we must look at the other eventual outcomes too. So, yeah.

• 33:46Speaker 03

  Okay. So, Sanjay, ask the question that you really want to get off your chest.

• 33:51Speaker 04

  Should we take the loan, Martin?

• 33:53Martin Lewis?

  Yes.

• 33:55Speaker 04

  Yes.

• 33:57Martin Lewis?

  Would you like more detail?

• 34:00Speaker 04

  No, I think, I, I think it was very clear as to, you know, how that is worked.

• 34:04Martin Lewis?

  It's actually more important than that. So. The first thing to understand is that, you know, look, I don't know your finances, I'm not going to ask you. If I were talking to Mark Zuckerberg, I would probably say there's no need for you to bother. Right, but assuming that you are affluent but not incredibly rich, then the first thing to understand is this cost is your daughter's cost, not yours. Right, it's her debt, not your debt. The second thing is, you're loving parents, you want to help your daughter. So let's just understand where student finance fits into the panoply of her lifetime finances. So the first thing to say is, not taking the loan at the moment,

• 34:49Martin Lewis?

  the net cost of that is the interest before you pay it off. Because you can always pay off the loan at any point, you can volunteer to overpay and pay it off at any point. So the cost is, she's going to be, she's doing medicine, so in her case it's five years and the loan will be bigger. She's going to have inflation rate interest over the years that she is a student. Right, once she finishes being a student, you're going to have a better idea of what she's going to do afterwards. She might change course, she might go and work for a charity, she might go and end up being an incredibly high-paid consultant.

• 35:24Martin Lewis?

  So the lower your graduate lifetime earnings, the less beneficial not taking a loan is for her as an individual. The higher her lifetime earnings, because even though the interest is at the rate of inflation, so there's no real cost, there is some interest, there is a nominal amount of interest that needs to be paid on top, so it would be beneficial. But we don't know any of that yet, and the cost of waiting a little bit is just interest at the rate of inflation. Now we get to the bit that people don't think about. We now have to look at the opportunity cost of using your money to pay off her loan now.

• 36:04Martin Lewis?

  The most important help that most graduates will need in their lifetime finances is money towards buying a property at some point. Saving up what has to be a large deposit while you can get mortgages at 5%, I would always want 10% because that's where the interest rate on mortgages come down. Typical mortgage rate, 4 or 5%, higher than the current, which is about going to be 3.2% from this September, inflation rate of interest. And the key thing on student loans, you are never going to get a better form of structure of the loan. Now, that's important. I'm not saying you won't get a cheaper loan, I'm saying structural loan. I mean, lose your job, you don't have to repay

• 36:45Martin Lewis?

  your student loan because you only repay 9% of everything above £25,000. If you're a low earner, you're only paying in proportion to what you earn. It doesn't go on your credit file, although it does, because it, just like all taxes do, it does decrease your disposable income. So when you're getting a mortgage on your affordability calculation because you have less disposable income, because it's effectively, as I discussed earlier, a higher form of tax, it will reduce that. It doesn't go on your credit file. It is, you know, there is no commercial lending that comes close to having such favourable terms as the student loan terms. And the interest rate is now only at the rate of inflation. Yes, a 0% credit card is cheaper, but one would expect over the next 20, 30 years, the rate of inflation will be lower than the mortgage rate, lower than the

• 37:27Martin Lewis?

  commercial rate that you can borrow on a mortgage. So for all of those reasons, if you were to use your money now, so that she did not have to take a loan, only for in seven or eight years' time, her to have to borrow much more on a mortgage which has commercial terms and a commercial rate of interest, you've effectively put your money into the wrong one. Not only that, if she needed a car loan, or she had other debts which are even more expensive, you would effectively be having to borrow back the money that you've given her to pay off the student loan. Now, if you're in, and let's not ask you this on the radio, if you're in such a good financial position that you can afford to pay her student tuition fees for her, give her all the money she needs to live off, and have enough money to buy a house, and have enough money that if she needed a car, you could

• 38:13Martin Lewis?

