Student Loan worry

Lady_K

My Daughter got her annual student loan bill this week up to August 31st 2005 and its really depressing... its almost 13k and up to that date it was increasing it by around £30 each month in interest, I think the interest rate has increased now hasnt it from sept 1st. We are really worried now as shes in Uni till 2007 so wont be paying anything off till she gets a job after that so the interest is just loading on. Its affecting her as shes worrying about it on top of studying and when she eventually gets a job it will take forever to repay as the interest keeps adding. Is the interest higher now than last year?

I know people say its the cheapest loan but its now a debt and a big one and its going to be years and years before its paid off if it ever is. I dont think students realize just how big its going to get or how much interest keeps going on and on top of that shes got an overdraft of £2000 all used

I also noticed all the phone numbers for student loans are 0870 numbers

Lady_K

Well yes the solution is to pay it off but I doubt many people could just pay it off or they wouldn’t have needed to borrow it in the first place. I wish I could pay it off for her but I'm not in any position to unfortunately.

It is lower interest than other loans I know but its very disheartening looking into the future. The cost of houses now and how hard it is going to be paying off the student loan and paying a mortgage on top if she can ever afford one. All this hard work and it makes you wonder if going to university is actually worth it. Her friends that went to school with her that chose not to go to university have cars, houses, go on nice holidays ect. and she has an enormous pile of debt, is constantly struggling and won’t be able to get her own house for years after she’s left University.

The interest will keep on adding so the whole loan is going to grow on top of that increasing the interest even more so it just gets bigger. As the interest was £30 per month for last year I dread to think what the total owed will be once she’s finished Uni. Plus I think it’s gone up to 3.2% interest this year. If she wants to see the loan going down at all she’s naturally got to pay more than the interest. It’s just going to be one big financial slog. I just think it is very very hard for young people now days to try and start a life of their own

tjohn

Hi! I currently have a student loan debt of £22,000 and it increases by over £50 each month. I used to get so stressed about it. I am now working but they only take £3 a month repayments !!!!???? That doesn't even cover the interest. I'm not well-paid either so can't afford to increase the repayments. It's a pretty dire situation but most of my friends are in the same position. I feel a lot better about than I used to. I think of it more as a tax because they will only take a repayment if I am earning so if I lose my job i won't have anyone knocking at the door demanding it. Also if it's not paid back in 25 years they wipe it out. In that time I will have only paid £900 at this rate!!!!Ridiculous!!!
It's a stupid system but I can live with it because I've accepted (sadly)I will never pay it all back but also I will never be asked for something I can't afford. If I do come into some money (by some miracle!) I'll be putting a deposit down on a house rather than paying off more than they are asking for as I know it will be cancelled in 25 years. Now I'm sure a lot of people wouldn't agree with that approach but it makes me feel better and I don't lay awake at nights worrying about it anymore.
Sorry, I know that's not much help but just thought I'd give you my situation.

Lady_K

Thanx tjohn

Are you sure its wiped out in 25 yrs? is that at a certain age or from when it was taken out? I thought it was at age 65. But anyway I suppose the rules can change at anytime.

I do understand what you mean about putting other things before it like a mortgage, I think you are right. I'm not sure how she will live with it herself over time but at the moment shes losing sleep over it. Your way of thinking about it as a tax is good and a helpfull thing to know though.

What do you mean you will never be asked for something you cant afford? Do you mean as you have got it that you cannot get credit or something?

Karnam

its only wiped out when you get over 65, not after 25 yrs.

gizmoleeds

Lady_K wrote:

Do you mean as you have got it that you cannot get credit or something?

I presume he means as it is taken as a percentage of your income over £15,000 you will never be asked to pay anything which you can't be expected to afford given your current salary (whereas with commercial debt you would be asked to pay a set amount regardless of your income).

Teerah

Karnam wrote:

its only wiped out when you get over 65, not after 25 yrs.

No, I'm pretty sure it is wiped out after 25 years if it is unable to be repayed, ie if you never earn over the threshold at which repayments start.

gizmoleeds

http://www.dfes.gov.uk/studentsupport/students/200_2006_entry.shtml

For students taking out their first loan in September 2006 or later, the Government will write off student loan balances (except for arrears) which are left unpaid 25 years after their liability to repay commenced, which is the April after the course finished. This will cover both student loans for fees as well as student loans for maintenance.

It is 25 years, but only for loans which are taken under the new system.

beccatt

I have a loan of around £9000 but am not currently paying anything back as I don't earn enough. The good thing is that it wasn't taken into account when I took out a mortgage earlier this year and it actually helps your credit rating so there's no reason to worry. I think it's more important for our generation to put spare cash into a personal pension or getting on the housing ladder than paying off these loans.

Something worth noting for graduates - I've just had a payrise up to £15,000 which I understood to be the payment threshold now but when I called the SLC they told me that they only start charging when you earn enough to make a minimum repayment of £1 a month. I haven't worked out exactly what this is, but they charge 9% on the amount that you earn over £15,000.

I just wonder how long it will be before the SLC goes bankrupt because of all the graduates who will never earn enough to pay back their loans. I'm sure that I will reach 65 with at least some of my loan left.

gizmoleeds

beccatt wrote:

I just wonder how long it will be before the SLC goes bankrupt because of all the graduates who will never earn enough to pay back their loans. I'm sure that I will reach 65 with at least some of my loan left.

They won't go bankrupt. Once the Tories get back in power (which, let's face it, will happen one day) they are planning on putting commercial rates of interest on student loans. :eek:

(They have a very good understanding of compound interest - they sound like they're being nice by getting rid of top-up fees, but actually everyone with any student debt will be paying much, much more. :mad: )

Lady_K

Oh thanx gizmo

Well not sure what to think of that. It seems a bit unfair on the people who had loans before that. My daughter started her loans in 2002... how depressing it all is