When you leave university the realisation of how much you owe in student loans will hit you like a freight train. It is a very quick and brutal wake up call. At no point has this fear been more palpable than in recent weeks when the interest rate on student loans was raised to 6.1%. This caused uproar in the student community, who through little fault of their own, were lacking a lot of the facts that should have instantly calmed the situation. However, in typical corporate fashion, the student loans company didn’t little to stem the panic. Instead it was third parties like MoneySavingExpert who provided the facts needed to calm everyone down.
As with all matters financial, things are not always as they seem. Yes, the interest rate went up, but should students be panicking? In a word, no. Your student loan statement may be showing £1000’s in added interest. Yet when you analyse it, the real surprise is that for most graduates the interest is irrelevant. Ignore it, and it'll go away; and for some, the reality is student loans are interest-free. I recommend visiting MoneySavingExpert to read more on this, as they do a superb job of explaining it. So, that’s the first reason you shouldn’t be worrying.
The second reason is the fact that for any current students, student loans should never be seen through a haze of panic but instead looked at as an opportunity. Do you know how many businesses would kill for a loan like the student maintenance loan? Not only will it potentially be written off, but if you your earnings remain at a certain level you may never have to pay interest. Maintenance loans are roughly around £7,000 per year now. Most students will blow £500 of that in the first two weeks on Fresher’s weeks. Even the sensible ones will still go out and blow a load of money in those first two weeks will also make the remaining £6,500 work as hard as possible.
Most matched bettors start after Uni and all will look back at university and wish they’d started when, an essentially interest free, £7,000 was injected into their bank account. This is an opportunity more students need to be looking at. So, for the first time on this blog we are going to go into the numbers a little bit. Hopefully, some of our readers will have or know people who have kids going into University and can share this information with them now!
These numbers are based on you taking out the maximum Student loan available, which currently stands at £50,000.
Total loan per year broken down:
Tuition loan = £9,000
Maintenance Loan = £7,666
Loan per year = £16,666
Interest rate on that loan per year while studying = RPI which is currently 3%
Total Interest per year = £499.99
So, if your course is 3 years long, at the end of your degree you will have an effective debt (including interest) of:
This is a significant amount of money. However, if matched betting is used, even at minimal capacity it can drastically reduce the size of how much you owe (using your profit to immediately pay off as much as possible). Or you can use it as a financial cushion for other things (house, car, etc) and like most people, generally ignore the loan until it goes away.
So now, let’s run the numbers on matched betting as a student. Now I know, having not long left university, that students have a lot more free time than they’ll ever admit to. That is why my example will assume the upper bracket of earnings when it comes to the amount you can make with Heads&Heads. Time equals money, and that could not be truer of matched betting.
With the Maintenance loan to boost your start, we’d expect an average earning for a student putting in the time of around £1,200 per month. This takes into account the initial learning curve. By year three, profits should be closer to £1,500 per month.
After 12 months = £14,400
After 3 years = £43,200
So, by the time you leave university, having not risked any of your loan money. You’ll either be sitting on a £43,000 financial cushion that can be used for anything or you can instantly reduce your student loan down to £8,299. Which I think we can all agree is a lot less scary to think about.
So that, is reason number 2!
Either way, students of the UK from the year 2012 and onwards, you should not be worrying about that 6% interest rate!