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

Oldernotwiser

xpanda wrote: »

How do you handle your student loan if your self employed and earning under £16,000

any help would really be appreciated

What loan system are you on?

argood

xpanda wrote: »

How do you handle your student loan if your self employed and earning under £16,000

any help would really be appreciated

Visit http://www.studentloanrepayment.co.uk and have a look there. If you're on the post-1998 system then you'll have to start repaying if you're earning over £15,000.

guvse

Hi,

Just wondering about the student loan repayments, and whether they are taken from gross or net pay?

I understand that the amount is calculated pre-deduction i.e. 9% of gross income > £15k. However, is the actual payment taken from your net pay? It's not clear on the pay slip, but I'm guessing net ...

Thanks for the help!

Regards,.
Paul

cannyshopper_2

Hi, just found this thread & wondered if someone could advise me please.

I have a deferred loan under pre-1998 rules, I was a mature student & over 40 when the loan started. I am now 55 & not working. It doesn't look like I will ever earn enough to start paying it off, as the best I can hope for now is a part-time office job.

However... I have recently inherited some money. Do I have to use this to pay off the loan? Or can I just keep quiet & trust that when I'm 60 I can forget about it.

thanks

Vicky

Oldernotwiser

cannyshopper wrote: »

Hi, just found this thread & wondered if someone could advise me please.

I have a deferred loan under pre-1998 rules, I was a mature student & over 40 when the loan started. I am now 55 & not working. It doesn't look like I will ever earn enough to start paying it off, as the best I can hope for now is a part-time office job.

However... I have recently inherited some money. Do I have to use this to pay off the loan? Or can I just keep quiet & trust that when I'm 60 I can forget about it.

thanks

Vicky

No you don't have to use it to pay back your Student Loan and you don't have to even be sneaky about it! Unless the interest on the money, added to your income, puts you over the threshold you can carry on deferring until you're 60. I'm in the same situation - great, isn't it!

cannyshopper_2

thank you for that I hadn't been able to find any references to "windfalls" in any of the documentation, and didn't want to ring them just in case...

I don't feel in the least morally obliged to pay it off, as everyone of my age who went to uni straight from school got non-repayable grants.

demodi1

Hi there,

I have 4 years worth of student load starting in 2003. I am now doing a PhD and therefore am exempt from tax but getting an allowance.

I was thinking it might be worth paying the interest off my student load but then read this article and re-considered. I decided I would pay the amount I intended to pay to the loans company into my pre-existing ISA instead. So with this in I went to look at my ISA only to find that the 6.25% interest in Aug 2007 has dropped to 3%!

With an ISA at 3% and my loan interest at 3.8% am I now better off paying to the loans company?

Many thanks

Diane

Oldernotwiser

demodi1 wrote: »

Hi there,

I have 4 years worth of student load starting in 2003. I am now doing a PhD and therefore am exempt from tax but getting an allowance.

I was thinking it might be worth paying the interest off my student load but then read this article and re-considered. I decided I would pay the amount I intended to pay to the loans company into my pre-existing ISA instead. So with this in I went to look at my ISA only to find that the 6.25% interest in Aug 2007 has dropped to 3%!

With an ISA at 3% and my loan interest at 3.8% am I now better off paying to the loans company?

Many thanks

Diane

I'm not an expert on savings rates but I wonder if you could get more interest elsewhere. Also, you need to remember that when you've paid money off your loan it's never going to be available to you again, whereas savings are going to be available if you need money for a deposit, travel, car setting up a business etc. You never know what the future will hold.

marklee

I'm beginning to wonder if the advice in the original article is at risk of getting a bit out of date.

Given that the current rate of interest is 3.8%, and that the current "Best Buy" savings rates are hovering around 4.5%, then paying off your loan may be the best course of action if:

• You've maxed your ISA allowance, or can't get one that pays more than 3.8% (not outside the realms of possibility in the coming months)
• You're a standard rate tax payer and can't find a savings account that pays better than 4.75%
• You're a higher rate tax payer and can't find a savings account that pays better than 6.33%

Of course, this also depends on what you think will happen to the rates in future (if you think the 2009/10 rates will compare more favourably to savings accounts than the 2008/9 ones) - but bear in mind that the current rates will apply until August 2009.

But there are definitely situations now in which paying off your student loan in full now is more cost effective than saving - especially if you are a higher rate tax payer and have maxed out your ISA, with no other (more expensive) debts.

Lokolo

Yes this year. But what happens for future years? You are losing out on potential profits.

Out of all the years, inflation never beats saving rates (not from what I've seen anyway), and even if it did, it would only bit a break in with profits.