  All that, well, then it's neither hidden nor tethered, just don't bother taking the loan. But if the finance is still a scarce thing, so that there's a choice for you between where you're going to put your help to her. My inclination, there's no rights or wrong here, would be to say, actually, I would be keeping that money aside for when she needs a mortgage later. And to reduce the amount of commercial borrowing she have to get later. Because ultimately, it's going to be a choice over the next ten, fifteen years as she follows most traditional life passes. Especially being a doctor, although she move around, she's got a longer time to learn and the residency and all of that stuff. That there will be a, that you're going to have a choice between those outcomes. And actually, the student loan is the least worst one to have. Is how I'd phrase it. Does that make sense, Sanjay?

• 38:54Speaker 04

  Very much, and thank you for the detailed explanation. I think it makes a lot of sense.

• 38:59Speaker 03

  Amaravi's got a superficially similar question. So should my son, who's in his fourth year doing his masters at Warwick, pay off his undergraduate student loan in full if he has the ability? What would you suggest he does? Pay off all the loan, pay off a lump sum, just pay it monthly and put the money into investments or a home?

• 39:19Martin Lewis?

  Well, I mean, first of all, let's, the undergraduate student, he's in his fourth year. Hold on, what year did he start?

• 39:25Speaker 03

  He's in his fourth, well.

• 39:27Martin Lewis?

  So, so we're going, so he's in his fourth year. Does that mean he's in his fourth year this year? So he starts, that's twenty five, twenty six. So you've got twenty four, twenty five, twenty, so he started in twenty two, twenty three. Which is the year under the old system. So everything changes.

• 39:45Speaker 03

  Oh, God.

• 39:46Martin Lewis?

  Right, he's on a plan two loan. Now, a plan two loan, his repayment is nine percent of everything above around twenty eight grand. So he repays less each year and it wipes after thirty years. But his interest rate will be above inflation, up to inflation plus three percent. However. Far fewer people on Plan Two loans will repay in full before the loan wipes than on the Plan Five loans that are currently in place because the loan wipes after 30 years, not after 40 years, and you repay less a year. So because far fewer people will see the loan wipe, far fewer people will repay in

• 40:30Martin Lewis?

  full, they won't repay all the interest being added. So even though the interest, this is why I said earlier, you have to listen to everything to get there. So even though the interest rate is higher, fewer people will repay at all. Now, if your son is in a position that we know he's going to be an incredibly high earner and he's still got money put aside for being a mortgage, and he's going to easily pay this off in the next, the loan off in the next 10, 15 years, then yes, because this is above inflation interest rates, he is probably best clearing the loan now. If that is uncertain, and especially if he's going to want a house or other things, even though the interest rate is higher, I would probably still be minded that the terms being better in an uncertain future, he may be better off to keep the money aside to get

• 41:13Martin Lewis?

  himself a property and just cope with the interest rate as it is, and pays 9% above 28 grand.

• 41:20Speaker 03

  Isn't it also possible if you pay it off, then God forbid things go badly for you in somewhere, you might have ended up paying off a loan, which in the end, you wouldn't have had to pay off at all.

• 41:31Martin Lewis?

  Absolutely, and the rules are very clear. If you make a voluntary overpayment of the student loan, you cannot have that money back. If you accidentally overpay, and there are four different ways you can overpay, people can go and look online for how to reclaim overpaid student loans when it's done accidentally, and there are millions owed money on that, by the way, then you can get the money back. But if you voluntarily do it, you can't. So it is a one-time decision, and you're absolutely right. Heaven forbid, he pays this off now, and then has, an accident has happened to the girl who spoke to me, and he was going to overpay her loan in panic.

• 42:05Speaker 03

  And he could do with that money.

• 42:07Martin Lewis?

  Right, and you could do with that money, you can never get it back, which is why I'm always, you hear that, I'm always, even when it all adds up that you probably should be paying it, if finance is limited, again, unless someone's ridiculously wealthy, if finance is limited, I always err on the side of not paying it back. Right, not overpaying. We're always talking overpaying. Of course you should pay what you're legally obliged to pay. But not paying it back.

• 42:30Speaker 03

  Okay, let's bring in Wilf from Lytham St Dan's. Wilf, what's your question? Thanks for joining us.

