This article on the BBC News site (Students save for business dream, 12/6/09) looks at some of the students who have used their Student Loan money to fund a business venture.
It’s worth a read whether or not you agree with my thinking (see this post) that using student loans for ‘investment’ purposes (which starting a business is, really) is against the spirit if not the letter of the student loans system, as they say.
The article doesn’t outright suggest that students should necessarily do this or whether it’s “right” in some sense.. the students featured there do seem to have taken out the maximum loans they could (the loans are means tested, so what this maximum is can depend on the household income etc) even if they were not needed for the actual day to day expenses of being a student.
Some of the striking points from this article are that:
While student loans are a vital ingredient in getting many students through university, there are no rules on what the money is actually used for.
For those in the privileged position of not needing all the funds – perhaps because they already have savings, backing from their families or are just particularly careful spenders – the loan can prove a vital resource for entrepreneurial students to start up their own businesses.
Television programmes such as the BBC’s Dragons’ Den have inspired young people to go into business says Nigel Culkin, head of Enterprise and Entrepreneurial Development at the University of Hertfordshire – which runs a business ideas challenge called Flare.
“Ten years ago, enterprising students used their loans to make money on the stock market. That option is no longer as appealing and entrepreneurial students are now more likely to invest in themselves, by using their loans to start a business.”
The National Union of Students declined to comment on students who take advantage of the loans system to try and make money.
Although interest rates on savings are low now the BBC are right that the interest payable on a student loan is lower than you are likely to find on a commercial loan so if wanting to spend the money (e.g. on starting a business) then it can still be viable. Especially as the loans do not need to be paid back until a certain threshold of income is reached – which I could see people getting around somehow by actually being “employed” by Jane Doe Consulting Ltd and taking a ‘nominal’ salary rather than the £15000 or whatever the miniumum is now for SLC repayment.
This sort of thing makes me quite angry to read about though, as it means some people are getting an unfair advantage at the expense of the taxpayer… If people have so much spare money from the loan that they can ‘invest’ it in a business rather than spending it on their actual living expenses then I would suggest the loans should be reduced considerably or scrapped and let students go through their studies on the same terms as people who are actually contributing rather than taking from the economy!