Facing up to Student Debt - Advice on SLs needed please

Annie_Fanny

What do you mean don't worry about it, David Hellier? The OP does right to find out were he/she stands. Moneysavinmonkey may not have any other debts and quite rightly wants to pay this one off. I am sure the OP will tackle by either making direct overpayments or by putting the overpayment amount into a savings account. Good for him/her!

The reality does not have to be that you will be paying it off for the rest of your life. I paid mine off in a year and I was only on £12k!

I think this resentment towards student loans which seems to permeate throughout society is totally disabling. A debt is a debt. I would rather be free of the shackles to be honest.

lynzpower

David Helier with all due respect, what utter rubbish. theres Imelda, me and Annie fanny that have either paid off or about to pay off the lot. Im certianly proud of paying it back, and not about to try and get out of it.

Whats stealth about it? The government offered me money to live on, i chose to borrow and live on debt instead of earn, every other student made that decision should pay back what they lived on.

thats my opinion in a nutshell.

morg_monster

I'm currently earning £20,000 (so repayments should be £37.50 - is this right!! That means its going to take at least 25 years to pay off my debt!!!) and am 23 (no chance of writing off debt at 65 jitsuguy!)

Well, yes - if you continue to earn £20,000 for the rest of your life! In reality your salary will increase, so your repayments will increase. The capital will go down. If you were earning £40,000 then your payments would add up to £2250 a year, then it'll really start going down.

If I open an ISA which is to collect 'overpayment' money for SL repayment and nothing else then I could justify to myself, that once this amount equals my SL debt, effectivley I have paid my loan...and technically I'm not in debt. This would be quicker than making actual overpayments on the loan as interest rates work in my favour.. have I understood this right?

Yes. Thats right. By the time you have saved this much, though, you might prefer to use the lump as a deposit on a house, or to pay outright for a car, or some other necessity, and save yourself the interest on the loan you would have got. Or you might still just want to pay it off, depends how you feel.

Am still a bit worried that although you say SL doesn't count towards your credit rating, what if i'm supposed to be paying it back already but I haven't and so I have defaulted, would that give me a bad credit rating?

You only default if you start paying and then stop, when you still should be paying. If the SLC haven't contacted you again, then as far as they know you shouldn't be paying yet, so you aren't defaulting. However as you said, you should check that they got the right end of the stick with your last letter to them.

I think it is obviously a matter of opinion / psychology / mindset whether you consider your student loan a ball and chain or not. I don't, I would always rather pay the minimum throughout my working life and save in a high interest account. I know that my salary will increase over the years and it'll get paid off, and if not, the repayments are still a percentage of earnings so I won't feel the pinch. However many people - especially on this board - feel that debt is anathema and they just want to be shot of it at any cost. A friend of mine got a lump sum of £10,000 from a small trust fund when she turned 21, she chose to use it to pay off her loan, I thought she was mad, why not put it in a high interest account and let it earn you some cash, but she was adamant - she didn't want to think about it again.

Different folks etc...!

moneysavinmonkey

david_hellier wrote:

I wouldn't worry about it because it's a government stealth tax and the reality is you'll be paying it for the rest of your life, just like your taxes. In terms of worrying, worry more about the most expensive debt in your life and less about the little ones. Avoid debt, start saving.

It is exactly the fact that I'll be paying it for the rest of my life that is worrying me!

Just to clarify this is my only debt, I have 'avoided' all other debt, I don't have a car loan, mortgage or credit card debt etc... because I don't have a car or a house or any expensive clothes! Believe me, when walking to work in the rain/snow/wind I have been sorely tempted to get a car asap on HP!
Am trying to stick to the MSE way, facing up to my SL debt and getting organised is a big part of this.

lynzpower

good for you moneysavinmonkey

Belive me when you only have a few more payments left as I do, you will be so glad of paying it all off.

It will be 10 years in September since I took the loan out and still slogging away. But the end is in sight and its one brilliant feeling

morg_monster

That is a great way to be, monkey, but remember it is virtually impossible to avoid all debt, unless you are happy to rent for your whole life. Moneysaving isn't just about avoiding debt but also getting the best deal when you do have to go into debt (eg a mortgage is generally seen as a sensible debt to get into at some point because it is in theory one of the best long-term investments you can make).

Anyway as you say, put the money in an ISA and see how you go. If you find at the end of the day you don't need the cash for anything else, great, pay off the SL. If something unexpected happens in the meantime, then you've got a good 'cushion' there to stop you having to go into more expensive debt!! (touch wood that for you debt will always be a (well informed!) choice and not an inescapable nightmare)

Petree

Just to let you know, as the Son of a payroll manager thought I would say a quick note regarding what the company gets.

When you sign up for the job, after 1-3 months they get a SLC start letter 'its Green for Go take my money', when you change jobs the P45 has a tick box if student loan deductions are still to be made. When you have paid off you loan, or are soon too the payroll department get a SLC stop letter 'it's Red for Stop taking my money', they have 21 (i think) days to enact the stop and thats it.

So providing you don't work for yourself its all done for you. Payroll are just told to start and stop, so they don't have a clue how much you owe neither can they delay the payments for longer (it's been asked!), in addition overpayment cannot be taken straight from your pay.

HTH

Petree

Molanole

I took my first student loan out in 1996, it was the old style student loan where it doesn't come out of your salary and you have to be earning somewhere in the region of 21K before you start paying it back. Over the next couple of months however I will have paid it off completely (with the help of some backdated promotion related pay) and the thought of getting shot of it is wonderful.

My OH on the other hand, who also took out his loans around the same time as me, still doesn't earn enough to pay his back. It looms over him everyday and just adds to the total debt that he is in. Government stealth tax it might be but its a debt either way and thus is a real worry to some.

moneysavinmonkey

appreciate your point morg_monster,

Due to certain recent events I definately do not want to be at the mercy of my landlady forever... mortgage is inevitable for me at some point!

Hopefully as now I've found this site, I can save for a 'cushion' to cover me should anything bad happen & hefty deposit incase of house price falls.

I count myself incredibly fortunate that I've beneffited from the financial wise words of MSErs on here before I got myself in any trouble!

Feel much better about the whole SL thing now, will speak to SLC tonight and sort out ISA for overpayment savings. Thanks everyone.

lynzpower

isnt it right though that your ISA saviongs need to be making over £35 per month in order to beatr off the interest from SLco.

I have never understood this isa thing. Yes, by the time you have 10k saved or whatever to pay back you will have the interest + profit. But up to a median point you will be making a loss.?

"If you take out a new student loan, or if you took out a student loan to fund a course that started in or after 1998, your repayments will be based on your income. You only start repaying your loan when you earn £15,000 a year."

So if you are earning 15k ( 21 on the one weve got molanole) then you have no choice but to be paying it back. If you are earning less than 15k but can afford to put the repayment amount in the ISA, then yes you will earn 2% more ish on it in an ISA than you would if you repaid it. BUt after how long, can someone tell me does it take to hit that median point. As presumably the interest is getting loaded on top of other interest accrued. the interest is applied I can see on my statments from the date the loan was taken out

Im confused here