Worth paying back student loan?

jamtart6

Hi - am new to the forums!

My better half has an 8500 student loan. He graduated in 2005 and earns less than £15,000 so does'nt have to start paying his loan back yet. .......

HORRIFYINGLY the Student Loan Company STILL charge interest even if you earn less than £15, 000 which everyone I have spoken to didn't seem aware of this.

The loan is cancelled out in 2040...perhaps we should hold out for that!

Is it worth trying to pay the whole lot back asap or just pay the minimum amount of interest which is around £300 per year?

We are saving for a house, so wondering which to put our money in first? The house savings fund or the student loan??

What would you do?

1012donna

jamtart

How do you know that it will be cnacelled in 2040? I got one in 1996 and haven't paid any back as I don't earn enough. I don't earn anything at the minute as I'm a housewife and was wondering when mine would be cancelled.

15lsp

HI I am in a similar situation. My student loan stands at £15k it was a 4 yr degree. I graduated 2005 and earn just under 17k so I pay about £4 a week off the student loan out of wages. I pay £40 a month off as well which covers the interest. I know its the lowest loan you can get but its a worry that the amount is increasing and paying off £4 a week isnt going to get me far! Im not too bothered about the actual student loan debt as there isnt a rush to pay it back but I sleep better at night knowing my debt isnt getting any larger.

jamtart6

i read somewhere they get cancelled in 25 years ..which would be 40 years.

Thanks, my idea was to put the money in a high interest savings account and concentrate on the house first.

I still think its awful that they charge you interest even though yu are earning under £15k. If you never earn over 15k what happens?! an £8k loan becomes massive!

SO glad i dont have one!

15lsp

The student loan debt is wiped off when you reach 60/65 or you die.

Sillychuckie

wahoo, bring on death!

Zziggi

15lsp wrote:

The student loan debt is wiped off when you reach 60/65 or you die.

isn't it if you don't reach ever earn a wage to start paying back after 25 years of graduating? I was looking forward to being debt free in 2022....

jaffacakesmmm

Zziggi wrote:

isn't it if you don't reach ever earn a wage to start paying back after 25 years of graduating? I was looking forward to being debt free in 2022....

Loans from this year will be wiped after 25 years. For the rest of us still in HE or graduated will have them wiped clean when aged 65.

Outstanding loans are written off:

when you reach 65 (loans taken out before September 2006)
after 25 years (student loans taken out for the first time in September 2006 or later, even if you are already on a course)

Apparantly, if you go to live abroad the interest rates change (increase).

OP i wasn't aware either that you received interest when earning under the threshold value of £15000. I had another student loan which despite paying voluntary repayments for some period, has only paid off the interest. The loan amount to repay is now considerably more than it was when I left HE.

OP - Is your other half seriously ever going to earn a high salary to compensate repayments? The industry I intend to work in is low payed and so would spend the rest of my life paying my 2 student loans off unless I happen to win the lottery.

I am under the impression that student loans are considered when applying for a mortgage - to what degree I am not sure but it is worth finding out. If you can successfully apply and receive a mortgage with the loan, then keep saving to get yourself on that property ladder. Pay off the loan, if your other half wants to, when you can.

I do wonder though, how many students will not pay off their loans and wait for it to be wiped clean.

tr3mor

jamtart6 wrote:

I still think its awful that they charge you interest even though yu are earning under £15k. If you never earn over 15k what happens?! an £8k loan becomes massive!!

The real value of the loan isn't increasing at all though!

Say you took out a loan of £10,000 on the same terms as the student loan 10 years ago, if you never paid any interest, and assuming a 3% per year inflation rate you would now owe £13,439.

If you had another £10,000 ten years ago and put this into a savings account paying 5% per year you'd now have £16,288.

Inflation is the cost to government of lending you the money. If the government had been able to save the £10,000 it would now be worth the higher value to them. Hence if they lent you the money at a 0% rate, they would have lost £6000.

You have to remember that the government's money doesn't come from the kindness of Gordon Brown's heart. Nothing is free, someone is paying taxes for everything they spend.

Linguistic_Chimp

Hi there,
I have been living abroad, in Belgium, since I graduated and am earning 30,000 pounds/year so am well above the threshold of repayment. Being languages students, me and all my friends used to say that we would run off abroad to avoid paying our student loans back. It is perfectly feasible to do that BUT here's the glitch:

If you go abroad and do not declare that you are there and what your earnings are (so they can assess you and begin direct debiting your account each month) and then return to work in the UK at a later date, they will apply a higher rate of interest to your loan for the entire time you were undeclared abroad. Sting in the tail or what?

So I decided to follow their way and pay it back dutifully. When I finished uni my loan stood at 18000 quid. They assessed my income and I have paid 130 quid back every month for the last 2 years. Despite this my loan has only gone down to 17000, because for each payment of 130 I make, 40 quid gets added to the loan in interest. :mad:

This makes me really sick and using a debt calculator online, I worked out that it will take me roughly 11 years to pay it off, by which time I wil 36. And that's without taking account of the pay cut I am about to receive since I am moving back to the UK, hence my automatic repayments will be reassessed and decrease.

I did have one idea though, to lessen the interest and be able to pay my loan off quicker.

I could play the 0% Super Balance Transfer game. Say I got a credit card that allowed money to be transferred directly from the card to my bank account, I could do say 7000 quid and use this to make an additional payment to the student loan company, reducing my loan to 10000. This would decrease the amount of interest earned and reduce the time taken to pay it off to roughly 7 years (making me 32 when it's done instead of 36).

At the same time as paying off my SLC payments automatically through my wage (I'm moving back to the UK) I could keep switching the credit card debt over to 0% credit cards and pay off as much as I could afford each month.
Not only would this reduce the length of time spent paying the whole student loan off, it would reduce the interest paid and make me feel more in control of my debts.

Still though, it's a big undertaking. What do you people think?

tr3mor

Linguistic_Chimp wrote:

Still though, it's a big undertaking. What do you people think?

You'd pay it off even quicker if you used the entire of your 0% cards and put them in a high interest savings account.