• 42:37Speaker 05

  Hello Adrian, hello Martin. Yeah, compared to everybody else, I've probably got a really left-of-field question because up until two or three weeks ago, my son wasn't going to go to university. He's sort of struggled at school, he's not academic, he's got ADHD and dyslexia. So we'd never planned that my son, who is now in a lecture, would go to university until he took himself off to an open day and said, "Oh, Mum and Dad, I'm going to go to uni." And he's in and he's successful, so...

• 43:03Martin Lewis?

  Oh, well done. Good for him. What's his name?

• 43:06Speaker 05

  I know, he's amazing. He's Sam. Sam and he is...

• 43:08Martin Lewis?

  What's he studying?

• 43:09Speaker 05

  We're so proud of him. He's studying media. He's studying media, did media at college after not doing very well at school. I mean, the SEN system and everything else really let him down. Another subject for a different day. But he's done this for himself. He's at uni and he's going to be living at home. Now normally...

• 43:26Martin Lewis?

  I can hear the tone in your voice. I've just teared up listening to you. Well done, Sam. You've made your dad so proud. I can hear it.

• 43:33Speaker 05

  Well, we have. And, oh, thank God. The thing is here, we normally, Mum and I, would be OCD level of planning. We've got a student loan, which happened remarkably quickly. I was shocked because it was literally days. So he's there, that's paid off. But what else should I do? I mean, I'm thinking university for me many years ago. Is there anything else I need to consider? He's living at home, so you don't need halls. But what else do I do, Martin?

• 44:00Martin Lewis?

  Okay, well, that helps. But let's just go and actually, I'm going to use this to go into my fourth point, which is is the one that many, many people miss and is another one of those big misunderstandings. So hopefully you've conceptually understood now how student finance works. And I would encourage you to, once this comes out on a podcast and to all parents listening to this, listen to this with your young person and go through this. And that includes 16, 17-year-olds, 15-year-olds who want to go to university. This is, have a listen and go through this and stop and pause. And you can slow me down and play me on half-speed. If I've gone too quick. Right. The big thing that isn't talked about enough is there is an implied amount most

• 44:42Martin Lewis?

  parents are meant to contribute towards their child's living costs. Now, funnily enough, all the political stuff that goes on out there is always about tuition fees and the student loan. They are not an issue for students. They are an issue for university leavers and graduates because you repay them, as I said, in the April after you leave university. The biggest practical issue for students is what do I live off? Now, you get a living loan. The technical term is a maintenance loan, I'm going to recur to that. I'm doing England, I'm going to come to the other systems in a minute, to Scotland Wells, Northern Ireland, totally different in there. But let's start with England and get the premise on England because that's the biggest one. Now, the living loan that you get is means tested based on what's called family residual

• 45:27Martin Lewis?

  income, which is total family income of that, this is for under 25s. Total family income minus pension contributions, which is a small amount and a small allocation for the other dependent children. Here's what happens. This is the shocking bit and is absolutely outrageous, as well as the fact that those living loans have not gone up with inflation, so they have been cut in real terms quite substantially over the last decade. The amount that your child starts to lose a living loan is based on family residual income at just £25,000. That's where it starts. That has not changed since 2006. We've had 64% inflation at that point, 2008. And not only that, that means that's now minimum wage, one person's minimum wage, and this is family income.

• 46:12Martin Lewis?

  So unless you have virtually no income, your child will not get the full loan. By the time it gets to £65,000, your child is on the minimum loan. Now, the loans, the full loan, is currently, for starters, this year, £8,877 living at home, that's you, £10,544 living away from home, £13,762 living away from home in London. So whatever is the gap... Your son will get the loan, but it's implied, because it's basically based on parental income for 18-year-olds, that you're meant to fill the gap, but they don't tell you that. So what I get is masses of complaints saying, "The loan's nowhere near big enough." Well, of course it's not big enough because you're not getting the full loan. And even

• 46:56Martin Lewis?

  the full loan, because of the degradation of inflation, isn't big enough for many people. So the first thing I'd say is, there are parental, can't tell you where, you'll work out where, there are parental contribution calculators out there that somebody, people who care about this a lot, have designed, which you put your details in and it'll tell you what the gap is. So the first point is, and you weren't saving for this, and I'd be saving, if you've got a 10-year-old now, I'd start, I'd go and do the cheque now and start saving, is you need to make up that gap. And you need to put your child, if you can afford it, and not everybody can, and I understand that, I'm not trying to guilt anyone, to give them at least what the full loan would be. So whatever living loan they get, because they're going to need those costs, and you need to talk to them about

• 47:39Martin Lewis?

  budgeting. So I'll give you my, here's my question, are you ready?

