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

JR_x

Hey,im usure what to do about my student loan.
I have around £1300 loan for tuition fees and in a position to be able to pay it off.Should i leave it till after i graduate in 2011 and keep on saving my money in an ISA of pay it off now and get it over and done with?

Chris2685

hannah1037 wrote: »

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.

I will pay it off eventually, there is no avoiding it unless I purposely get myself a !!!!! job for the next 30 years... However, it is a loan, and as such I think it is only human nature to want to pay back as little of it as possible

Numenor

JR_x wrote: »

Hey,im usure what to do about my student loan.
I have around £1300 loan for tuition fees and in a position to be able to pay it off.Should i leave it till after i graduate in 2011 and keep on saving my money in an ISA of pay it off now and get it over and done with?

Depends - how much of a financial safety net do you have? If you were to spend all your 'spare' money on repaying the loan early, you might be kicking yourself later if your source(s) of income dry up.

I have enough in savings to pay off my student loan in full today. But I wouldn't dream of doing so, because what would I do if I lost my job? I couldn't have the money back from the SLC.

Bigwigg

argood wrote: »

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.

I do have an understanding of the interest mechanism, thanks for your explanation anyway. However, the point I'm trying to make is that as women take maternity leave, most women for 9 months, and 7 months of that on statutory maternity pay which is between £450-£550 per month. For those 7 months then you don't get enough money to qualify to pay off your student loan, accruing interest while you can't pay any off. This does not happen to men, therefore women are financially worse off, because they are women, not men.

Yes some men take 2 weeks of paterntiy leave, where they also get 2 weeks of statutory pay. I don't think 2 weeks of accruing interest (whilst not being able to pay any off) is in the same league of 7 months though.

Numenor

lizwigg wrote: »

For those 7 months then you don't get enough money to qualify to pay off your student loan, accruing interest while you can't pay any off. This does not happen to men, therefore women are financially worse off, because they are women, not men.

No, they are financially worse off because they are not working, not because they are women. Would you expect your mortgage to stop accruing interest just because you were pregnant? It's the same principle.

I'm about as feminist as a man can realistically be, but this is just pathetic.

Oh, and you can pay off as much of your student loan as you like whether you're earning over the threshod or not. Contact the SLC, they'll tell you how.

argood

lizwigg wrote: »

therefore women are financially worse off, because they are women, not men.

They're not financially worse off, it'll just take them slightly longer to pay off their loan.

If you're that keen to avoid repaying any longer than necessary then surely the simple solution would be not to have children while you're repaying your student loan. Therefore you stay in employment for the 7-9 months you'd otherwise be off or earning below the threshold.

Your loan is already subsidised by the government with an interest rate of 2% (for post-1998 loans), do you really expect them to waive all the interest for 7-9 months because you're pregnant?

melancholly

just for a female perspective - there are many things i would be happy to shout 'sexual discrimation' for, but not paying back student loans. doing so only demeans women and makes us look daft.... you get child benefit and women also need fewer years to reach the required number of years for NI for the state pension (whether that will be worth anything when we retire is a different story). in the grand scheme of things loan interest at the rate of inflation for a few months is nothing to complain about.

HangTime

hannah1037 wrote: »

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!

There's a difference between being willing to pay back the money, and wanting to pay back the money!

In my eyes not paying off a student loan early is just... well, not quite 'common sense' as it is not totally straightforward, but in general the benefits of retaining the loan outweigh the disadvantages (at least for basic rate tax payers).

It looks increasingly likely that the interest rate for next year (September 2009-) will be very low, possibly even negative. Yes, savings rates aren't what they were 6 months ago, but even so, it's not hard to get a better net return than zero!

A Student loan is also unlike pretty much any other credit you can get in that payments are strictly tied to income. In that sense, it is 'safe' in the sense that even if you lose your job, you know the baliffs won't be showing up on your doorstep demanding payment. They are not going to repossess your home, or your car.

I could repay all of my SL tomorrow if I wanted to, but if I did, I'd never be able to get that loan back. It's a once in a lifetime deal and I certainly don't blame people for exploiting it. One of my biggest regrets is that foolishly I made a lump sum repayment of £4000 about 5 years ago or so, when I wasn't quite so savvy about these things

HangTime

lizwigg wrote: »

the point I'm trying to make is that as women take maternity leave, most women for 9 months, and 7 months of that on statutory maternity pay which is between £450-£550 per month. For those 7 months then you don't get enough money to qualify to pay off your student loan, accruing interest while you can't pay any off. This does not happen to men, therefore women are financially worse off, because they are women, not men

You can pay it off when you are on maternity leave if you choose to, PAYE isn't the only way of making repayments.

If I were to be playing devils advocate, by your logic I'd say that the whole maternity pay thing is sexual discrimination against men. Men can't get pregnant, therefore they are financially worse off, because they can't get months of statutory maternity pay while not working! If I phoned up my employer and said "I'm preggers, gonna take 6 months off k thx bye" I'd be shown the door quick smart. If my fiancee did that, she'd get a bunch of flowers and a fistful of cash. Where's the equality in that? Joking aside, that's probably part of the reason why in recent years there's been more of a push for equality in terms of paternity leave.

I just don't see the connection between maternity leave and student loan interest at all. The reason you'd be accruing more interest is simply because you are paying less off. The reason behind that is irrelevant; the whole student loan thing is inherently impartial with regards to gender - it doesn't care about anything but how much you earn.

Bigwigg

Okay so I'm not getting any converts on this forum! You've all got valid points but surely someone must agree, that women, because they take mat leave and then many women go part time, end up paying more in interest on their student loans because they take longer to pay it off. This doesn't happen with any other kind of loan/mortgage because they don't come straight out of your pay packet and only start to be taken after a certain pay threshold. It may not be sexual discrimination, but is a reality of life for women. Yes you can pay extra off your loan when you're on mat leave, but how many women can afford to that when they're getting paid £500 a month? Or eat for that matter! It would be interesting to see the stats on how long men v women take to pay off their loans. I bet women pay back considerably more.