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

missterial

I have fortunately managed to pay nine off quickly, but can sympathise with those who have not. I have one question, if I had not paid it off could that not have affected my ability to get credit?

missterial

Apologies, I have re-read Martins article and it answers my question.

Kavanne

I would overpay on my SL but frankly I am too disillusioned to do so. I know they don't take into account overpayments immediately, so even if I overpay they still calculate interest on the whole lot, and I've heard awful things about them 'losing' payments, etc. So I just leave it accruing interest at a rate of £36 a month and only paying off £18 per month... sigh.

Northern_girl_2

jamtart6 wrote: »

I'm not really one to voice an opinion strongly, but I don't understand why we shouldn't pay the student loan back more quickly than necessary??

It'll take me years to clear the debt plus interest, yet if I pay it off now in full or at £200 per month then surely that's better in the long run than just making the minimum monthly repayment of £60??

Am I missing something vital with this? I have no need to borrow money in the future (except only for a house) so surely its best if I pay the loan off as soon as possible?

Can someone explain to me why I shouldn't pay it off in full now? I would be most grateful

You would be better off putting any money you have to make over payments into a high interest savings account. This is because the interest on the savings account, say 6.5%, would give you a better return that the cost of the interest on your student loan at 4.8%.

For example:

1. For a £10K student loan I would need to make repayments of £105 per month to pay if off in 10 years. At 4.8% interest I would be paying back £2610.80 interest on top of the original amount so in total I'd be repaying £12610.80.

2 If I instead put that £105 in an ISA at 6.25% (HSBC online ISA rate) then after 10 years I would have £17,422.80.

There would be extra interest to pay on the student loan because the interest monthly interest would be higher than in example 1. I'm not quite sure how to work that out accurately but think it would be about £2500 extra.

That would still leave you with about £2500 extra if you after 10 years if you put the money in a savings account. Plus the benefit of being able to draw on that money at any time if there was an emergency.

Of course, you could just continue to build up your savings rather than paying off the student loan early. It would probably come in handy as a deposit on a house say and save you even more money!

This is turning into a really long post but this is the order I will be paying back debts:
- loan with bank
- mortgage
- building up savings
- finally pay off student debts only when I have really really good savings.

Toothfairy4

Sorry, but i'm really confused! I've just finished uni this year, so how do i pay it back? do they come and ask me for it ir do i have to sort it out myself? thanks! x

Kavanne

Toothfairy4 wrote: »

Sorry, but i'm really confused! I've just finished uni this year, so how do i pay it back? do they come and ask me for it ir do i have to sort it out myself? thanks! x

When you start a job after uni you fill in a form for student finance and send it to them. Then they start taking money directly from your wages

Toothfairy4

Oh right! I see, so where do I get the form from? thanks for your help

Northern_girl_2

You only have to start paying it back if you earn over 15k. If you're working you can just ask your employer to arrange making the payments and they will do the paperwork.

Oldernotwiser

lwt2006 wrote: »

Just re-read your post kerrij!

It's the thought of paying for the next 25 years, every month, without seeing it go down, that is bugging me.

As I was a mature student, I will be 65 then, anyway!:(

I've suggested this before in a similar thread but in your (and many other people's) situation the best way to look at this is as a graduate tax. If your money doesn't go up dramatically (which would obviously increase your payments) then you just accept that you'll be paying £50 per month (or whatever) until it's written off when you're 65. Many people would think that this is a small amount to pay for a university education and the advantages it's given you.
It only takes a small change in mental attitude to stop seeing it as something hanging over you; nobody's ever going to knock at your door and demand immediate repayment after all and should something depressing happen with your job you just stop paying. It really isn't worth worrying about, unlike other debts.

Donal

I've just received my yearly invoice for the student loan, and it's currently sitting at £23,000. At 4.8% interest, that's around £90 a month interest.

I'm really struggling to see the logic in not paying it off soon, surely the interest keeps building up cumulatively?

I'm earning £14,500 at the minute and would love to set aside money each month to pay it off, but is there really a more sensible way of dealing with it?

I don't intend to be earning a low wage my whole life, so letting it ride till I'm 65 seems anathema to me, but is it actually more logical?