• 47:42Speaker 05

  Hmm.

• 47:43Martin Lewis?

  You're a working person, you shouldn't spend more than you.

• 47:46Speaker 05

  Um.

• 47:47Martin Lewis?

  That was easy. Your son is going to university, he shouldn't spend more than...

• 47:53Speaker 05

  Well, more than he's, more than he's budgeted on his loan, we've already started this conversation, because of course he's going to get a big lump of money to him.

• 48:00Martin Lewis?

  Yeah.

• 48:01Speaker 05

  And we've, we've already said, well, look, don't just burn, burn the money because it's there. And know worryingly how easy it's likely to be, I mean, we'll support him.

• 48:11Martin Lewis?

  I'm going to be a bit more, bit more tight on you. I, I would say, it's, it's the money he gets from the living loan, the money he gets from you.

• 48:18Speaker 05

  Yeah.

• 48:19Martin Lewis?

  Any grant or bursary he may get, and it's worth talking to the Student Hardship Fund, he may apply, especially if he's got special, special educational needs, for some extra funding to help with that. I don't know your finances, so I'm not going to get involved in that. It is not any debt, it is not the 0% overdraft he's getting on his new student bank account. Santander's my top pick, by the way, people always ask that one as we're going on.

• 48:39Speaker 05

  Thank you.

• 48:40Martin Lewis?

  Because it gives you the, the free four-year rail card and the, the interest free overdraft is pretty good. So, so that's the conversation that you need to have with him. But yeah, it's worth... You might want to give him more than the than the full loan. But for every parent out there, I once had a parent who came to me. A student who came to me and said, I'm going to have to drop out of university. I haven't got enough funds and my parents are saying you're on your own. You should be doing this. And he was on the minimum loan. And I actually spoke, I was doing a roadshow for my tele show. I said, get your parents on the phone. And I explained to them the parental contribution system. They said, no one told us. We thought it was. And I said, your child's on the minimum loan because of your income. And they said, oh, well, we'll give him the funds then. We didn't, we thought this was about his life experience. They weren't being tight. They were trying to encourage him to live on his own.

• 49:25Martin Lewis?

  And it's outrageous that we don't tell people that. I've gone on too long.

• 49:28Speaker 03

  Wilf, thanks very much for your call. Best of luck to you. Sam, was it?

• 49:32Speaker 05

  Thank you very much, Sam. Thank you very much.

• 49:37Martin Lewis?

  Well, we've just finished the main pod section with Adrian. I hope you managed to understand it all. It's a complicated subject that I'm obviously quite passionate about. Just want to say, we didn't get a chance to say to him on air. Thank you so much to Sanjay. I thought it was brilliant just having him there to be able to talk through those issues with. And Matt, we've got more questions to go on student finance. So let's go straight into it.

• 49:58Speaker 06

  Yes, we do, Martin. Richard is in England. How much should you aim to save for your children to support them for the whole year? As the cost probably varies between the north of the country and the south. What's the ideal amount for each part? Could this working out also include if you're a higher tax person or a low tax person? As I presume the grants you get from the government is means tested on the amount a household earns.

• 50:21Martin Lewis?

