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 Can you afford to go back to college? CDLs: The basics Choosing a CDL Boosting your pocket Size of the Savings Related Articles/Discussion |
 Make sure you double check the maths with a CDL. |
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Before you hit the books you must do some basic maths. If you're going to rack up debts to fund your studies, weigh up the cost against your future earnings. While postgraduate training in medicine or law might be a nice little earner, two years musing Medieval poetry mightn't be so lucrative.
Don't rule out the idea of getting a bursary; several charities and foundations offer these and many go unclaimed each year. Check with the six government funded Research Councils and the Arts and Humanities Research Board – if you want to study something undersubscribed such as physics you could strike it lucky.
And why not ask your employer to sponsor you? Especially if the course is related to your job.
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Your next port of call is a Career Development Loan (CDL). Here, the Department for Education and Skills foots the interest on your loan for the duration of your course (and one month after it finishes). Quit the course and you have a one month break before being charged interest.
Your course can be a full-time, part-time or distance course, lasting up to two years. It can also cover an additional year of work experience, if this is part of it, though if you're eligible for a normal student loan or an employer training award you can't get a CDL.
How much you can borrow
You can borrow between £300 and £8,000 and you agree with the bank how long you'll take to pay it back. The amount you're entitled to is 80% of course fees, expenses including childcare, and living costs for full time students. If you've been unemployed for at least three months you can apply for 100% of your course fees.
Other study loans: beware impostors!
The line they use to draw you in is “no repayments to make while you study”. But don't be sucked in; unlike a CDL where there's no interest charged while you study, here you're charged interest, but just don't make repayments, which means the debt grows and is unpaid during that time.
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Not all career development loans make the grade. They are run by three banks and not the government, so rates (after the interest holiday) can be steep and you may be rejected if you have a poor credit history. You can only apply to one bank at a time, but if you're turned down you can target another.
| £5,000 CDL, 1 year course, then repaying over 3 years (1) | |||
| Bank |
Typical APR |
Total repayable |
Maximum term |
| RBS |
20% (2) |
£6,540 |
5 years |
| Co-op and Barclays |
12.9% |
£5,990 |
5 years |
| (1) one month of the three years is a grace period (2) My estimation of the APR, not theirs, calculated on the interest charge only after the government's 0% period ends - see my note below | |||
Don't trust the advertised APRs
In actual fact its CDL is substantially more expensive than the others, I estimate its true APR to be nearer 20% on a like for like basis (and it's that figure in the table above, compared to 12.9% for the others).
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Even if you don't need all the cash, get the biggest career development loan possible anyway. Take out the loan, plonk it in a high interest savings account (see ‘Where to Start with Savings') – and you could sneakily make money from study.
Then repay as much you can (or all of it) at the end of your study, before any interest is charged, and move whatever debt remains to a cheaper personal loan. This way while you're on the course you'll be earning interest on the cash you've borrowed for free - on an £8,000 loan, over two years, you can reap £820 profit from the interest, a nice addition to your educational finances.
Borrow £5,000 with a RBS career development loan, repay it over three years, and it would cost £1,540 in interest. Take out a CDL, pay it off with a Moneyback* loan as soon as the 0% period runs out and it would cost just £440. That's £1,100 cheaper than taking out and sticking with the RBS loan.
| Study the savings: £5,000 loan, 2 year course, then repaying over 3 years (1) | ||||
| |
Interest rate |
Total repayment |
Interest cost |
Saving |
| RBS CDL |
20% |
£6,540 |
£1,540 |
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| Co-op or Barclays CDL |
12.9% |
£5,990 |
£990 |
£550 |
| CDL then Moneyback loan (2) |
5.7% |
£5,440 |
£440 |
£1,100 |
| (1) one month of the three years is a grace period (2) normal 3 year unsecured personal loan borrowing £5,000 | ||||
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