may as well just pay the minimum until I'm 65

dmg24

lkmc01 wrote: »

my family have advised me that taking the student loan to pay for a house deposit is a good idea as the interest only rising with inflation. couldn't afford to save anything , so never reach a house deposit otherwise. I would imagine my starting income to be about 18000 to 20000. at todays income level I can't see me earning more than £25000 to £28000

With that attitude why did you ever go to uni?

littleemmie

It may only seem like a small amount per month now, but as you progress in your career and life it will be an awful lot more. Think about when you have your house and a mortgage to pay, bills, a family to support, insurance, credit cards etc etc (I appreciate not everyone will have all these however, and others will have these + more), you will resent that student loan payment as you could use that money for more important things! Surely it would be better to pay off how ever much you can afford per month, not just the minimum, to reduce the debt quicker?

Also, as you will have been in University for 5 years, am I right in assuming you are doing some form of post-graduate study too? If so, wouldn't you like to think that those 5 years will eventually help you get a much higher paid job than an undergrad degree - in which case the student loan minimum will be higher than you are estimating.

Finally, do you really aim to be in debt for, effectively, the whole of your life?

CLAPTON

Actually inflation is the chancellor hidden friend.

Assuming someone earning 25,000 now who never gets promoted but simply only gets payrises in line with inflation, then assuming a modest 3.8% inflation rate, in 10 years that 25k will be 36k, in 20 years it will be 52k.

Now in reality since 1948 there has been a real growth in the economy of about 2% per year and its unlikely that inflation will stay as low as 3.8% and you might actually get a real promotion then in 20 years time you will probably be earning 100,000 in nominal terms.

Of course the governament may up the 15k threshold but I wouldn't hold your breath.

Blacksheep1979

Wow someone has high hopes for their future.

[Deleted User]

Right.. Lets do some repayment maths

25k per year / 12 = 2083 - 1250 = 833 * .09 = 75 quid payments
30k / 12 = 2500 - 1250 = 1250 * .09 = 112
40k / 12 = 3333 - 1250 = 2083 = 187

Now, i'm 5 years out of uni and my salary is edging towards the 40k mark, mostly because i've been promoted a couple of times. I would not be happy paying out that much still (it's more than my pension contributions).

[Deleted User]

Right.. i've hit Excel big time.. my estimate is that if you started paying back 16.5k this year, on a starting salary of 20k, with 3% payrises and 3% interest on your loan, you'll pay your student loan back in about 20 years.

Oh, and your debt will have cost you 25k

wbaguesty

ringo_24601 wrote: »

Right.. i've hit Excel big time.. my estimate is that if you started paying back 16.5k this year, on a starting salary of 20k, with 3% payrises and 3% interest on your loan, you'll pay your student loan back in about 20 years.

Oh, and your debt will have cost you 25k

I also did similar calculations to you, I left University after being there for four years in 2007. Came out with 9,000 student loan. I had my statement come through about a month ago it hurts me to see the £35 interest going on top every month. I am not earning enough yet to go over the £15000 barrier but will be very soon. I found out today that I could make extra payments via standing order so I have done this to try and reduce it.

Even though I know you can get better interest rates in savings accounts I would like to think that in the future when I am earning a lot more I wont have to pay back the student loan out my wages.

Lokolo

You need to think differently.

The £35 a month on top does not matter, who cares if its getting bigger. The fact is, your money could be put to better use, instead of paying off the student loan.

For example:

You have £100.

Student loan rate is 4.8% - by using the £100 to take some off student loan you will save yourself £4.80 a year.

6% ISA - you put the £100 in an ISA. You will save yourself £6 a year.

---

Please, please please understand, yes the student loan maybe rising £35 a year for you or something similar, but the money is better off elsewhere than paying back extra amount.

pboae

dmg24 wrote: »

With that attitude why did you ever go to uni?

Maybe they are just being realistic. Despite having spent most of my adult life in education my current field is very poorly paid. I am not likely to reach a salary of £28k in the foreseeable future, but I love what I do, and quite obviously I am not in it for the money. Not everyone goes to university purely as a means to earning more money.

If I had to start as an Undergrad now there is no way I would ever be able to stay in my current field *and* pay off the loan. That's not defeatist, it's just realistic.

Oldernotwiser

wbaguesty wrote: »

Even though I know you can get better interest rates in savings accounts I would like to think that in the future when I am earning a lot more I wont have to pay back the student loan out my wages.

This seems totally illogical to me. You want to pay your loan off now whilst you're comparatively badly paid so that you won't have to pay it when you're much better off.This makes no sense at all!!