  As I've explained, yes, it is means tested on the amount a household earns, but it isn't related to the tax plans. It's totally separate. It is a linear scale from around £25,000 where you start to lose the loan to around £65,000. So that does depend whether they're going to be living at home or living away from home or living in London. So it's why I'm rounding it rather than saying exactly. And you, you lose it in a, in a direct straight line. So the more you earn above £25,000, the lower the loan. Till you're getting around half the full loan at £65,000. Now, how much is difficult? It doesn't just depend on where in the nation. It depends on the university and the cost of halls and all the different expenses. If you're talking about for next year, so let's just focus on the English

• 51:06Martin Lewis?

  maintenance loan system for a moment. The maximum loan, if you're living at home with parents, is eight thousand nine hundred pounds ish. The minimum loan is three thousand nine hundred pounds. So that's a five thousand pounds difference, a five thousand pounds potential parental contribution. If they're living away from home, the maximum loan is ten and a half grand, the minimum loan is six thousand eight hundred pounds. So again, that's just under around five grand. If they're living away from home with parents in London, then the maximum loan is bigger and the minimum loan is slightly smaller. So you could be talking an eight or nine thousand pound differential going on each year there. So it really depends where they're going to go.

• 51:48Martin Lewis?

  I would say as a rough rule of thumb, based on the current financing, if you earn over sixty five thousand pounds total family income, so if both parents are working, that's total income, I'd want to be putting away six to seven thousand pounds per year minimum. And that just gets them up to the sort of subsistence standard which the full loan is. Though in reality, because that's been decimated by inflation over the years, you'd probably want even more than that. So I'd be talking six, six, seven thousand pounds per year. So a three-year course, you're talking around twenty thousand pounds to be saving.

• 52:20Speaker 06

  And following on from that.

• 52:21Martin Lewis?

  A lot, isn't it?

• 52:22Speaker 06

  It is a lot. It's a lot of money. I was just thinking that. And following on, Simon is asking if there's a maximum that a parent or grandparent can give a child to help fund like accommodation fees, living costs during university. And also, is there any tax implications on that?

• 52:36Martin Lewis?

  There's absolutely no maximum whatsoever. There's no maximum amount. You can give anybody. You can give your money away as you like, without anybody restraining it or doing it any way. And the recipient, if it's a pure gift and not being done for work or recompense in some way, and is not some form of disguised employment, which it certainly isn't for your child, should not be taxable. The one exception to that is inheritance tax. If you give money away and were to die within seven years, then the money that you've given away could form part of your estate. And therefore, if you're over the amount in which you would pay inheritance tax, you may pay inheritance tax on it. Frankly, I think in this type of conversation, it's not really an issue. It might be for the grandparents. I mean, I hope the parents will live that type of time. But but anyway, you're allowed to give money away each year.

• 53:21Martin Lewis?

  Oh, I'm trying to remember. I think it's up to £3,000. I need to double check. Plus, if you're giving money away from income each year, so and it's a provable regular amount that you're giving from income, which it would be if you were trying to give to your child or your grandchild at university, then money from your income would not count towards inheritance tax. So I think, yes, I mean, if I'm going technical, there's inheritance tax. Otherwise, give them what you like.

• 53:42Speaker 06

  Quite a lot of people, Martin, have got in touch. You're talking about this system now, and you're explaining it. What happens if this changes?

• 53:51Martin Lewis?

  Okay. So let's remember, and yes, you're right, we're talking about a system lasting over 40 years on current Plan Five, English starters. Student loan terms, in my view, should be locked into law so that only an act of Parliament can negatively change them once you've started uni, but I need to be plain, they're not. And a few years ago, we saw a very bad change imposed, though thankfully, after a lot of campaigning and I threatened judicial review against the government, it was overturned and they decided not to have that fight. Now, I need to say technically, I've said this before on the pod, Parliament is omni competent. Parliament can make any law change that it wants to do. Parliament can make a law now that says, I always use this example because it makes you smile, that the United States is part of the United Kingdom.

• 54:35Martin Lewis?

  And in British law, it would be, even though in practice, of course, it would be nonsense. So anything could change, and even if it were locked into an act of Parliament, they could always change the act of Parliament. Most of the changes that we have had are about repayment thresholds. So where you start repaying the loan. And I would actually, and I've tried to urge the government to communicate clearly that they should say, some things are fixed and some things are variable. So for example, the 40 years is fixed. They can't make that worse, but the repayment thresholds can change and they're variable, but they don't communicate it the way I would like them to. What I would say, though, and to try and just assuage some of the fear, because all my assessment is based on the system being as it is right now, or roughly as it is right now.

• 55:18Martin Lewis?

