Should I Pay Off My Student Loan? 2008/09 article discussion

Lokolo

Its a loan, you will get charged from it. You have been charged £150 for all that money, get over it. If it had been a normal loan then you would owe a lot more.

If your family could afford to pay you all the money why didn't they in the first place? You should have know it was a loan and that you would be charged interest on it.

Chris2685

sally, are you planning on getting mortgage or a car loan or anything like that in the future? If so, then it is well worth taking at least an ISA allowances worth of student loan (provided you're good with money and won't spend it all!). Just stick all of the money into your ISA and you will be earning more interest on it than you are being charged.

Interest rates on a student loan are 3.8% right now if I recall correctly. A decent ISA account should pay around 6% (such as the one from alliance and leicester). That is a much better return than the interest you would be paying off...

You borrow £3000 today, save it in an ISA and it will be £3180 by next year.
The debt will only be £3114.

In my opinion, it is much better to take the student loan now, even if you don't need it, and stick it into savings so that it earns you some free money. As long as you don't touch the savings you will never lose anything. Even if you do HAVE to touch them, then it is money you wouldn't have had anyway, so you would have needed to take a more expensive loan in order to get the money.

The important thing is, just pretend that it is money you don't have and lock it away.


Of course, this is all no good if the bank you deposit your ISA in folds and you end up not earning interest on the amount anyway *grumbles about Icesave and walk off*

melancholly

Umski wrote: »

Hello folks,

First post here as something got me thinking about Student Loans. I've been paying off my loan since 2002 now and had my statement a few months ago. Now from what I understand, the Inland Revenue gets my payment every month, yet the SLC only receives the details at the end of the tax year and then lumps the interest for the previosu year on top. So my point is, we're being charged interest on the outstanding balance per year, whilst the taxman sits on our payments every month :mad: how is that fair? My monthly payment is quite significant (over £200) and even more if I get a bonus - I reckon my balance should be going down monthly, not yearly. Seems a bit of a con to me

no no no

just have a google - this is wrong and it comes up every few months. the silly petition on the number 10 website brought this to everyone's attention but didn't bother checking the facts..... it is exactly what it should be, but the updates are only made annually - so you ahve nothing to worry about.

sally2489

Lokolo wrote: »

Its a loan, you will get charged from it. You have been charged £150 for all that money, get over it. If it had been a normal loan then you would owe a lot more.

If your family could afford to pay you all the money why didn't they in the first place? You should have know it was a loan and that you would be charged interest on it.

Hi. As is said in my post i am very new to posting things on the boards. etc.
Also, i am only a 19 year old and the first in the family to go to university. I did not know what to do for the better, and am learning from my mistakes.

Everyone was advised in college to take the loans out, as it was effectively free money, and being naive students with little or no life experience everyone listened. I guess it was easier for them to tell us, as it was not their money and not their debt!! They said it would earn interest at a nominal amount, so you would only end up paying a tiny amount of interest back!

Now, quite afew of us are in the same situation, that we already owe about £150 interest, which is just in the first year, so, when we eventually come to paying it all off, you can imagine what the final figure will be!!!
£150 is a helluva lot of money, and i'm sure any student like me could welcome that amount of money!

My family also did not have that sort of money then, and they have even less now, as if they did i wouldn't have gone through the hassle of the loans, etc. I only suggested this, as i'm sure i could scrape together a bit from everyone, which could hopefully add up!!! (But, i'm pretty sure this won't be a vast sum of money)

Lokolo, i came onto this students board to find an answer to a question from people who are student like me. I did not find your comments of "get over it" very helpful or polite, especially as this was my first time posting a question.
If i could not answer a question, i would just helpfully or politely state so, not be rude about it or make the other person feel less superior or stupid!!!
I very much hope you do not give other newbies to the board such a rude, callous welcome as you gave me!!!

Chris 2685, thank-you very much for your indepth reply to my query. I have been thinking of getting an isa for a while, but have been dithering due to safety/security of the money, also am not sure what to do with the money after the tax year, do i keep transferring it every yr? I found your advice and way of explaining it very, very useful and easy to understand!! Will try to take out the loan if i still can, and put it in an isa!!!

Chris2685

You don't need to transfer the money anywhere, although it makes sense to transfer it to an account that pays a decent amount of interest. Check out the Savings board for more info on ISA's, or the article on this website.

http://www.moneysavingexpert.com/savings/best-cash-isa

Umski

melancholly wrote: »

no no no

just have a google - this is wrong and it comes up every few months. the silly petition on the number 10 website brought this to everyone's attention but didn't bother checking the facts..... it is exactly what it should be, but the updates are only made annually - so you ahve nothing to worry about.

Thanks melancholly, that's reassuring - will have to look that one up as the statements don't show anything other than a lump sum payment hence the enquiry here. I didn't realise that there was a petition maybe the SLC need to make their info clearer! This is what the direct.gov website says:

When these details come through, the amount of interest you are charged will be adjusted to reflect when you actually made the repayments.
This means that you won't be charged interest on the part of the loan you have already paid back.

Which seems fairer :beer: I received my SLC login this week so will have to give that a go too :cool:

gav160

im a dentist, graduated in 2005, in my first year after graduation i was in a vt (vocational training) position where my student loan was taken out of my monthly wages.
Since then i became an associate which is classified as self employed. So i havnt made a payment since august 2006!
my accountant says i shud just save up and pay off when i have the money but im a little confused what im supposed to do.

any help greatly appreciated

gav

Chris2685

Even if you are self employed, you still have to make the minimum payment for whatever you are over the threshold. I am not sure how it is dealt with, with regards paying yourself minimum wage or whatever though... Your accountant should certainly know though!

pags967

Hi,I am a bit confused about how an inheritance affects my obbligation to pay back my student loan.Earlier this year I recieved a quite substantial inheritance.I used the majority of it to pay off a large part of my mortgage.I am left with approx £20,000 which I am obliged to spend on maintenance of the property.The property is let to a tennant.I am due to fill out a tax return and am unsure as to whether the inheritance payment has to be delclared,and if I am obbliged to declare it,how the inland revenue will view it inlight of my debt to the student loan company of approx £13000.Currently my yearly income from work and the property does fall short of the £15,000 threshold.Now that I have paid off a good part of the mortgage this may increase towards or marginally above the threshold.But what concerns me is whether the £20,000 set aside for external works and maitenance will be seen by the revenue as monies that automatically go toward paying the student loan.could you please clarify this form me.Many thx

Oldernotwiser

Student loan repayments are based soley on income, not on capital. If you had invested this money then the interest you received would be added to your normal income and included in the income calculations. You don't need to worry about the lump sum for student loan purposes but I hope that you're including the rental income that you receive.