Help needed re student loan interest, can you freeze it?

Miss-spent_2

I wonder if anyone can help. My son has left university after two years. he failed the second year and isn't going back (another thread entirely.) We opened his student loan statement today and he owes over £13000 but what shocked me was that he is accruing £50 + a month interest. I know this will go down a bit from since as rate has dropped but were worried.
He is now working in a supermarket and earning £600 a month net so the automatic payments won't kick in. At this rate he is never going to clear the debt.
Is it possible to freeze the interest? Is there anything we can do?

Lokolo

Nope, thats the interest being paid just like a normal loan.

He can make contributions to pay it off if he really wants.

Um other than that nope!

If it never gets cleared meh hell to it. it will get written off at some point (depending on when he started)

Blacksheep1979

well yes, earning under the limit and paying nothing off obviously he'll never pay off the debt - but he won't either even if the interest is frozen. Why do you think he should have the advantage of no interest when everyone else has to pay it? He's had the advantage of the money...

Fire_Fox

Is your son living at home with you? If so he should be able to start paying some of his debt off, even if that is just meeting the interest (actually inflation). Alternatively he could start paying into an ISA which, as a percentage, would pay more interest than the debt he has. £13000 is an awful lot for two years of university - are you sure the amount is correct?

Miss-spent_2

Blacksheep my query was really is it possible to have the interest frozen (as I believe some credit card companies do), not just for him but in general. I have just read the whole thread on 'Should I pay my student loan of early' and realise that it is not possible and that indeed everyone faces the same problem.
It seems that, taking a long term view, the government are never going to get their money back.
I did not understand the situation but now, thanks to helpful and patient posters, I feel I do a little more.

Miss-spent_2

Fire_Fox wrote: »

Is your son living at home with you? If so he should be able to start paying some of his debt off, even if that is just meeting the interest (actually inflation). Alternatively he could start paying into an ISA which, as a percentage, would pay more interest than the debt he has. £13000 is an awful lot for two years of university - are you sure the amount is correct?

Yes it is correct. He started uni in 2006. Tuition fees were £3000 for the first year and £3070 for the second and the maintenance loan was aaprox £3300 each year, the rest is interest. The actual total owed was £13313.31 at the end of August. The interest for the final month was £52.75 although it will go down slightly as the rate has dropped.

Yes I think we will suggest he put it in an ISA. He has one at Barclays but I am not sure it pays more than 3.8%

PinkPig

As people have said, don't make any payments on the loan. He will only ever pay a percentage of his earnings, which means if he doesn't earn much there is absolutely no advantage in having it paid off. Instead, put as much as he can afford into an ISA (or another savings account if he's reached the limit) and let it earn interest.

surfcat

Miss-spent wrote: »

It seems that, taking a long term view, the government are never going to get their money back.
I did not understand the situation but now, thanks to helpful and patient posters, I feel I do a little more.

But the government don't need to make their money back...they are saving money by not giving out grants as they did years ago, and these student loans are generally pumped into the economy somehow.

Miss-spent_2

True but doesn't it just feel like thoudands (millions?) of pound being poured into a big black hole? I don't think the current system is possible to maintain.

whitfreak

In referance to the government black hole, the situation is actually getting worse. Under the "old" system (pre 2006/7) loans were written off when you reached 65 giving you 40 years to get a wage well over £17k needed to just reply the interest (2% assummed...). Now loans are double the amount due to tution fee loans, the loans are written off after 25 years (35 if your scottish), and you now need to be earning over £20K just to repay the interest.

Now I know graduates in general earn more, but the likes of NQT's will not be making a dent on thier loans and the same with numerous professions which graduates undertake.

Not that any of this is relevent really.

hstudent

whitfreak wrote: »

In referance to the government black hole, the situation is actually getting worse. Under the "old" system (pre 2006/7) loans were written off when you reached 65 giving you 40 years to get a wage well over £17k needed to just reply the interest (2% assummed...). Now loans are double the amount due to tution fee loans, the loans are written off after 25 years (35 if your scottish), and you now need to be earning over £20K just to repay the interest.

You can pay off the loan whatever your income. But you are only forced to make repayments if your income is above the treshold amount.

I entered Higher Education in 2003 and I would have been much better off had I started in 2006 or later.

Firstly, I didn't get a grant, the whole package was a repayable loan. If I started in 2007 I would have a loan of around £9000 and anything else in the form of a grant. As it is I had a loan of £12500 when finishing Uni.

Secondly, I'm not earning anywhere near the threshold to be asked for repayments. This means that at present I don't see my loan being paid off within 25 years, so I may even still have it when I retire, as my loan won't be cancelled if it's not paid off after 25 years,