  In the past, all the major changes we've seen have been for new starters. So as you've heard me talking about throughout the pod, you know, there was a big change in in 2023, but that change only applied for 2023 starters in England and beyond. So if you started uni in 2022, in your first year and your second year was in 2023, you stayed on the 2022 system, you didn't move, you were still on plan two, you didn't move to plan five. And that's generally how it's worked. Now, there is a big change coming in January 27. The government plans to introduce a new lifelong learning entitlement, which effectively means that the type of student finance that you get for a full time undergraduate course will be available for single modules too.

• 56:02Martin Lewis?

  And you'll have an amount of finance you could get until you're aged 60. As far as we know, that's unlikely in practice to change the terms for students who are starting university now. So, so yes, look, truth is, anything could change. The most likely changes would be to repayment thresholds and potentially to interest rates. But it would only generally, we've ever seen it be lower interest rates where they put in a market adjustment factor if the interest rates for some reason have gone too high. So the vast likelihood is the system will work for you in the same way as the system that you start on. I can't give you a guarantee on it, but and I would certainly be campaigning if they changed it in a negative way that was unexpected, other than the repayment thresholds.

• 56:46Martin Lewis?

  But I think that's what's likely to happen.

• 56:49Speaker 06

  Lisa, my son is doing a year in industry. He will be able to save most of his wages living at home. He plans to pay cash for his final year's tuition and not take the loan. Is this the best course of action?

• 57:01Martin Lewis?

  Well, I think I discussed that in the main programme. I, I would think he would be far better to have that cash saved up for other future uses, which are, are worse uses of the money, you know. A student loan is the least worst type of debt you're ever going to borrow, especially under the current system where the interest rate has come down. So I would be keeping that money aside for future financial needs, such as if he might need a car or he might need a deposit on a mortgage, unless he's got so much funds that that doesn't matter. I think, I think we covered that one earlier, Matt.

• 57:29Speaker 06

  Yeah, I think so, but good to ask you just to, just in case.

• 57:32Martin Lewis?

  Yeah.

• 57:33Speaker 06

  Lindsay, in England, if you only complete a partial year, so you've incurred loan costs for the course and a partial maintenance loan, is it best to try and pay this back?

• 57:43Martin Lewis?

  I understand why you're asking that, and I think some of this does depend which plan you are on. I don't know whether that is something you have done recently, so you'd be on Plan Five, you're a post 2023 starter, or you're on Plan Two, because you started before that time. Let's just go through it. The reason the rationale is different is because you've borrowed a much smaller amount than somebody who's gone for a full three year course, then you are far more likely to pay it off in full before it wipes. Now, under the current system in England, where the interest rate is based at the rate of inflation, I would probably still go on the argument that I would just let it be paid off naturally, because you might need to borrow it back for other purposes in the

• 58:27Martin Lewis?

  future, and you can't get that money back. I mean, if it's a trivial amount of money, then just overpay it. If you were on the Plan Two system, because unlike most university leavers, where there is a real manifest risk, they will not be paying it in full in the 30 years, therefore, they will not be paying all the interest that has been added to it, that you, because the borrowing is so small, will almost certainly be paying it off in full, and the interest, because you'll clear it in well under 30 years, then because on that Plan Two loan, the interest rate is above inflation, for anyone earning over about, what, 25, 26 grand, I can't remember the exact figure on the old Plan Two loans,

• 59:07Martin Lewis?

  then, yes, it is more likely to be beneficial for you to be paying it off on the Plan Two loan than it is on the Plan Five loan. I'm so sorry for the complexity. Haven't even talked about Plan One, Plan Three, and Plan Four. Plan One is Northern Ireland, Plan Three is England Postgrad, Plan Four is Scottish Loans. I mean, the student loan system is diverse, shall we say.

• 59:27Speaker 06

  I've got an interesting one. Fleur, Fleur? Say that again. Fleur?

• 59:34Martin Lewis?

  I've decided she's French.

• 59:35Speaker 06

  It's because I'm studying French, so I'm having to do my French accent, so I'm reading things.

• 59:42Martin Lewis?

  Ah, très bon, Matt.

