Student loan calculations and consolidation

Dakta
Dakta Posts: 550
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edited 30 January at 10:05AM in Student MoneySaving
Rather than make a few seperate threads as they're both loan based questions I thought I'd put them both here, hope someone can help

Background - I'm doing ok on paper, but due to personal circumstances and supporting people a few years ago I racked up a lot of debt, my income is reasonable, life should be relatively affordable but I'm treading water a bit with not a lot left over at all, my aim is to do what I can to increase resilience this year. 

Question 1) I have two student loans, one on plan 1, another on plan 2. Because of my salary I pay quite a lot into these, and these are going down and I estimate have another 2.5-3 years left before both get paid off. One plan (plan 2) doesn't have a lot left at all (about 1500), the other (plan 1) about three times as much. 

I've been using a variety of calculators online with not a lot of luck, because of the fact I'm on two plans they don't seem able to cope. What I want to figure out is, will plan 2 with a lower balance get paid off quicker, and if so and will it affect the overall repayments?


Question 2) Based on my salary I should be able to live comfortably but it's a stretch because of historic debt. I've worked hard to get it down, and it's slowly getting there. I noticed that the repayments for a loan I took out a few years ago are substantially lower than what Im paying out in total to other debts each month. Despite that, if I could get a loan of this size I'd be able to wipe out most of them. Because of my credit history I can't get a loan of this size anymore, but if I did I'd be able to comfortably afford it and have more headroom for living and unexpected expenses. It would push the overall time to being debt free down the road, but my job is stable and prospects are good. I'm looking at this because whilst I can't have it now, I am putting so much into repayments (and I do hit them) I can only imagine it's a matter of time before I go good again. 

The main aim here, I think is respite in terms of monthly outgoings  - I work hard, I've got reasonable prospects at a good, stable job -  I even have a side gig, but I'm barely making it quite frankly it's just down to events in my life. 

Just wondering if we can look to consolidation or the fact at least one student loan repayment is coming close to completion as means to assist. 

thanks for listening!

Comments

  • enthusiasticsaver
    enthusiasticsaver Posts: 15,292
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    I would do an soa so we can advise you better.  There is a link in my signature.  

    I would think it unlikely that paying off your student loans would be a good option given they used to be fairly cheap borrowing although with inflation high last year that would have made it more expensive.  It is coming down now though so moving it to commercial rates is probably going to be a lot more expensive.

     Consolidating debt is also not a good idea before examining your budget.  That often shows where money is leaking and to get your finances on a sustainable footing you need to see whether you are finding it a struggle on what you say is a good salary because of debt or because you overspend and don't budget.  If it is the second you will just rack up more debt after consolidating which will make  the debt higher. 

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  • Dakta
    Dakta Posts: 550
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    Thanks for taking the time to reply, I'm not so much wanting to pay my student loan off early (though it would help me a lot to not have to pay it), I was just wondering if completing the plan 2 payments (leaving the plan 1) would impact the amount I put out each month overall on SLC - its complicated but from running through some examples I don't think it will, whilst it'd settle one plan the other would just take more by the looks of it. 

    I've filled out that form, not sure how to post it (just c+p?), because my situation is complicated I've had to guess some exact figures as I pay some things for an adult dependent (but itl be close  - within a few pounds) 

    I dont know what or how much of it to post but summary is I have approx £225 left over after all expenses, realistically this will go on 'dynamic events' that cant be predicted but we do mottle through (just). 

    Bulk of it goes to credit cars and a loan

    One thing i will add is I am a single income household, so that's probably a big impact on why we struggle (the household doesnt get to benefit from 2 incomes tax personal allowances, I'm on higher rate etc)
  • silvercar
    silvercar Posts: 46,736
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    edited 27 January at 11:41PM
    For student loans you pay 9% over the lowest threshold.

    the amount you pay between the thresholds goes to the lower threshold loan and the remainder to the loan with the higher threshold.

    The threshold for plan 1 is currently 22,015 and for plan 2 it is 27,295. So if you earn above 27,295 then take 9% of your income above 27,295 as the repayment towards plan 2 and (27,295-22,015=5,280) x 9%= 475.20 a year towards plan 1. They will be attracting interest at different rates, so the calculation isn’t that straight forward.

    repaying all of plan 2, leaving yourself with just plan 1, won’t change your repayments at all. Repaying all of plan 1 will mean that you only make payments on income above the higher threshold, so saving yourself 475.20 a year.
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  • Dakta
    Dakta Posts: 550
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    Thanks for that, you put it in a way the sites I was looking at wasn't clear about - ah well nevermind, looks like I'm in it for the long haul there xD
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