Facing up to Student Debt - Advice on SLs needed please

moneysavinmonkey · 21 June 2006 at 12:09PM

Hi,

Haven't faced up to fact that I owe thousands of pounds in Student Loans (eek typing that now is kinda scary). Probably doesn't seem that much to many of you and at least it is not a some scary interest rate ( I think- the rate doesn't go up once your are finished being a student does it?).

It didn't bother me at all when I was a student, but now that I am realising I have to pay it back it is really worrying me and stressing me out as I have never had debt before.

Haven't yet been able to properly face up to it yet, so hoping with a little support I will get myself more organised. Have a few questions:

How do you start paying off your loan, I don't even know how much mine is!
Do you have to tell them that you now have a job or do they know automatically?
Also I know that they will take money out of my salary but is there a way to pay them extra to clear the total faster? thanks.

Been moneysaving for a few weeks now and starting to put extra aside each week already, so hopefully once I get organised having that total to chip away at will motivate me even more.

Perhaps will post SOA and hopefully you can advise where I can make more savings.

Thanks in advance, just need a little advice and prompting to start me on my journey to being Debt-free.

jitsuguy · 21 June 2006 at 12:29PM

Hi moneysavinmonkey,

Don't worry about a Student Loan. I am assuming the loan is with the student loans company. I believe the rate is at 3.2%, so if I were you I wouldn't think about making overpayments, just chuck the extra money you have into a ISA at around 5% (you can find higher if you look around - there is an article on this website somewhere).

Student loans don't show up on credit checks so don't harm you. The only time that a bank might take them into consideration is when you are applying for a mortgage as they need to work out your excess income.

I believe when the company you work sort out your tax rating they also should sort out your student loan (you might need to tell the payroll section that you have a student loan as well) and a deduction should be automatically taken out each week/month at the same time your tax is. However is you are self-emplyied you will need to tell the student loans company and sort out a payment agreement with them (just filling in forms i think).

Bare in mind if you are not earning at least £15,000 you will not need to pay anything towards your student loan.

I hope this covers all your questions, if not don't hesitate to ask more.

Jitsuguy

jitsuguy · 21 June 2006 at 12:31PM

Just looked back at what i've written and I think I need to work on my english!!!

CLAPTON · 21 June 2006 at 12:32PM

when did you graduate and what is your salary?

morg_monster · 21 June 2006 at 12:51PM

Seriously - don't worry too much about your Student loan. As jitsuguy says it has such a low interest rate you can just pay the required minimum payments and save any extra cash to a higher interest savings account.

If you've just finished Uni (then well done!) The SLC will probably contact you at some point in the next year, asking you to tell them if there is any reason why you should NOT be paying money back to them yet. For example, any reason why you wouldn't appear on the inland revenues records. EG - you are still in full time education (maybe doing a Masters), or you are out of the country, or you are doing volunteer work, etcetera. They will also inform you that if none of these apply, you need to start paying £X a month back.

If by the time you get this letter (it can take ages) you're already in a paying job and earning more than £15k, the IR may have already caught up and started deducting the amount automatically from your pay. If this is the case just reply to the SLC's letter with a photocopy of your payslips showing the deduction, and that'll be fine. (This is what happened to me - after I started work in september the first payments went out of my pay in December and SLC wrote to me in february). At the moment my deduction is something like £56 from a net monthly pay of about £1300. Not masses.

Again, if you're earning under the £15k threshold you let the SLC know this.

Don't worry if you don't hear from them yet - you don't have to 'back pay' if the SLC don't get in touch with you for a while (though make sure they have up to date contact details for you, obviously). I know some people who have been in well paying jobs for 2 years plus before the SLC got round to them!

This is the best value loan you'll ever get. The amount you pay back each month is 9% of your income over 15k. So if you earn £25k, you pay 9% of 1000 = £90 [wrong - sorry - see below post!]. Work out your amounts if you haven't already, put these amounts into an ISA every month as soon as you're paid, and kick back until deductions start being taken from your paycheque or you get contacted by the SLC. Then you won't miss the money they take!

