Guide discussion: Should I repay my post-2012 student loan?

sheramber

Regardless of the size of the loan the repayments are set at 9% of earnings over a set amount. But the larger loan will take more repayments to clear and depending on earnings either loan may not be repaid in full.

silvercar

In my head, it doesn't make sense to pay the same for that loan as someone who stayed for 4 years and borrowed close to £50,000. What am I missing?

You are more likely to clear the lower loan in full and have no further payments.

Hhouse

Hi


I took out a postgrad loan for £9000 in 2016. I finished my studies in September 2017 and am due to start paying the loan back in April 2019. ( based in info I have been given from student loan company) . I have been charged at 6% since September 2016 and have currently racked up £700.00 ish of interest. I an now working and earn just over £46,000.


I am thinking to get a personal loan to pay of the student debt as this is charged only at 2.7%.


I s there any flaw in my plan that anyone can think of please?


Thank you

WendyS63

My son is a medical student so I think Martyn is giving the wrong advice and people should seriously look into this. By the time his 6 year course in medicine is over, he has intercalated at the moment he will owe more than £100 000, that will be a lot more if we had not decided to self fund.
His interest at the moment for one month is £267, going up monthly. He will hopefully be in a well paid job at the end of his training and I grant you he will only pay a small amount back every month to start with which will not even touch the interest being added on every month. By the time he has been working 10 years goodness know what he will owe but he is edible to pay it all back. This is yet another unfair tax. I am so angry that this has been allowed and only the ones who will not pay it back are being spoken about, check your stamen. It is in Student Loans in Scotland! They do not send you the statement, asked twice and two weeks later still nothing but Student Finance found it for us. It should be sent to the student every month so they can physically see the amount they are being charged when they have no means of repaying it so keeping the loan down. They should hang their heads in disgust.
No wonder all the doctors etc go and work abroad and go private, and I never thought i would say that!!

GDog

Martin's guide is very useful, but I am still unclear about one aspect of the interest.

Before I get to that, I do find it iniquitous that the higher rate of interest is charged between the course ending and the loan entering repayment. There is no logic for that. The lower rate should apply.

So, I have tried a couple of times to get the SLC to explain how the interest is calculated.

They told me that they work out the interest annually and then divide it by 12. They don't. Each month a different amount is added to the outstanding balance.
They then said it was adjusted to take account of the days in the month. It isn't as months of the same length have been getting increasingly "expensive".
So I asked what the effective interest charged is? They quoted the published rate. They deny it is compounded, yet it is. It took a very long time to get them to admit that the interest is compounded.

So, I ask myself why the lack of transparency? At the current bottom rate of 3.6%, without any repayments, the debt would double in 20 years.

Who benefits from this?

I'm not worried as I am unlikely to earn over the threshold.

Alonso14

I dont follow Martin's example of inflation: if wages do not increase in line with RPI, then even if interest was RPI + 0%, it is still costing me more to repay the loan

Jake_Formby

I am a recently graduated student with a debt of £48,000. As an Arts student I have just taken a minimum wage job. Although I hope to be earning more in the future, I do not ever see myself making the top 17% or so for whom doing anything other than simply paying the 9% makes sense.

However, I recently inherited £500,000 from my grandfather’s will and I am very confused as to what to do. If I invest this sum at an annual return of 5%, then the interest income plus my minimum wage income will immediately place me in the top repayment tier for whom repaying the whole student debt immediately makes sense.

However I have also thought of investing in a capital-growth investment that pays no income but accumulates capital. I understand I would be subject to Capital Gains Tax if I ever want to use any of this money (to buy a house for example), but as I understand it the CGT would be free from any 9% student loan addition and my student debt & repayments schedule would still behave in response to my minimum wage income status, and so this may be my best way forward.

Any thoughts / ideas would be most welcome

Ed-1

Jake_Formby wrote: »

I am a recently graduated student with a debt of £48,000. As an Arts student I have just taken a minimum wage job. Although I hope to be earning more in the future, I do not ever see myself making the top 17% or so for whom doing anything other than simply paying the 9% makes sense.

However, I recently inherited £500,000 from my grandfather’s will and I am very confused as to what to do. If I invest this sum at an annual return of 5%, then the interest income plus my minimum wage income will immediately place me in the top repayment tier for whom repaying the whole student debt immediately makes sense.

