Student Loan - never debt free?

crazyaboutsaving · 14 June 2008 at 5:54PM

Hello,

You're all quite lucky to be under the student loan scheme here in the UK. My student debt is overseas debt, which are basically large unsecured loans. :eek:The payments are significantly higher, they MUST be paid off or you will have to claim bankruptcy and even then it won't wipe all the debt (too many people did this in the past...). Also, the interest rates are variable and quite high. I definitely count my school loans as debt because it does affect my credit rating and the chances of securing a mortgage on a home in the future.

Idiophreak · 15 June 2008 at 1:52AM

Oldernotwiser wrote: »

I'm afraid that trying to pay off large amounts extra, soon after you've graduated, is just plain daft.

Don't really see why - if you have no other debts and can afford to pay it off quickly - for the rest of your life you'll actually enjoy your *full* pay packet. I'd like that, just on the principle more than anything else...

NUFCnutter · 15 June 2008 at 2:02AM

And in an ideal world so would everyone.

Northern_girl_2 · 15 June 2008 at 2:34PM

dudleyboy wrote: »

I think the "repercussions" to which Northern_girl refers is basically the SLC one day realising that you've not been repaying what you should have, when you should have, and rather than them merely saying "well, if you don't mind, can you start making the repayments again at the start of next month?", they could be saying "You owe us £ X,000 in missed payments. Failure to repay this debt by DD/MM/20YY will result in...[lots of legal jargon about court dates, CCJs, that sort of stuff]"

I strongly believe that we're going to be in a recession, or even a depression, over the next decade (or more!), with high costs of living, high inflation, high interest rates and high unemployment. Given the choice of repaying £100+ PCM now when you can afford to it, compared with £1,000+ in one go when you can't... well, I know which I'd go with.

Yep, that's exactly the kind of thing I had in mind. I was worried that if they realised at the end of the year or whenever they would ask for a lump sum to cover the payments I should have been making. Like I said, I don't know whether they could do this, but for me it just wasn't worth the risk in comparison to just making a small monthly payment straight from my wages.

Oh, and my first employer took the payments without asking too. It was when I changed employers that they stopped and I had to query it.

Northern_girl_2 · 15 June 2008 at 2:41PM

Idiophreak wrote: »

On the subject, I find the amount of people who don't consider this real debt a little bit weird - I mean it's still money you've borrowed. Would people be the same way if they had one of these 3% for life deals on £10 - £20k of CC debt - would they just pay the minimum and forget about it as "not real debt". Not having a go, I just think it's an interesting way of looking at it.

As other posters have said I think it is a combination of the fact that it is taken at source and a relatively low rate of interest. As it goes straight out of your pay it is easy to view it in the same way as tax and NI.

The low rate of interest means that practically everything else money wise is going to be a higher priority. For me, all of the other debts would be paid off first, which when you include the mortgage is going to be quite a while. Even once that it done (say 10 years down the line) then there are savings account where I can earn more than the interest on a student loan. For me it doesn't make sense trying to pay it back quickly other than the psychological benefits of being able to say I'm completely debt free.

Puzzledbubbles · 15 June 2008 at 2:50PM

Hey,

Me and DH both have Undergrad student loans, mine was taked automatically as soon as i hit the 12 months after graduation because my employer is really switched on with taking whatever it can, lol.

DH was not paying anything back and had been earning over threashold for about 18 months, after (rather a lot of) nagging he told his employer that he needed to pay it and within a month had confirmation that he would start repaying at the end of the following month.

Although they know he has been earning over threashold i think that they were just happy to start taking money from him, i would suggest that you just get your employer to tell the SLA that you should be paying incase the lovely government decides to change the rules again.

That said, i dont class it as a debt and see it as a tax the same as most of you

hbl_2 · 15 June 2008 at 4:29PM

I've now paid off everything except my student loan. (even the £500 overdraft in my sig is gone, I should update that...)

I consider myself to be debt free, which is a minor achievement, but I don't measure myself by that, I use my 'net worth' as an indicator, and that is still very much in the red due to my student loan. I am working to save that much against it.

Why bother paying it off any sooner if you can save as much and earn more in interest. Sure the interest rate at the moment is a criminal 4.8% but that should half in September and if it doesn't we should probably do something about it.

I have considered upping what comes out my salary to at least match the monthly interest so it won't get any bigger, but yet to decide whether or not to do it.

jess444_2 · 15 June 2008 at 6:02PM

I consider my student loan to be debt and want to be rid of it.
I borrowed £7000 and did not have to start repaying until my wages went up to £19000, about 3 years after graduating. Since then I have had to pay £138 a month (for past 5 years) and have about another 2 years to go. Despite Martins advice, at 4.5% my student loan is more expensive than my credit card, which is fixed at 3.9%. I think not viewing it as a debt is a bit dangerous. Interest will continue to be added and at some point you do have to repay it.

Student Loan - never debt free?

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