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

Oldernotwiser

Sponge wrote: »

I graduated in 1996 with 4 student loans. I immediately started to defer payment and have done so every year since. It's highly unlikely I'll ever earn >£25k so I anticipate deferring payment for a long time.

So my thoughts are on the debt being, possibly, wiped clean. But I have a few questions.

'25 years after your repayments started' - but my payments never started. Can I assume this simply means the 25 year 'countdown' commences from when I graduated, i.e. when my payments were due to start?

Edit: Having re-read this bit I'm now interpreting it a different way. Does it mean the 25 year countdown starts when you make your first payment? So if you deferred for 10 years, you don't have 15 years to go, you still have 25 years, from the date of that first payment?

If the 25 year countdown started in 1996 then in 2021 (I'll be 48) whatever money I owe (the payscales in my job means this'll probably be the full amount) will be wiped clean?

If the 25yr countdown didn't start in 1996, but starts when/if I make my first payment, then taking into account the last 12 years of deferments and my current age (35), I'll be 50 years old before any 25 year clause comes into force - whatever debt remains will be wiped?

I just want to get it straight in my head and appreciate your comments.

I've always taken it to mean 25 years from when the payments were eligible to start ie. April after you graduated. I don't think it would make any sense otherwise.

Miss-spent_2

Oldernotwiser wrote: »

I believe that the university will have told the SLC that he has left but it would do no harm for him to contact them. In his situation it would be really foolish to pay 25% of his income to repay this debt; I'd leave it until he earns over the threshold.

Thank you.Yes sleeping on it and reading the threads, that is what we have decided. We suggested to him that he try and save £150 per month in an ISA.

Taking a wider view, the government are never going to get back all the money they have lent out are they?

Miss-spent_2

Me again. Does anyone mind telling me how much, net, you take home each month if you are earning £15000 pa

melancholly

Miss-spent wrote: »

Taking a wider view, the government are never going to get back all the money they have lent out are they?

about 10 years ago, when fees started being charged, i'd have still said yes they were - but now, i think they will be missing out on a lot of money since the size of the loans has spiralled with the increasing fees...... but i think it is still 'cheaper' for them to have the fees being paid by students and getting some/most of it back via loans than the situation previously, when all of the fees were covered by government funding.

as far as £15,000 per annum goes, the tax free allowance this year is £6035, so assuming none of that has been used, it leaves £8965 that is taxable. at 20% that makes £1793 in tax. NI will be about £1000 all in, giving a total of about £2800 in deducations. i make that just over £1000 a month in take home pay, before you take off the student loan deductions.

i know dmg has posted a brilliant link to a site that works it out for you exactly, so i'll go have a dig around their posts to try and find it!

The_One_Who

melancholly wrote: »

as far as £15,000 per annum goes, the tax free allowance this year is £6035, so assuming none of that has been used, it leaves £8965 that is taxable. at 20% that makes £1793 in tax. NI will be about £1000 all in, giving a total of about £2800 in deducations. i make that just over £1000 a month in take home pay, before you take off the student loan deductions.

Almost, but at £15,000 exactly you won't have any student loan reductions. It's only what you earn over the threshold that is counted.

melancholly

The_One_Who wrote: »

Almost, but at £15,000 exactly you won't have any student loan reductions. It's only what you earn over the threshold that is counted.

lol i haven't been up long, that's my excuse..... thanks!!

n_ireland_boy

Hi,

Just wanted to raise 2 quick points on this.

1. My student loan is 3.8% interest, whilst my mortgage is 2.8%, so somehow its worked out cheaper for me to borrow from a bank? (So, it's not always the cheapest money you'll ever get!)

2. I went to uni late 90's, early 2000's. I took out roughly £13k...I now owe more like £14k. I pay £60 a month most months but when I get a quarterly commission this jumps to £150! To me this is like having a second mortgage!

The other VERY important thing to note on this thread is that we live in a society that seems to be comfortable with debt...but that doesn't mean you have to be. If you have money available to pay a student loan off then, if it means you get more money in your pay packet every month, you don't get constant reminders of how much money you owe and generally makes life a little more stress free, then go for it!

I know the financial rational behind it, but I'll personally be paying it off as soon as I can.

Good website though. Thanks.

Oldernotwiser

n_ireland_boy wrote: »

Hi,

Just wanted to raise 2 quick points on this.

1. My student loan is 3.8% interest, whilst my mortgage is 2.8%, so somehow its worked out cheaper for me to borrow from a bank? (So, it's not always the cheapest money you'll ever get!)

2. I went to uni late 90's, early 2000's. I took out roughly £13k...I now owe more like £14k. I pay £60 a month most months but when I get a quarterly commission this jumps to £150! To me this is like having a second mortgage!

The other VERY important thing to note on this thread is that we live in a society that seems to be comfortable with debt...but that doesn't mean you have to be. If you have money available to pay a student loan off then, if it means you get more money in your pay packet every month, you don't get constant reminders of how much money you owe and generally makes life a little more stress free, then go for it!

I know the financial rational behind it, but I'll personally be paying it off as soon as I can.

Good website though. Thanks.

If you have spare money hanging around, pay some off your mortgage! It's not only the interest rate that matters with student loans, it's the fact that you wouldn't have to pay them anything if you weren't working for some reason and in this financial climate that could be very useful. Also, nobody will wipe your mortgage off after 25 years!

Wappers

FYI student loan rates (post 98) is now 3% due to the low base rate. http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,3866911&_dad=portal

HangTime

Miss-spent wrote: »

Me again. Does anyone mind telling me how much, net, you take home each month if you are earning £15000 pa

From memory that's roughly £1000/month net, but you can calculate it very easily and quickly here: https://www.listentotaxman.com

Interesting to see that SLC is also restricted by the interest rate i.e. there's a ceiling in place to 'protect' us if the rate drops too low. So basically what I wrote a few weeks ago isn't so pertinent - basically for basic rate tax payers there is still very little reason to consider paying off your student loan early unless savings rates really fall through the floor. At 3% it's still more expensive than my mortgage though (base rate +0.59%).