Repay Loan?

jonnyblue

OK so i received my P60 today and was checking it over and noticed the section about "Student Loan Deductions = £0"

That got me thinking about this loan as i had managed to easily "forget" about it so far. Basically the last job i had i was making contributions to pay this off but since i changed employment 2 years ago they have never took payment. Originally i contacted SLC and advised them of the change in jobs and they just said "Dont worry it will all process through automatically", i rang a couple of times and then forgot about it when they did nothing

I owe around £13k and the thing is im in 2 minds what to do:

1. Say nothing and until i change jobs, probably get away with making no contributions.Though this obviously means the interest is added on and my loan grows each month.

2. Contact them again and start making payments

Realistically the loan will take a long long time to pay off, I earn about £20k at the moment and with not much chance of that increasing substantially (Not sure how long that would take to pay back at the current payback rates??). I always looked at it as though im just going to pay a slightly higher tax for the rest of my career rather than as a loan that has to be paid back asap.

What does everyone else reckon? The other thing that worries me a bit is that i plan on emigrating at some point over the next 3/4 years so ill guess this will be an issue then and they will probably want to know why i havent paid for so many years?!

SamMoffatt28

I think you already know the answer! Pay back the loan, it will never go away!

jonnyblue

Yeah i know what your saying but im looking at it this way: (although my maths is crap so this may not be that accurate!!

Owe £13,000
Earn £20,000

Repayment is 9% of anything over £15,000.
In my case i would pay back 9% of £5,000 per year - £450

However the loan is accruing interest at 3.2%
£13,000 * 3.2% means £416 interest a year

So a year of repayments would mean id clear around £34 off my loan!

Like i say my maths is pretty rubbish and the interest figures would change as i pay it off but unless i overpay then it looks like i would owe this debt for many many years (if i ever pay it off). so if i get away with not paying it then is it worth it and just let it build up with the intention of never really paying it off??

Tirian

You are correct to say that until you earn over £20,000 you will not be doing much more than paying off the interest if you repay at the standard rate. You could of course pay over the minimum, and this would reduce your debt.

However, the best solution is to take any money that you would pay off your debt, and save it into an ISA or high interest savings account. This way you will actually do better than if you were actually making payments, as the interest you receive will be higher than you are paying on that part of the loan.

I would advise that you save at least as much as your minimum payment would be. And resist any temptation to spend that saved money on something else, as that destroys the whole point!

Tirian