Worried About Debt

MsDelightful

Hello,

I like, most students, thought student debts were a good thing with interest rates hardly above inflation rates. But having read some other posts here I'm getting worried. It's been 2.5 years since my graduation and I've been wondering the world, trying to avoid getting a job and basically acting like this £12k loan doesn't exist (since i don't have to pay it till I have a proper job, which maybe never ). Is this a bad idea?

Should I really be treating it like any other debt and paying it off as much as possible? (why isn't there an MSE article on this...)

lynzpower

I graduated in 99, and have been paying it off committedly since ( but also got into an extra grands worth of debt when I got my flat for furniture) As you can see, Im slogging away here, paying off 350 a month, higher than I NEED to, but i want it out of my life now.

I say, of course pay it off. I simply dont understand the argument that says"its the cheapest debt you'll ever have, whats the point". Its debt, and its costing you more than not having it. Yes, its not the ball- breaker a credit card interest is, but its still there, and its still mounting up.

I also dont understand why people are SO reluctant to pay it off? Of course resenting paying it is something ( IM like that with all my debts!) but it restricts the debt you'll be able to get in the future ( eg a mortgage). Of course you may never get a "proper" job, but it sounds like you are avoiding getting one so you dont pay off your debt. My uncle did this, and he told me recently this was simply cutting off his nose to spite his face - he got a good job, cleared the debt easily and was earning "proper" money finally....

kittiwoz

Don't avoid earning just so you don't have to pay the debt back but also don't pay it back any faster than you have to. If you have money over after your living expenses and paying off the minimum it is better to put it in a high interest account, mini-ISA or other investments. You can earn more interest on the money than you acrue interest on your debt. This is therefore the quickest way to pay off the debt in full.

Sasuke_2

agree with him

Montymoo_2

I agree its a debt but not a priority. if i had no other debt, had a mortgage sorted out, had a well paid job and could live comfortably then I would maybe consider paying if off earlier.

Heth_2

I don't think you should avoid getting a job just because of your student loan, but I probably wouldn't make it a priority over other things to pay off. I am very lucky not to have a student loan, but my husband does. He went to uni in 1998 and the loan comes straight off his pay when he is earning more than the threshold, so there is no way he can default on it etc...When we arranged our mortgage they were not at all bothered about the loan, so it didn't restrict what we could borrow to buy our house at all (obviously we aren't taking a mortgage that we can't afford on our net income with the loan taken into account).

SamMoffatt28

Don't you think you are selling yourself short by not getting a 'proper' job just to avoid paying back the student loan. You must have put a hell of alot of work into getting your qualifications - don't let it go to waste!

lipidicman

Montymoo wrote:

I agree its a debt but not a priority. if i had no other debt, had a mortgage sorted out, had a well paid job and could live comfortably then I would maybe consider paying if off earlier.

On top of that list I would add 'had built up significant savings in some ISAs' as already mentioned this would beat the interest on the loan. Then if you need the money for a real emergency it is there (you have to have your own discipline for this to be really effective)

Just to make a point I bet there are people out there who have settled their loans and then bought a car on credit. They have swapped a student loan for a car loan. Insanity

ftbworried

lynzpower wrote:

course resenting paying it is something ( IM like that with all my debts!) but it restricts the debt you'll be able to get in the future ( eg a mortgage).

Sorry to disagree but they dont. My fiance (who also has a SL) and I recently got a mortgage and we were offered the largest amount we could on our wages. When we replied with "yeah, but we both have big student loans", the mortgage advisor said that student loans aren't considered to be REAL debt when underwriting a mortgage as the house will not be at risk because of them and if you cannot work for whatever reason the SLC cannot chase you for it.

MsDelightful

thanks for the replies. Typical me, since writing this post I've gone and promptly forgotten about it again which is why I haven't been back earlier.

The SL is a bit of an oddity I have to say. I'm very frugal usually, I've never been in debt of any kind, I've never even OWNED a credit card as due to my background and upbringing it just doesn't seem right to spend beyond your means. That's why it's quite hard to accept that I AM actually in debt, and £12k in debt at that!! I mean, I've never owned/seen/earned that amount of money. :eek:

And it's not really because of the SL that I'm procrastinating about a job. Like I said, I usually forget that it exists at all! I'm still not clear what the advice is. I thought that if the rate of interest is merely that of inflation it's actually equivalent to a interest free loan? And that like one poster said just pay it off as it comes out of whatever salary you get and not anymore?

Believe me if it were a commercial loan I'd be eating sainsbury's basics and selling everything I own on ebay to pay it off - but is it necessary to make such sacrifices for an SL?

lipidicman

This is what I would do:
Eat the Sainsbury Basics (if you like them), sell off your stuff (that you don't need) on ebay. However, dont use it to settle the debt. USE IT TO FEED AN ISA. This will beat the loan, you have the option of paying the loan off and you have the security of the capital if a real emergency arises.

What I am saying is you should acknowledge that you have a debt, you should make plans for paying it back but since you can earn more interest than the loan charges it makes sense to delay paying it back (but dont delay making provisions for paying it back. You could if you knew you would qualify to a £30k job in a few years time, but it doesn't sound like you have anything mapped out)

Finally you say you are have a £12k debt but have never seen that much money. You certainly have! Maybe not all at once but you have spent it on something!