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

Chris2685

I've not heard anything, but will be bloody interested to find out!

happycatuk

Have gone alittle cross-eyed from reading all this good advice!

The only thing is .. my Student Loan pre-dates 1998, and is the old-style Mortage type. I've had to defer since the outset, as I've never met the minimum income threshold (which is a far more generous circa £24k), at a rate of 3.8%, on an original amount of about £1,200 (now compounded to £1,651.55, as of Aug 08)

There is little foreseeable chance of me ever earning that amount; even less, now I'm on long-term Incapacity Benefit, DLA etc (have chronic fatigue). Unduly pessimistic, perhaps, but given the last 10+ years ..!

If this was a credit-card/loan debt at this interest rate, I would be very keen to clear it! At £30.00 a month it is doable, but do I take it that I'm better off putting my money into a cash ISA etc instead - despite the fact that savings interest rates are terribly low? It's the only outstanding debt I have, so it does trouble me, but my only official savings are £2k in last year's cash ISA.

Thanks!

MrsManda

happycatuk wrote: »

If this was a credit-card/loan debt at this interest rate, I would be very keen to clear it! At £30.00 a month it is doable, but do I take it that I'm better off putting my money into a cash ISA etc instead - despite the fact that savings interest rates are terribly low? It's the only outstanding debt I have, so it does trouble me, but my only official savings are £2k in last year's cash ISA.
Thanks!

I think generally speaking the advice is to save if the saving rate is higher than the repayment rate, but pay off the debt if the rate of interest on the debt is higher than what you get get in interest from saving.
However student loans are a special case as they technically never need to be paid off. Therefore it probably doesn't matter either way, though from another point of view, it is always useful to have instant access money available (all the finance people I know suggest a minimum of 3 months salary if you can) in case of emergency and once you've paid money volutarily to the SLC you can not get it back.
So, if I was in your situation I'd keep saving so I had access to the money. But someone else more well versed in all these things may have different advice.
HTH a little.

Oldernotwiser

happycatuk wrote: »

Have gone alittle cross-eyed from reading all this good advice!

The only thing is .. my Student Loan pre-dates 1998, and is the old-style Mortage type. I've had to defer since the outset, as I've never met the minimum income threshold (which is a far more generous circa £24k), at a rate of 3.8%, on an original amount of about £1,200 (now compounded to £1,651.55, as of Aug 08)

There is little foreseeable chance of me ever earning that amount; even less, now I'm on long-term Incapacity Benefit, DLA etc (have chronic fatigue). Unduly pessimistic, perhaps, but given the last 10+ years ..!

If this was a credit-card/loan debt at this interest rate, I would be very keen to clear it! At £30.00 a month it is doable, but do I take it that I'm better off putting my money into a cash ISA etc instead - despite the fact that savings interest rates are terribly low? It's the only outstanding debt I have, so it does trouble me, but my only official savings are £2k in last year's cash ISA.

Thanks!

If you're unlikely to earn enough in the foreseeable future to pay it off then there's absolutely no reason to do so now. I'm in the same position as you are and will have my loan wiped out next year. Yours will be wiped out competely when 25 years have passed so you may never need to pay it back at all! Just make sure you carry on filling in the deferrment forms every year.

rb10

WelshGandalf wrote: »

There's a real chance that this March's RPI figure will be negative. Is there any official, or unofficial news if this will lead to a negative rate of interest on student loans from this September? Or will they just charge 0%?

This isn't known yet. In one of the emails from this site a few weeks ago, it was claimed that the loan rate would in fact go negative if RPI was negative, but there was no source given, so I don't trust it as being reliable.

As far as I know, no official announcement has been made yet.

happycatuk

MrsManda wrote: »

I think generally speaking the advice is to save if the saving rate is higher than the repayment rate, but pay off the debt if the rate of interest on the debt is higher than what you get get in interest from saving.
However student loans are a special case as they technically never need to be paid off. Therefore it probably doesn't matter either way, though from another point of view, it is always useful to have instant access money available (all the finance people I know suggest a minimum of 3 months salary if you can) in case of emergency and once you've paid money volutarily to the SLC you can not get it back.
So, if I was in your situation I'd keep saving so I had access to the money. But someone else more well versed in all these things may have different advice.
HTH a little.

I think you've managed to encapsulate my quandary perfectly, thank you!! I guess my dilemma was fuelled more by guilt at being on benefits still, rather than clear-headed financial practice

I shall fill in and post my deferment paperwork to my local benefits office, for their much-needed rubber stamp, scoop any surplus cash into a savings account etc, and try to stop being so hard on myself!

Thank you!

gozaimasu

It says in Martin's article that if you earn under £25k a year then you can defer payments for 12 months, but I see absolutely no reference to this anywhere on the slc website.

Chris2685

I never knew you could do that. I thought it was if you earned less than 15k?

argood

gozaimasu wrote: »

It says in Martin's article that if you earn under £25k a year then you can defer payments for 12 months, but I see absolutely no reference to this anywhere on the slc website.

That's only for people with the old-style, pre-1998 loan.

Loans issued from September 1998 are repaid once you earn over £15,000 per annum or £1250 per month.

Have a look at http://www.studentloanrepayment.co.uk

WelshGandalf

rb10 wrote: »

This isn't known yet. In one of the emails from this site a few weeks ago, it was claimed that the loan rate would in fact go negative if RPI was negative, but there was no source given, so I don't trust it as being reliable.

As far as I know, no official announcement has been made yet.

As anecdotal evidence, the government has already told the train companies they will have to abide by the RPI + 1% rule for increasing rail fares, even if RPI is negative (that story was on the BBC website earlier this year). So hopefully it will be true of student loans too. Feb's RPI figure is announced on Tuesday.

I smell a potential political problem later this year though - tax thresholds & pensions etc. are linked to RPI too - will the government decrease them if RPI is negative?