Student Loan Debt

Yorkielass

I know I'm not a typical debt free wanabee as I have no credit cards, overdrafts or bank loans but I do have a student loan and I'm not sure what to do with it.

I finished 4 years studying in July 2005, I took all the loan I could for the first 3 years which was nearly £9000 and got a bursary for the 4th year (did teacher training) so I've only just become eligible for repayments - however in my current job (couldn't get a teaching job where we live) I don't earn enough to enter repayments.

The APR is currently about 3% on a student loan so I believe about £25 a month interest is being added - you can only find out how much you owe by the annual statement they send you or by checking your payslip for repayments - not very helpful at all - I've just been on the website and they haven't launched an online balance function yet so not that helpful.

My current job is temporary until the end of February and I'll be looking for a new job soon obviously. You don't start repayments until you earn over 15k and I've worked out you are only paying off the interest added each month if you earn under about 17K.

I do have some savings but we are hoping to buy a house once my job situation is more stable so probably this September/October and I want to be able to contribute to the deposit - fiance has a fairly large amount of inheritance - otherwise we wouldn't be considering the house buying scenerio.

Add to all this OH has 12K student loan and is up to about £30 interest a month. He's currently doing a PhD and gets a grant and extra bursary too and won't have to start repaying until at least the end of 2008.

We're doing our very best not to get into any debt and we're suceeding at present, green on Martins budget planner ignoring student loan issue obviously but with only 2 more months of certainity job wise for me doing a full budget isn't really an option at the moment.

Any advice welcome - I'm just not sure whether it's best to try and make some extra repayments to reduce the debt with any extra money I have or whether it's best to just leave it and make the normal repayments through my salary when I start earning over 15K.

Thanks in advance

tomstickland

Student loan is inflation matched as far as I understand, so it's not costing anything in real terms.

MPH80

Yorkielass wrote:

You don't start repayments until you earn over 15k and I've worked out you are only paying off the interest added each month if you earn under about 17K.

The first bit is true - the second bit depends, obviously, on the amount you owe.

Yorkielass wrote:

Any advice welcome - I'm just not sure whether it's best to try and make some extra repayments to reduce the debt with any extra money I have or whether it's best to just leave it and make the normal repayments through my salary when I start earning over 15K.

Thanks in advance

As has been said - this loan is not increasing in real terms - and that's very important to note.

Basically - this loan is NOT showing up on your credit file and I don't believe mortgage lenders will ask about it when you apply.

So the basic thing here is that in reality it's a 'non-debt'. You only pay if you are earning enough - so you can't actually default on it - and if you reach 65 without clearing it - it'll get written off.

It's the cheapest loan you'll ever have. Obviously - if you are on a true money saving quest - then you don't want to pay ANY interest - but I'm not sure it's worth it for this amount of money. Just let it pay itself back.

M.

tomstickland

All the same, I felt better once I'd payed mine off. But it was quite a low monthly amount, something like £40.

K9cuddles

Hi Yorkshirelass, I had the same problems trying to work out how much I had paid/paying back before I got there statements, I've set up a spreadsheet now and when ever I input my monthly wages it tots it all up. I've estimated this year interest at about 3.2% and working out at about £178.80 obviously varies on how much you borrowed.

Mine was just over £6k and started paying aback straight away (as I dropped out!) I was overall the thresholds. But as said.. it won't be picked up on a credit check that's have your battle!!! Unlike me you don't have more important bits to pay off, but I'd put the money to a house deposit then make any additional payments ,as they won't really do you any favours!!!

Yorkielass

Thanks to everyone for the advice - I thought what people said about it not showing up on credit debts and being a 'non debt' was true but wanted to hear if others thought the same.

I suppose we're trying so hard to try and stay out of debt in every other way - don't have a credit card, I've never been overdrawn and OH has always managed to clear his overdraft with summer work/next student loan instalment and with his grant etc now it's just like a good graduate salary so there's no big worry there - however I do know that combined we have about 20K of debt in student loans.

I think once I'm working and can see how much any repayments are then I'll set up a spreadsheet too - thanks for that S_a_r_a. The house deposit is definently more of a priority.

Thanks again - you've put my mind at rest - I feel really motivated to look at our budget etc etc but without knowing what my job prospects are it's so hard to do.

sarah_elton

MPH80 wrote:

Basically - this loan is NOT showing up on your credit file and I don't believe mortgage lenders will ask about it when you apply.

When I got my mortgage recently, they didn't ask about the balance of my student loan at all.

They were only interested in it because I'm earning over £15k and making repayments, so as part of the affordability check they wanted to know how much I was repaying per month since it comes out of salary obviously.

So basically no, they aren't bothered about it as with credit cards, etc.

summerday

Hi Yorkielass,

I graduated in 2002 and have about £11k student loans left. At first I did feel very conscious about it being a debt hanging over me, and feared it would go against me when applying for a mortgage. But it didn't go against us at all when getting the mortgage.

What I decided to do in the end was to save the money I could afford to pay towards overpayments to the student loan in a high interest account, so I would in effect be making a bit of money myself (the difference between the interest the SLC charges, about 3.2% I think, and the rate of interest I am earning on my savings, 4.75%). Then, when I have the full balance that I owe to the SLC I will pay it off in one go.

The upside to this is that if I really wanted/needed to access the money in this designated account, I could, in an emergency. Of course, this wouldn't work for anyone who would be tempted to blow these savings on a shopping spree! But once you pay the money back directly to the SLC you will never be able to get it back again, even if you were in a difficult financial position, so it seems safer to build up the full balance up in a high interest savings account that you have as a safety cushion just in case.

I think of the SL payments as an extra tax- in that they only take the payments while you're earning above 15k, and if you lose your job there is no pressure to make repayments as you would if you had cc debts or a bank loan.

One point to note- if anyone does decide that they would prefer to make overpayments direct to the student loans co, at least save it in a savings account until the end of the tax year as they don't re-calculate how much you owe until the end of the tax year so you are losing out big time for the months until the end of the tax year.

Hope this helps, just my take on it,
Sarah