However I have also thought of investing in a capital-growth investment that pays no income but accumulates capital. I understand I would be subject to Capital Gains Tax if I ever want to use any of this money (to buy a house for example), but as I understand it the CGT would be free from any 9% student loan addition and my student debt & repayments schedule would still behave in response to my minimum wage income status, and so this may be my best way forward.

Any thoughts / ideas would be most welcome

Interest income is irrelevant for student loan repayments. It's based on national insurance income (i.e earned income).

koru

Hhouse wrote: »

Hi


I took out a postgrad loan for £9000 in 2016. I finished my studies in September 2017 and am due to start paying the loan back in April 2019. ( based in info I have been given from student loan company) . I have been charged at 6% since September 2016 and have currently racked up £700.00 ish of interest. I an now working and earn just over £46,000.


I am thinking to get a personal loan to pay of the student debt as this is charged only at 2.7%.


I s there any flaw in my plan that anyone can think of please?

Given the relatively small loan and your reasonably high salary you are unlikely to end up having any of the student loan written off. You will earn enough that you pay off the loan in full within the 30 year limit. So, your plan might be a good one.

Will you be able to pay off the personal loan before it becomes due for renewal? There's a risk rates on personal loans might go up in future. That's the only downside I can see.

peterbaker

I say to those teenagers who are reading this trying to decide what real higher education to seek (3 years at uni is not enough on its own) and what sort of lives to lead, the following:

First, I've not seen any reference to the 15% payback that will apply to more and more Plan2 students now when they have continued after their Bachelors and completed an extra e.g. Masters course to separate themselves from the crowd. Yes you read that right. 15% not 9% if you are a serious STEM student.

To EU and most of the rest of the civilised world, Britain is now looking a complete basket case in most respects. I strongly recommend anyone still with a chance, to jump ship to Europe or even further afield, before inadvertently tying themselves in further stupid knots and uncertainty here in UK.

Contrary to the concept that Martin and others are happy to massage upon the confused brows of inexperienced youngsters, the Plan2 scheme is completely contemptuous of the lives and aspirations of our young people - the ones we seem to expect to inherit the basket case we created and even now continue to weave to the astoundment of our world peers. We expect our new graduates to soon lead this country out of the ridiculous low wage little Englander mess it is now in. Why should they? Afterall, no-one wants to be PM right now, do they? And anyone remember the UK "Brain Drain" of the 1970s? It's on again for those who smell the coffee.

Our top STEM graduates should aspire to be true leaders i.e. leaders of working people not only of their own generation but of long term specialists of twice and even three times their own age. None of them should settle for any length of time to be continual low wage followers to be dumbed down by advice like Martin's to already blinkered little Englanders on this subject.

Within a couple of years of leaving university the factual small minority who are used by politicians as their stereotype top students who will supposedly earn more in their lifetimes than they ever would without a UK university education, should be noticeably well on that path, but very few are. In 2 years they should be on no less than £40,000 a year and once there, quickly double it to catch up with the uniquely London-based no-conscience banker graduate intake. They should also have found a way not be saddled with low salaries coupled to high accommodation expenses and high commuting expenses, all three of which are the norm in most of the UK.

In Europe the same types would almost all confidently expect to start on more than £40,000 and not have to suffer low wage doldrums and continue to live like students in rabbit hutch rentals. And they would pay the same salary deductions as the rest of the workforce - their university education would in many cases have been totally free and even further subsidised with living cost grants. In fact if they work part-time during their uni courses, then their grants would be taxed as income as further evidence that they are not special, just normal taxpayers from the moment they start to wait tables at 16.

So. Travel and learn from elsewhere as early as possible. The future isn't here, not even for higher education, and certainly not for high paid fulfilling leader jobs unless you call working in the financial services laundries as willing head-down apprentices to unscrupulous fat cats, fulfilling. We're a tiny island and there are no longer many fish in our seas. It's the world that is your oyster, and it, not UK, is open for business and for living. Ryanair is still cheap for starters. Go this weekend and check it out, whilst carrying yourself as an open-minded young European citizen, not close-minded like our witless PM who keeps turning up there embarassingly now.