PS - it is never worth overpaying as long as you can get a savings account with an interest rate higher than you're paying on the loan. This should always be possible as the purpose of the SL is NOT to make a profit for anyone.

morg_monster · 21 June 2006 at 12:53PM

Sorry my calculation should be: if you earn £25,000, then you pay 9% of £10,000, which is £900, spread equally over 12 months is 900/12 = £75 a month.

lynzpower · 21 June 2006 at 12:59PM

I dont get why people say dont worry about your student loans.

I got my statements through the other day and It was fairly clear on the statements that the interest is 35 a month every month when it wasnt being paid. Obviously now, as Im at the end of it almost, the interest is pretty mininature. But for 2 years I didnt pay any of it off 35 x 12 =420 a year.

I just DO NOT understand at all why people dont worry about it

dinkylou · 21 June 2006 at 1:18PM

lynzpower wrote:

I dont get why people say dont worry about your student loans.

I got my statements through the other day and It was fairly clear on the statements that the interest is 35 a month every month when it wasnt being paid. Obviously now, as Im at the end of it almost, the interest is pretty mininature. But for 2 years I didnt pay any of it off 35 x 12 =420 a year.

I just DO NOT understand at all why people dont worry about it

My thoughts exactly Lynz.

As far as I am concerned its this 'ignore it, it'll be fine' attitude that causes bad debts in the first place.

Yes, its a cheap loan at 3.2% (and this can change) but it is still a loan and needs to be paid back (the faster the better in my opinion)

For the people who say dont overpay, ok, I can understand why you say that as the interest is higher when you put the same amount in an ISA. But and there is a big BUT here, if you dont use that money at some point to pay it off and end up using it for something else, then you're not making money, you're losing it.

It is a cheap loan and it doesnt show up on your credit record or for mortgage applications, but in my opinion, if you are in the fortunate position of being debt free, work to getting rid of it asap.

After all, who wants a loan (no matter how cheap) hanging over them for another 10-15 years? Not me for one.

elisebutt65 · 21 June 2006 at 1:21PM

lynzpower wrote:

I dont get why people say dont worry about your student loans.

I got my statements through the other day and It was fairly clear on the statements that the interest is 35 a month every month when it wasnt being paid. Obviously now, as Im at the end of it almost, the interest is pretty mininature. But for 2 years I didnt pay any of it off 35 x 12 =420 a year.

I just DO NOT understand at all why people dont worry about it

I don't worry - cos then i'd never sleep;) I'm on my 4th year and going to do a PGCE when i graduate so my loan will be humoungous!!!! The way I see it - there is now way that I can ever pay it all back. I'll be nearly 45 when I finish studying so there will only be 20 years of payments they can take off me.

I rent from the council and have no intention of ever moving or getting a mortgage so no worries there. I have 2 cc and a debit card with no need to get any more. Most of the time cc's are paid up anyway and I save for things I need.

The loan comes out of pre-tax pay after earning over £15,000, so it's not like I'll miss it - just take it inot account when working out earnings. I'm a single mum and full time student and if I can survive on single parent grant, partial HB, loan and CTC, then I can survive on whatever salary I get. If it's low then WTC will top it up to pay for childcare and I won't pay loan anyway. Kids won't be around forever ether so when they go my salary will be all mine and just how much does 1 person need to live on??? My bf and I are happier living apart - we'd claustrophobe (is that a word?) each other too much- lol.

Just look on it as another deduction from earnings like Tax and NI. You'll sleep better:p

lynzpower · 21 June 2006 at 1:44PM

Some of us dont have that luxury of having it taken at source- i have to pay tax on mine

gutted!!!

never mind only 7 more payments I tihnk now

jitsuguy · 21 June 2006 at 2:00PM

The main reason for not worrying about it, is that it doesn't harm you when it comes to your other finances (as long as your on top of them). It doesn't get used in credit checks and the repayments are not that large and you can make more money elsewhere due to the interest rate. Plus at 65 it is written off!

So why worry?

Jitsuguy

Facing up to Student Debt - Advice on SLs needed please

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