Student Loans: "Should I pay mine off?" article Discussion Area

student_advisor

carlaz wrote: »

What are the powers of the SLC in terms of non-payers who are abroad with no assets held within the UK, can they make me pay from outside the EU or is a case of them being stuck? Any advice on this subject would be grateful please

If you move abroad, you are obliged to inform SLC. You must keep them informed of your salary so that they can convert it and work out your monthly repayments (9% of anything over £15k) which you then agree to pay by direct debit.

If you decide to move abroad and do not inform SLC, they can ramp up the interest rate on your loan to a commercial rate:eek:

The information they give out can be found here

It's always best to keep them onside:rotfl:

dsided

I spoke to SLC last week and they said that the APR, currently at 2.4%, will increase to 4.8% next month (September 2007).

I currently owe £14,970. As I don't earn enough for my employer to make payments, I've set up a £80 a month standing order payment.

Is this enough to keep the loan from getting bigger until I can start to reduce it by making larger lump sum payments? (when I can!).

Thanks for any advice.

student_advisor

dsided wrote: »

I spoke to SLC last week and they said that the APR, currently at 2.4%, will increase to 4.8% next month (September 2007).

I currently owe £14,970. As I don't earn enough for my employer to make payments, I've set up a £80 a month standing order payment.

Is this enough to keep the loan from getting bigger until I can start to reduce it by making larger lump sum payments? (when I can!).

Thanks for any advice.

If you can afford to put aside £80 per month, why don't you invest it in a high interest account? Why do you need to reduce your student loan?

dsided

Hi Student Advisor -- I've been advised to make payments towards it to stop the interest growing. I feel that all debts should be paid back as soon as possible, £14K is a lot of money!

If I put the £80 into a high interest ISA (for example) what should I do about my student debt? I do not see myself earning above the employer auto-payment threshold for, possibly, the next decade. Should I keep the interest static on the loan as I'm currently doing? Thanks again!

phlash

dsided.....

If you pay £80 per month off of the student debt you will have paid off £960 in one year. This will *save* you £23 in loan interest growth over the year. (960*4.8%*0.5) Simplified calc, but legitimate enough.
If you put the £80 per month into an ISA for a year earning 6.3%, which is out there atm, then you would save £30 in the year. You would therefore be £7 better off by paying into the savings account than paying off your loan.

The simple acid test is this: If the interest in a savings account is greater than the interest of the loan, then save and don't pay! i.e. 6.3% > 4.8% so pay the money into a savings account instead, that is the money saving thing to do.

I also have about £14,000 of student debt which I could pay off, but I won't be. (It is also a far better deal than a mortgage!) So remember, pay off all your other debts first, it isn't growing it is just keeping pace with inflation, so don't panic.

sly_dog_jonah

dsided wrote: »

I currently owe £14,970. As I don't earn enough for my employer to make payments, I've set up a £80 a month standing order payment.

cancel the standing order and save the money in a tax free high interest ISA as other posters have suggested. you'll be better off in the long term.

darkly

I decided that I didn't want to take the risk of not paying back while overseas. Phoned the SLC and they are posting me a form. Looks like I'll be paying around £180 per month back to them. Fortunately, no back charging or penalties will be enforced

Still need an answer on this higher rate tax though - not sure how good a position I'm in now the SLC charge 4.8% and my ICICI account is paying 6.3% gross (but I am paying 20% tax + another 20% after my tax return each year). Means that for the first time I'm getting a -ive return.

http://forums.moneysavingexpert.com/showthread.html?t=544604