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

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  • koru
    koru Posts: 1,494
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    Tom26 wrote: »
    Does this mean for 2017/18 his student loan interest rate will be 3.1% - or 6.1% ?? (Is the £21k 'earnings' threshold based on salary at tax year end - or actual income in the tax year?)
    The rate only hits 6.1% if his earnings are £41k per year. They gradually increase from 3.1% to 6.1% in proportion to the amount of salary greater than £21k. So, even if he was on £22k for the whole year, the rate would only be 3.25%.
    koru
  • Mogley
    Mogley Posts: 250 Forumite
    Tom26 wrote: »
    (Is the £21k 'earnings' threshold based on salary at tax year end - or actual income in the tax year?)
    The contributions are based on gross monthly pay threshold of £1750 earnings. Your son will be paying £7.50/month contribution at £1833/month earnings.
    Full details of repayments and interest can be found here:
    http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678715&_dad=portal&_schema=PORTAL
    You should pay attention to the needs of the moment - otherwise there is no future. But to ignore the future is foolish - living solely for the moment leaves nothing for when the next moment arrives.
  • BoxerRules wrote: »
    I am not currently a student ( I graduated more than forty years ago) and I applaud Martin for his efforts to put this issue into perspective.
    ... ...
    Was I better off than today's students?

    I graduated in 1970 and now have two millennial children living at home, rent-free.
    In the context of the cost of a degree, the question "Was I better off than today's students?" is only mildly interesting but I think any answer should take into account, for each case:
    1. the typical income tax, National Insurance and Purchase tax/VAT paid by a graduate (I feel mine were much higher)
    2. "expectations" - that latter seriously affect how "well off" you feel and I feel that my children's are much higher than mine were, including in terms of the environment and global justice.
  • The MSE advice is, again, very useful. However I wonder how it applies to someone, such as I know, who started a course, say with OU, and then "dropped out" with, say only £3000 student loan? Their salary profile over the next 30 years could mean that they repay their loan+interest in full but might do better to clear it much sooner? Perhaps a topic for the next "incarnation" of this guide?
  • I've just completed my degree, having studied part time, and skipped a year via credit transfer my student loan is currently just over £11,000. I've not worked for a few years but I am looking at going back into work in the next month or so with a starting salary of between £25-30k. I'm 42, so not sure if the full 30 years is valid for me but if all goes as expected with my career then I expect to repay the full amount. This being the case, should I look at paying more on my loan payments to pay it off quicker?
    Why pay more if you can pay less!! :j:j:j
  • I have a £15k loan after pulling out of uni and won't be going back. I currently earn £14k and may earn £21k plus in three or four years. Any suggestions? Thanks
  • Have I made a mistake?

    I am going into my final year of study and only took a loan out on my first year of study so at the moment my debt is £9,000 + interest. As I have paid off a year of study already, am I better off paying all of my student fee's off or taking a loan for my final year?
  • Ed-1
    Ed-1 Posts: 3,867
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    edited 7 September 2017 at 8:48PM
    Billy1996 wrote: »
    Have I made a mistake?

    I am going into my final year of study and only took a loan out on my first year of study so at the moment my debt is £9,000 + interest. As I have paid off a year of study already, am I better off paying all of my student fee's off or taking a loan for my final year?

    Noone can answer that as with student loans, the amount you repay depends on what your future earnings are. The size of the debt is mostly irrelevant.

    Many people on modest salaries will pay the same if they have a debt of £20,000 or a debt of £100,000. The only difference is the amount that the Government will write off which is no worry for the student.

    With interest of RPI+3% added annually most people's debts escalate into unrepayable territory anyway so it becomes a 9% tax above £21,000 for up to 30 years. Paying off the debt voluntarily by paying fees upfront is like paying tax upfront that might never have needed to be paid.
  • silvercar
    silvercar Posts: 46,865
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    With interest of RPI+3% added annually most people's debts escalate into unrepayable territory anyway so it becomes a 9% tax above £21,000 for up to 30 years. Paying off the debt voluntarily by paying fees upfront is like paying tax upfront that might never have needed to be paid.

    The chances of fully repayimg are higher if you have a smaller loan. You need to look at the chances if repaying more than 18k to see if its worth not taking it this year.
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  • koru
    koru Posts: 1,494
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    Billy1996 wrote: »
    Have I made a mistake?

    I am going into my final year of study and only took a loan out on my first year of study so at the moment my debt is £9,000 + interest. As I have paid off a year of study already, am I better off paying all of my student fee's off or taking a loan for my final year?
    So, you have £9k that you could use to cover your year 3 fees, but you want to know if it is better to hang on to that money and instead take a further £9k student loan, leaving you with a £18k loan?

    As others have said, it depends what you would otherwise do with the £9k and what you will earn over the 30 years after you graduate. You can get an idea of the latter from the following Economist data, which shows the average salary, 5 years after graduation, for most subjects:
    https://www.economist.com/blogs/graphicdetail/2017/08/graduate-earnings

    So, you can find the average salary, 5 years after graduating, for your subject and university. You should have a fair idea whether you are heading for a first or a third, which will influence whether you earn higher or lower than the average for your class.

    Most graduates will be on £30k after 5 years, so that is £9k above the £21k threshold, which means they will be paying 9% x £9k= £810 per year. If their salary continues increasing, they will be paying off more. I would guess most graduates will have paid off a £9k or £18k loan while they are in their 30s.

    Unless you are studying, say, creative arts at a uni that has unusually low selection criteria (or you expect not to be in work most of the 30 years), I'd say you are likely to pay off a £9k or £18k loan in full. This means you are unlikely to benefit from any of the loan being written off.

    Even then, you might be better taking the loan, if this means you can use the money for something that earns you higher interest than the SLC interest. That includes reducing other loans (such as overdrafts, credit cards, mortgages), which saves you interest at a higher rate than the SLC interest.
    koru
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