2012 Repayment Options

RonMcJack

Hi All!

I've just graduated and I'm trying to assess my options. I have a student loan of about 40k now.

I'm on a fairly good graduate salary of £30k in tech which has a potential for good income growth due to the nature of the industry.

I have a decent amount in savings for a rainy day already from previous work, and my parents are in a good financial position to help me out with a deposit/student loan repayments, one or the other, not both.

I'm wondering if it is a good idea to get my employer to increase the amount I repay after £21k to boost repayments as it is paid before tax is applied. For example 100% instead of 9% above £21k so that way I would be paying £9000 to the student loan company instead of paying them myself via direct debit after tax has been applied (20% + NI). Something like £6100.

From rough calculations, not entirely correctly accounting for inflation, but I could wipe my debt after 6 or so years at this rate. (Assumes my income stays the same, hopefully it will grow but that means so does the loan interest...)

I'm extremely concerned about the terms of the contract changing (they already have done), which isn't exactly illegal either since the clause says "The regulations may change from time to time and this means the terms of your loan may also change. This guide will be updated to re ect any changes and it is your responsibility to ensure you have the most up-to-date version." This does seem like I have effectively signed a blank piece of paper.

What if they change the repayment amounts? What if they change the interest rates? What if they don't wipe it off after 30 years? What if the country faces financial hardship like Cyprus and Greece and it becomes a source of funding to raid to save the country coffers? Call me tinfoil hatted but the recent change only a few years after introducing the initial terms hasn't filled me with confidence.


So the choice is to leave it at 9% and hope the debt gets wiped off after 30 years, but I could end up paying a lot more back than if i downplay it hard now. Should I be saving for a house deposit instead with my parents help? Should I pay my loan down hard and get my parents to fund my house deposit? Should they pay off my loan and I save for a house deposit?

There are so many options and it seems like there isn't a clear cut answer as everyone's circumstance is different.

Opinions and suggestions would be absolutely fantastic!

Thanks:money:

ViolaLass

Are student loan repayments really made before tax?

RonMcJack

Yes, why wouldn't they? It is calculated before tax, so the percentage will be taken before any income tax and NI is applied.

My account is too new to post links... but if you search "student loan repayment plan 2" and click the studentloanrepayment .co .uk website and click "How repayments are calculated"


EDIT: Actually maybe you're right, thats what income calculator seems to say. Might have to rethink my calculations!

Richey_

Ron, having paid mine off after 10 years a few weeks ago. Viola is correct is earnings after tax not before. If I was you, leave your employer to make the normal repayments and then whenever you like (but without commitment) log onto the Student Loan Repayment website and make extra repayments.

I know nothing your personal circumstances, but if you are not a home owner it may be worth using any money for a house deposit. I know I was on plan 1 and had interest at 0.9% but house price growth for me was significantly higher and quicker than any interest paid on the student loan. Just one to think about and the total amount of your loan doesn't affect mortgage affordability just the monthly repayment. Plus if you never earn enough to pay it off then it is written off anyhow. You never know how th future may pan out so i would be tempted to concentrate on other investments and not worry about the loan. Just a personal perspective of course:)