student loan ~~~~

sly_dog_jonah

Even if you are seriously considering making overpayments to the SLC, don't do it monthly. For interest calculations, they only apply your payments at the end of the tax year (through PAYE and manually). So even if you paid off £250 a month they would only subtract this off your debt at the end of the year, they would still charge interest on the full balance daily (not the full balance minus your payments). Its a bit of scam to say the least.

If you really want to pay it off, set aside an amount monthly into a savings account and then at the end or march (see elsewhere for precise cut off date) withdraw the money and pay it off in a lump sum. All the time its sat in your savings account it will be earning interest.

I subscribe to the school of thought which says sod em, they can have it back at minimum payments, but I'm going to save the rest of my money for MYSELF. I have every confidence that I will have no problems with mortgage applications in future, as reported by countless moneysavers.

morg_monster

that is really cheeky!! Even more reason to keep those savings stacking up else where. I never knew that sly_dog - nice one.

sly_dog_jonah

morg_monster wrote:

that is really cheeky!! Even more reason to keep those savings stacking up else where. I never knew that sly_dog - nice one.

Its downright criminal in my book! I'm 90% sure it's true though, read it somewhere on MSE forums. If you made monthly payments your annual statement would look something like this so I'm told (the actual interest charged are pie in the sky numbers):

April 5th Balance CF £10000
date transaction amount balance
1/5/06 interest £15.00 £10015.00
1/6/06 interest £15.02 £10030.02
etc etc
1/4/06 interest £15.10 £10150.45
5/4/06 payments (PAYE) £500 £9650.45
5/4/06 manual payments £500 £9150.45
Balance CF 9150.45

I know for certain that the PAYE payments are dated at the end of the tax year and I'm pretty sure the manual payments are treated the same.

morg_monster

Interesting. I found this here http://www.studentsupportdirect.co.uk/portal/page?_pageid=1647,468259&_dad=portal&_schema=PROTOCOL

If you have been identified as a PAYE or Self-Assessment repayer, interest accrual will be suspended from the start of the tax year until the end-of-year repayment details are received from HM Revenue and Customs (HMRC) (formerly the Inland Revenue). Interest for the previous year will then be calculated and applied to your account retrospectively upon receipt of your repayment details.

To me that sounds like student loans company only finds out about what repayments you made that year at the end of that tax year, from HMRC. Then it goes back and looks at your account over the past year and charges you the whole years interest in one go, rather than monthly, but it does kind of sound like they do take into account the 'repayment details' you've made throughout the year. Not too clear though at all. I find it hard to believe that if you say paid off half the loan in a year, they wouldn't take that into account for interest? but hey who knows..

it is worth remembering that student loans are supposed to be 'inflation neutral' that is, the SLC doesn't actually make a profit on these loans - the amount you pay back has the same value as the amount you initially borrowed. (of course if sly_dog IS correct, then this isn't really true.)

sly_dog_jonah

Hmm, looks like I've been proved wrong! Maybe the interest isn't calculated unfairly.

Still, I'd rather keep it in my savings than lining the pockets of the government.

Edit: just chatted with an SLC bod via chat and they seemed to think manual repayments would be treated in the same way as above. Which is good.

Here's an Old chat thread here: http://forums.moneysavingexpert.com/showthread.html?t=38341

Glitterari

I probably go with what a lot of people of this thread have said already - pay back the minimum payments and put money away into savings, pension or whatever.

The way I look at it, I am currently paying off my credit card, managed loan and car payments. The first two, paid off by Sept, car final payment in Oct. I am paying £600-700 per month off the debts. In september, I'm going back to uni to take an MA (should not be any extra borrowing on my part). Paying off these debts will take the (financial) pressure off me. Going to have a hard enough time trying to scrape money together to live, without worrying about meeting minimum payments on a credit card!

So, there is no point in paying off extra before uni (whoo a whole extra £20 a month or something similar). It's unlikely I'll be paying anything back during the MA - i won't be earning anywhere near the threshold. So I won't be able to even consider it seriously until i complete the MA. I'll be almost 28 by then.

28 with no savings, or pension or anything put away for my future. That scares the life out of me. But it's just way it's happened. So, when I finish my MA, I am going to scrimp and save and start putting money aside for my future. The SLC can keep taking their minimum payments. If by some miracle, once I have a house and in a well paid job with plenty in the bank, I find I have a spare £x that would clear the student loan - then I'll think about it. I'm sure plenty won't agree but having the student loan isn't going to hold me back - I've even noticed it doesn't even come up on your credit checks (well it's on none of mine!). So that's the way I'm going to do it - that's how I have prioritised things.

And I personally think that is probably one of the most grown up ways I have thought through something!

C xxx