• 59:43Speaker 06

  I'm not very good. It's only my second lesson. Anyway, Fleur. She's a single mum of twins that are both starting uni next year. Do student finance consider siblings at uni the same when making decisions?

• 59:56Martin Lewis?

  So get prepared to go, what? When your twins go to university, the finance is exactly the same, they get the same tuition fee loan, the student loan. What changes, because they're twins, is the student living loan. Now, the living loan, as I explained before, is based on an assessment of family residual income, which is basically total family income. These are assuming they're under 25 and they're not independent students, which they're not by the nature of your question. Total family income minus pension contributions, and there is a slight change if you have other dependent children, which would be another child under 18 or another child at university. So what

• 1:00:37Martin Lewis?

  happens is, because you have twins, your income is deemed to be £1,130 lower than it would have been were it just one child going to university because you have another dependent child. So if you earn £35,000 a year, then they will take £1,130 off that, so just under £34,000. That would be deemed to be your income that would dictate what loan you're getting. So basically, it makes only a trivial amount of difference. So if you have lots of kids going to university, triplets, and another one who's 14 months younger, then, you know, or if they're still at school because they count as dependent children too, it hardly makes any difference. You're going to have to fund the cost for

• 1:01:19Martin Lewis?

  all of them. And probably a good way to end everything that we have been talking about here is I have deep frustrations with the student loan system. I have met over the years probably six or seven university ministers. Some of them didn't really understand student finance, some did, some were honest, they didn't understand student finance, others, it was just blooming obvious in the conversations. All of them, of different persuasions, have tended to say to me, it's such a big political hot potato to change this, we're not brave enough to do it. And I will give you one example that really angers me about the way that the system works. And it comes with parents who are divorced. So I met a girl,

• 1:02:02Martin Lewis?

  this is a few years back, but it would still happen now. I met a girl who was in a second year student, and she came to me for help at one of my TV roadshows. And her situation was this, she had got the full living loan in her first year because she had a single mum, and her single mum was the primary parent, and that's the one she lived with. So that's the one that the finances were assessed upon, and she got the full loan. For her second year, her mum had met someone, and her mum had moved in with a new partner who she'd known for six months and had been living with for two months. Because of the way the household income assessment works...

• 1:02:36Martin Lewis?

  The new partner's income was then assessed as well as the mum's income, not just for the year he had moved in, but because it's a retrospective assessment, even though she had not met the partner in the year before, his income was still assessed for her student loan assessment. And she went from being eligible for the full loan to being eligible for the minimum loan. It was probably a gap back then of around £5,000. So suddenly, even though she already was working to be able to afford to go to university, she had a £5,000 a year gap in the living loan. And is she going to go and ask her mum's new partner, can you give me £5,000 a year to go to university?

• 1:03:20Martin Lewis?

  Clearly she's not, clearly he isn't going to give it. That doesn't make him a bad person. Nobody would do that, but that's the way the system worked. And she had to drop out of the university that she was at to go to another one, where she could live at home and it was more affordable to her. And she had to change her course and that could have changed her entire life plans. What a manifest unfairness due to a broken system. And the system is so broken, especially on the living loan contraption. I find it deeply depressing, which is why I get very passionate when doing a programme like this. Because the system's broken and it's misunderstood. I can't fix the system, I've been campaigning for years, but I can do my best to try and explain it.

• 1:04:05Martin Lewis?

  And I hope I've managed to do a little bit of that today.

• 1:04:10Martin Lewis?

  That's it for this week. Please do tell friends who may have children going to university or students about to start university or people who want their kids to go to university in a few years' time, that this is really worth a listen to. Don't listen to the political spittle about student finance. You need to know the actual facts. And generally, just tell everyone you've been listening to the Martin Lewis podcast. And why not subscribe to make your pockets pleased with you? We tend to put out a new episode every Thursday and now Mondays too, in the form of our new Question Time podcast, where you ask me absolutely anything and everything. So I hope you've enjoyed it. And if you haven't, well, I'm done frankly. I'm just not more sure what more I can do. What do you want from me people?

• 1:05:10Speaker 07

  Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing [email protected]. The offers and rates mentioned in the podcast are correct at the time of recording, however, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

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