Should I repay my student Loan

lesleyA_2

Hi, I'd be really grateful for any advice on this as my parents, partner, friends ect all have their own differing opinions based on not much.

This is my situation: I went to university 2001-2005, I'm from Scotland but I went to england so got an english size loan to cover tuition fees. I can't find the last statement, I don't remember how much it was but the interest for the last year had been over £900. I don't earn enough to be paying it off automatically -it is likely I will never be earning enough to pay it off. I live a low cost lifestyle producing my own food and stuff.

My parents are offering to help me pay it off, using money in their savings that I would otherwise inherit (this part doesn't bother me, I didn't know there was money i would inherit) having been shocked by the accumulating interest. They would give me some towards it and expect me to use some money they gave me a few years ago which is in my savings. (This money was to help towards buying some woodland or some land to keep goats). This is not really my money and I didn't earn it, but it seems a shame to give up those plans to pay off part of a loan I'll may be not otherwise have to pay.

The other thing is, it would only be part of the debt, I will then have to decide if I should drain my own savings to help pay it off. This would be hard to do as it took a while to build them up and I think it is unlikely I will be able to build them up again.

So as I said it would be gutting to pour all the money I've saved into paying off the loan, but seeing it get bigger and bigger is a bit terrifying. Also my partner is of the opinion that I will have to pay it off at some point, with the government being so short of money they will change the rules so that his income is taken into account or whatever.

I wish I'd never gone to university, all I did was prove I'm a bit clever before going back to the life I would have lead anyway with a huge debt!

Tixy

Hi

Have you had a look at this - http://www.moneysavingexpert.com/loans/student-loans-repay if not it might help you decide.

MrsManda

Don't pay it off unless you have to. Yes the interest will accummulate but that's kinda irrelevant as you only ever have to pay 9% of what you earn over 15k a year and your loan doesn't affect your credit rating in any way (unless you earn over £15k and default on payments).

Read Martin's guide: http://www.moneysavingexpert.com/loans/student-loans-repay
for further advice

FATBALLZ

If you don't think you'll ever be a high earner, I really wouldn't bother. In theory you only pay back what you borrowed in real terms, however with low wage inflation and high price inflation the theory doesn't really stack up in practice.

I wouldn't waste your savings on it - if you never get a high earning job you are unlikely to pay it off in any case so you'll lose more in savings then you'd have otherwise had to pay back.

I do agree though that the repayment rules are likely to be changed, I can see the government dropping the threshold for paying it back and increasing the % of your pay they take off you. Im really glad mine is going to be paid off within 3 years or so, I've made £5k of payments or so and it's really depressing seeing that money that could otherwise go to good use just go to the government when I'm already paying a fortune in tax.

iolanthe07

I agree with all the above. Don't pay it off unless you have to; the interest accumulating is irrelevant since they can only take 9% of your salary if you earn over £15K pa. Your life style sounds terrific, by the way, and I bet you're a lot happier than most of us wage slaves.

lesleyA_2

Thanks a lot for the advice all, that was really helpful, now I just need to convince my parents!

MrsManda

lesleyA wrote: »

Thanks a lot for the advice all, that was really helpful, now I just need to convince my parents!

Perhaps they want to give you the money now to reduce the amount of inheritance tax you'll need to pay but want to do something useful with it? In which case it may be worth suggesting they put it into a long term ISA or premimum bonds or something else in your name?

woody01

So as I said it would be gutting to pour all the money I've saved into paying off the loan

You only have the money saved because you haven't paid your loan.

It also begs the question, why bother with uni if you are going to be a hermit goat herder?