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    • MSE Rosie
    • By MSE Rosie 14th Jul 17, 6:16 PM
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    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


    Click reply below to discuss. If you haven’t already, join the forum to reply.
Page 3
    • koru
    • By koru 9th Sep 17, 11:37 AM
    • 1,306 Posts
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    koru
    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:
    https://www.economist.com/blogs/graphicdetail/2017/08/graduate-earnings

    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.
    koru
    • ken roberts
    • By ken roberts 4th Feb 18, 1:17 PM
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    ken roberts
    I am not currently a student ( I graduated more than forty years ago) and I applaud Martin for his efforts to put this issue into perspective. It would be a great step forward officially to remove the concept of 'debt', with all its bad connotations of millstones round necks, ultimate personal bankruptcy and even the Marshalsea. If you must think in terms of debt, then try comparing it to the so-called ' Third World ', where countries borrowed money they struggled to pay back and were eventually in such dire straits that the lenders were forced to cancel the debt completely. With student finance you may feel you struggle to pay it back, but unlike ordinary debts like mortgages, car loans and the like, there is no life-long millstone and the system has a built-in guarantee that any liability to repay the sum outstanding disappears after thirty years. Wouldn't developing countries have loved a loan like that. What today's graduates have is a Personal Payment Plan and while Martin's description of a 'graduate contribution tax' is a bit clunky, it's accurate and is the best one available. I certainly haven't yet thought of a snappier title.
    Is it a good deal? Well, try applying the system to a house mortgage instead of a student loan. If you think you might currently be able to afford a £150,000 house, wouldn't you like to be able to go to the government , who would give you the money to buy the house and then say you need only repay a small percentage of what you earn above a low benchmark? What we'll do is add interest onto the sum outstanding, but after thirty years, whatever the total, it will be written off and you'll still own the house? An even better deal, you apply for a house costing £450,000 ( because it's just up the road and has a dedicated parking space) and the government still give you the money, still only want the same repayment as for the cheaper house and still write off the much-larger accumulated sum outstanding after thirty years!
    You can call such a mortgage comparison absurd, but that just illustrates why the Graduate Contribution Tax is different to a normal debt.
    The universities obviously understood the reality of the system, which is why they all queued up to charge the maximum amount for course tuition. They get the maximum money from the government up-front and leave the government to worry about reclaiming graduate contributions.
    I went to university 1968-73, when course fees were paid directly by government and I received a maintenance grant. No repayments required. However, the reasoning was that graduates were probably going to have a much-better paid career than if they didn't go to university, so over a working life of forty years the Treasury would get back much more in tax than it would otherwise and the investment was worthwhile. Importantly, however true this was, no-one could quantify it.
    Was I better off than today's students? It seems to me that in important respects the modern system is the same as that of yore. Course fees are still paid by the government and the student still receives money for maintenance. The difference concerns the attempts to quantify the students' contribution to defraying those costs over a working life. In my day it couldn't be done, so no worries were generated. Now an individual sum can be attached to each graduate and you can track how much he or she is contributing each year back into the nation's coffers. This insistence on information, transparency, call it what you will, generates the anxiety. So yes, I probably was better off, but only because I was more positive about graduating because no-one bothered to keep telling me how much I owed the state.
    One final thought . As to the politics, Mr Corbyn and the Labour Party should be supporting this system for its pure Marxist credentials. If I may re-order Karl's phraseology from 'The Critique of the Gotha', the student loan system fits exactly " to each according to his needs, from each according to his ability ( to pay-my italics)
    Originally posted by BoxerRules
    The write off after 30 years is not guaranteed. My worry is that our house, that will eventually be left to our four children, who each have a debt of £50,000 will be used to pay off their debt, or seized by a debt collector. Which leads me to another point ...how is inherited income to be treated. Also two of my kids took post graduate degrees and will eventually be paying 35% of their income over £21000 in taxes (income tax and student tax)
    And if they do eventually earn over £45000 they will be paying 55% and over £150000 60% tax.
    • Ed-1
    • By Ed-1 4th Feb 18, 6:23 PM
    • 2,107 Posts
    • 1,127 Thanks
    Ed-1
    The write off after 30 years is not guaranteed. My worry is that our house, that will eventually be left to our four children, who each have a debt of £50,000 will be used to pay off their debt, or seized by a debt collector. Which leads me to another point ...how is inherited income to be treated. Also two of my kids took post graduate degrees and will eventually be paying 35% of their income over £21000 in taxes (income tax and student tax)
    And if they do eventually earn over £45000 they will be paying 55% and over £150000 60% tax.
    Originally posted by ken roberts
    It's unlikely to change for existing post-2012 loans as it's set down in law in the loan repayment regulations.

    As for repayments, from April 2018 post-2012 undergraduate loans are repaid at 9% above £25,000 (a threshold which will rise with earnings growth thereafter). Postgraduate loans are repaid at 6% above £21,000 (a threshold that will be reviewed by 2021).
    • kelsallphil
    • By kelsallphil 5th Feb 18, 4:20 PM
    • 3 Posts
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    kelsallphil
    I have just e-mailed Sam Gyimah to suggest that the annual statement from the SLC should contain a calculation to show if the loanee continues to pay off at the rate of the last 12 months whether they will or will not pay off their loan before the 30 years.

    Taking into account existing interest rates then the date of repayment will either mean - they repay the full amount or part will be wiped off.

    If it to be wiped there is no advantage to paying it off but if it will be paid off them additional payments will reduce the interest charge. It could then be a case of taking out a 4% loan to repay the 6% interest SLC!

    But from the above it is clear there is confusion from so many. So a final paragraph on the SLC statement will help.

    Will Martin join in pushing for this request to be actioned by the SLC?
    • Emcow95
    • By Emcow95 12th Feb 18, 9:04 PM
    • 1 Posts
    • 0 Thanks
    Emcow95
    I have a very small student loan around £600 due to my course being pulled 5 weeks in. I've only just started to repay it as I had a one off bonus which must have put my wage over the threshold, would I be better just paying it all off before the interest piles up or should I get in contact with the student loans company and stop the repayments as my salary is actually under the threshold and carry on ignoring it until I have to start repaying if I ever earn enough to need to?
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