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

JoeA81

Jam13 wrote: »

Hi all, I would like some advice if that's okay

I currently a second year student and I have a student loan with half paying my university fees and half going into a bank account and being invested. I am lucky and have inherited a reasonable sum of money so don't need the loan to live off.

Is it advisable to pay off the loan? I know that the interest rate is 2% but I could probably only get 3.5% interest on that money. With inflation at 3% am I losing 1.5% a year??

I just heard on the news that RPI (which is what the student loan is based on) has fallen to 0.1%.

http://news.bbc.co.uk/1/hi/business/7893873.stm

They set the rate of the student loan every September, based on the value of the RPI in March, so next month if the RPI is just as low, then come September 2009, the student loan interest rate will effectively be nothing (unless the politicians decide to change the rules).

So my advice would be do not pay off your student loan any faster that you are forced to by the system (i.e. 9% of everything you earn over 15K), and never pay any more than you have to.

Chris2685

Oldernotwiser wrote: »

Student Loans are provided by the taxpayer (ie "us") so if anyone cheats the SLC then it's just cheating all of us who pay taxes! The SLC are not a bank, they're funded by the government from our taxes.

That's a fair enough comment, however I will pay my taxes either way.. So it doesn't really matter, the loan payment being reduced will affect me directly and save me money personally.

The tax rate won't be reduced even if the student loan interest rate goes up to 50%

Bigwigg

Hello, I'm just throwing this out for others opinion........after just taking 9 months mat leave for the 2nd time and yet again getting interest on my student loan, it just occurred to me that surely this is sexual discrimination? As men don't have to take maternity leave and will therefore never have to pay these interest payments whilst on mat leave this leaves women worse off than men. Are these interest payments therefore not illegal as they sexually discriminate? Thoughts welcome

Chris2685

What? I am all for fair rights and all of that jazz, but if you take a loan with monthly interest repayments, then you have to expect that interest will mount up whether you're working, unemployed, go back into education or decide to have a baby...

Also, if you're on maternity leave you do get paid still...

Bigwigg

Of course, I don't object to paying interest at all in normal circumstances, I am currently unemployed for various reasons and i am paying interest, no problem. That can happen to men or women. However, as a man, you will never have to pay out interest because you are on maternity leave, women do, meaning we are financially worse off because we are women, not men, surely some kind of sexual discrimination?

Numenor

lizwigg wrote: »

Of course, I don't object to paying interest at all in normal circumstances, I am currently unemployed for various reasons and i am paying interest, no problem. That can happen to men or women. However, as a man, you will never have to pay out interest because you are on maternity leave, women do, meaning we are financially worse off because we are women, not men, surely some kind of sexual discrimination?

They'll say no. The point of the interest on the student loan is to make sure it retains a similar 'real value' (minus repayments) over its duration. That's why it's based on inflation. So after X months of interest without repayments you have a debt of the same 'real value' as you had before.

Because of that reasoning they'll feel quite justified in saying you have not been penalised unfairly. I don't fully agree with their reasoning myself (inflation changes month by month so cannot be a 100% accurate measure), but I definitely wouldn't call it discrimination in any way.

hannah1037

To be honest, this whole thread makes me feel quite sad. There seem to be very few people out there willing to repay the money!

I graduated in 2007 and am currently in the position to pay it back slightly more quickly that they're expecting it. I spent the money - why shouldn't I pay it back? I have no desire to be in more debt than I need to be. With bank interest rates what they are, the money won't be earning much elsewhere. Those 6% ISAs are non-existent now! Surely the whole point of the 'credit crunch' is that people were lent too much 'easy money' and I can't help but think that this debt shouldn't be ignored. The fact that there are posts on here talking about how it will "expire" are really ignorant. I'm 23! I don't want to avoid paying it back for 42 years!

I know there will be a lot of disagreement with this post - but for those who have some extra cash and are considering paying back their loan... I'm arguing the other side - paying it back feels good.

Lokolo

I am willing to pay back the loan

argood

lizwigg wrote: »

Of course, I don't object to paying interest at all in normal circumstances, I am currently unemployed for various reasons and i am paying interest, no problem. That can happen to men or women. However, as a man, you will never have to pay out interest because you are on maternity leave, women do, meaning we are financially worse off because we are women, not men, surely some kind of sexual discrimination?

From your two posts I don't think you understand the interest mechanism on student loans.
The interest accrues every month on your loan from the date you first receive it. It then continues to accrue interest every month even while you're paying it off. It only stops accruing interest once you repay the loan in full.

Everyone pays interest on their loan while there's a balance. Men, women, young, old, employed, unemployed.

You're not being sexually discriminated against.

Masomnia

lizwigg wrote: »

Hello, I'm just throwing this out for others opinion........after just taking 9 months mat leave for the 2nd time and yet again getting interest on my student loan, it just occurred to me that surely this is sexual discrimination? As men don't have to take maternity leave and will therefore never have to pay these interest payments whilst on mat leave this leaves women worse off than men. Are these interest payments therefore not illegal as they sexually discriminate? Thoughts welcome

Interesting thoughts. Not sure I agree, though. Men can also have paternity leave, and to be fair you get maternity pay with which you could pay off the loan if you really wanted to.