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

bananafaffer

Chris2685 wrote: »

Nah, if you need the money you need the money. Repaying it won't make a bit of difference. You say (hypothetically) you can't afford to save the 8k. So where you gonna get the money from to repay the 8k loan? It makes more sense to have the cheap loan whether or not you have savings. If you are in a position where you are going to repay the loan, you do have money to save and you are better off using that money to invest in something which pays more than the loan rate.

I still dont get it!

Re where am I going to get the money from to pay off the loan, at the moment I pay off £175 per month through PAYE and, if I were to make these extra payments which I'm debating making, then I could have it all paid off within about 6-8 months I reckon.

I just don't see how it can financially make sense to be incurring a higher amount (ie not level/percentage but actual amount) on a debt which I owe, than I couldf gain if I were to put the money in a savings account (which it is actually in at the moment). The interest on the amount I have in savings, I do not think will outweigh that being charged on my SL. Surely, therefore, it's better to get the SL paid off and stop paying so much in interest.#

Also, last year, when I wasn't paying off so much of my loan per month through PAYE, in a year I paid off something like 800 and got charged 300 in interest (or it might have been 500, can't remember). Therefore, I actually only paid off 500 effectively (or 300). The only reason why my balance went down is that I made a random switch card payment of 300. My friend, on the other hand, only made the minimum paynets (similar level to mine) and her balance ended up increasing, so she effectively spent about 800 on her loan and has nothing to show for it. How can that be a more sensible thing to do than make extra payment and actually see the balance get lower?

Lokolo

bananafaffer

http://forums.moneysavingexpert.com/showpost.html?p=14617685&postcount=3

Please see that.

SlimJ_GBR

Hi guys,

I finished uni last year and had the full student loan, it totals about £12,000, fortunately I lived at home with parents so was able to save that money to my ISA which at the time was earning more interest than I had to pay. I'm now self employed earning around the UK average salary but will not have to pay any tax till January 2010 I think (?). I've been sensible with my money and could quite easily clear the loan to clear my debt, but reading posts on the forum and other information from Martin Lewis it seems I should only pay off the minimum every month. But the situation has changed slightly now with the interest on savings being about the same as the interest on the loan meaning the loan is actually starting to cost me money, is this correct?

Of course, I understand that this is a cheap loan and it could come in very handy when looking to buy a house when prices bottom out, so if it's worth it, I'd rather sit on the money now than require a more expensive loan in the future.

Not really sure how paying off the student every month works when Self Employed, is it paid before tax at then end of every year or what? does anyone have any experience of this? My accountant was not too sure as he hasn't really dealt with any ex-students with the debt.

Any advice much appreciated. Cheers.

James

Chris2685

The student loan interest rate can never be higher than 1% above the BoE interest rate, which makes the current student loan interest rate 2.5%. You should be able to find a savings account which pays more than that, but if it is a standard savings account and not a tax free one (ie an ISA), then you have to have a slightly higher savings rate to offset the tax that is taken from your interest payments.

bananaffer: read Lokolos post and take heed. Also, don't forget you can only invest a maximum of £3600 a year in an ISA, so it is best to make full use of that oppurtunity every tax year if you can, much better than paying off your loan faster...


I know it seems stupid to keep accumulating interest on your student loan, but the actual maths behind it speaks for itself.

If you can not save money, and would just end up spending it on random crap if it was there for you to spend, then it would make sense for you to pay off your loan, but if that is the case you wouldn't even really be posting here

BattleToy

A friend of mine told me that his student loan can be written off after living abroad for at least 2 years. But what I heard that some of his friends got their SL, spent all these money on hoildays or other stuff and then left uni without finishing their degree. Although they don't earn more than 15000, they believe that they won't need to pay back their loans if they stay in other countries for 2 years. I hope it is not really true. But some ex-students still believe that they can be debt free if they go this route.

It is shocking to hear that some people are so irresponsible. When most of the people including myself are paying back a min. payment of SL every month, other people are trying to find a way not to pay back their debt. So, it seems that people can pretend to go to the uni and get SL and then use these money for their holidays, drinks or other personal shopping rather than paying their uni fee. After 1 or 2 years, they quit the course for any reasons. In order not to pay back these debts, they live aborad for few years and come back to the UK. Then they are debt free. If many people are using this way to get free loan, it is wasting tax payers' money.

melancholly

BattleToy wrote: »

A friend of mine told me that his student loan can be written off after living abroad for at least 2 years. But what I heard that some of his friends got their SL, spent all these money on hoildays or other stuff and then left uni without finishing their degree. Although they don't earn more than 15000, they believe that they won't need to pay back their loans if they stay in other countries for 2 years. I hope it is not really true. But some ex-students still believe that they can be debt free if they go this route.

It is shocking to hear that some people are so irresponsible. When most of the people including myself are paying back a min. payment of SL every month, other people are trying to find a way not to pay back their debt. So, it seems that people can pretend to go to the uni and get SL and then use these money for their holidays, drinks or other personal shopping rather than paying their uni fee. After 1 or 2 years, they quit the course for any reasons. In order not to pay back these debts, they live aborad for few years and come back to the UK. Then they are debt free. If many people are using this way to get free loan, it is wasting tax payers' money.

if they ever come back and work in the UK, everything will be linked back to them and they will have to pay it back. they can also ask for the loan back in full as soon as someone stops being a student part way through a course. they are also very daft to think that the university won't communicate back to the SLC that they have left the course.

to sum it up - no they can't get away with it!

Sammie_UK1

Does anyone know what the current interest rate is for SLC and also the exact daily rate?

Also, I don't suppose anyone has a spreadsheet mapped out to record and track payments and forecase interest applied?

Lokolo

Interest rate is currently 2.5%

To work out how much you are paying daily:

((TOTAL OWED / 100) * 2.5)/365

Saibe

Hi there,

Wonder if anyone can help. Since starting my new job 2 years ago i have not been paying my student loan. For some reason they have stopped deducting the amounts out of my salary each month. What should i do in this situation?
Will there be any problems because of this?
Thanks S

surfsister

melancholly wrote: »

if they ever come back and work in the UK, everything will be linked back to them and they will have to pay it back. they can also ask for the loan back in full as soon as someone stops being a student part way through a course. they are also very daft to think that the university won't communicate back to the SLC that they have left the course.

to sum it up - no they can't get away with it!

I have heard of people marrying (need to be female) and coming back with new name so hard to trace!