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The better class of student-loan investor

So you thought student loans were to help poor students through university? Wrong. They're a way to develop the financial acumen of young members of the middle class, writes Frances Rafferty.

Some Cambridge University students have taken to "turning round" their loans, investing the money in a building society or buying shares and thus earning a higher rate of interest than the 2.7 per cent they will have to repay on the loan. Some investin property - supported, meanwhile, by Mummy and Daddy.

"A lot of students don't need any loans at all because they've inherited wealth," said one Cambridge student. "One of my friends has invested the money in a building society on the advice of her father." Others used loans for holidays or extra beer money, she said. Her less well-off friends often did not take out loans because they would never be able to pay them back, she added.

A student at Magdalene College said a friend with no money had taken out a loan and splashed it all on a weekend in New York.

Student loans are not means-tested so the Student Loans Company does not know the financial background of applicants. "Once we pay the money into the student's bank account, they're free to do as they wish," a spokeswoman said.

Sarah Bonnett, president of the Cambridge University Students Union, said: "This is why we're against the loans system as it stands. The only criterion is that you're a home student on a first degree course. It's very easy - you take out Pounds 1,500 and buy a few shares."

The average value of loans in 1996-97 was Pounds 1,490.

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