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    • MSE Rosie
    • By MSE Rosie 14th Jul 17, 6:16 PM
    • 63Posts
    • 29Thanks
    MSE Rosie
    Guide discussion: Should I repay my post-2012 student loan?
    • #1
    • 14th Jul 17, 6:16 PM
    Guide discussion: Should I repay my post-2012 student loan? 14th Jul 17 at 6:16 PM
    This is the discussion area for the

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    • koru
    • By koru 9th Sep 17, 11:37 AM
    • 1,276 Posts
    • 644 Thanks
    Have I made a mistake?

    I am going into my final year of study and only took a loan out on my first year of study so at the moment my debt is £9,000 + interest. As I have paid off a year of study already, am I better off paying all of my student fee's off or taking a loan for my final year?
    Originally posted by Billy1996
    So, you have £9k that you could use to cover your year 3 fees, but you want to know if it is better to hang on to that money and instead take a further £9k student loan, leaving you with a £18k loan?

    As others have said, it depends what you would otherwise do with the £9k and what you will earn over the 30 years after you graduate. You can get an idea of the latter from the following Economist data, which shows the average salary, 5 years after graduation, for most subjects:

    So, you can find the average salary, 5 years after graduating, for your subject and university. You should have a fair idea whether you are heading for a first or a third, which will influence whether you earn higher or lower than the average for your class.

    Most graduates will be on £30k after 5 years, so that is £9k above the £21k threshold, which means they will be paying 9% x £9k= £810 per year. If their salary continues increasing, they will be paying off more. I would guess most graduates will have paid off a £9k or £18k loan while they are in their 30s.

    Unless you are studying, say, creative arts at a uni that has unusually low selection criteria (or you expect not to be in work most of the 30 years), I'd say you are likely to pay off a £9k or £18k loan in full. This means you are unlikely to benefit from any of the loan being written off.

    Even then, you might be better taking the loan, if this means you can use the money for something that earns you higher interest than the SLC interest. That includes reducing other loans (such as overdrafts, credit cards, mortgages), which saves you interest at a higher rate than the SLC interest.
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