Should I Pay Off My Student Loan? 2008/09 article discussion

Former_MSE_Dan · 17 July 2008 at 10:38AM

UPDATE AUGUST 2009: The guide has been updated for 2009/10 so this discussion thread is now closed.

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Should I Pay Off My Student Loan? Article

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Lokolo · 17 July 2008 at 10:57AM

Nice one. Hopefully people will actually n otice this though!

kerrij · 28 July 2008 at 3:49PM

I'm not particularly financially minded so i was wondering if anyone can help?

Martin talks in the article about there not being any 'real' charge because the rate of interest is the same as the rate of inflation.

I borrowed around £10,000 over the three years i was at university and I recently received a statement from SLC saying that i now owed £12,000 and that i was being charged £54 per month just in interest! i got my payslip for August and they have started to charge me £27 per month as i am now earning over the threshold.

What i want to know is that does the amount i owe go down with inflation or will this stay up? It seems to me in that case that i will end up paying too much?! I'm in a bit of a panic because if i'm only ever paying back that 5% interest or whatever it is per month i'm never going to be paying back even the interest!!

This just doesn't seem like an amount i can ever realistically pay back. i was seventeen when the SLC came into my college and gave me the forms to fill in. I wish they had made it much clearer just how much money i was going to have to pay back and i never would have bothered.

Masomnia · 28 July 2008 at 4:13PM

The amount of money you owe will continue to go up by inflation; even if inflation falls, there's still inflation, and it will still increase by that amount. So the amount you owe won't drop, but the increase in that amount will drop.

Deflation can happen, though it hasn't happened here for a long time, what effect that would have I don't know...

I wouldn't worry about never paying it back. They cancel it after so many years (depends when you went to uni), and it isn't passed on to relatives should you die.

jamtart6 · 29 July 2008 at 5:37PM

I'm not really one to voice an opinion strongly, but I don't understand why we shouldn't pay the student loan back more quickly than necessary??

Scenario: I've got a student loan for £8000, with an variable interest rate (currently 4.8%). I didn't earn over the minimum wage for 2 years (ie. only repay when you earn over £15k per year), so my loan went up during this time as interest is still charged so we'll say my loan is now £9000 for arguments sake.

So I've now paid back £60 per month out of my wages (£720 per year), yet the interest on the loan is going up by approx £400 per month, so surely I'm only paying off £300 per year overall??

It'll take me years to clear the debt plus interest, yet if I pay it off now in full or at £200 per month then surely that's better in the long run than just making the minimum monthly repayment of £60??

Am I missing something vital with this? I have no need to borrow money in the future (except only for a house) so surely its best if I pay the loan off as soon as possible?

Can someone explain to me why I shouldn't pay it off in full now? I would be most grateful

melancholly · 29 July 2008 at 5:45PM

jamtart6 wrote: »

Can someone explain to me why I shouldn't pay it off in full now? I would be most grateful

without cutting and pasting from the article, i don't know how to explain it any better than martin... if you've read that and still want to pay it back, then i guess you should!

kerrij · 30 July 2008 at 11:58AM

Masomnia wrote: »

The amount of money you owe will continue to go up by inflation; even if inflation falls, there's still inflation, and it will still increase by that amount. So the amount you owe won't drop, but the increase in that amount will drop.

Deflation can happen, though it hasn't happened here for a long time, what effect that would have I don't know...

I wouldn't worry about never paying it back. They cancel it after so many years (depends when you went to uni), and it isn't passed on to relatives should you die.

Thanks:T !

It still makes me worry though i hate having outstanding debts, i'm just beginning to crawl out of the hole i dug myself during uni!! I think seeing that come out of payslip every month is what will bother me the most.

Although I am pleased to read that Martin says because my loan was from the SLC it won't be counted when i am applying for a mortgage etc.

So another question:

Would it be cheaper to simply pay my minimum amount each month as i have just started to this month, for the next twenty five years or whatever until they cancel it, than to actually pay the amount back in full?

Does anybody know a way other than calling them where i can found out after how many years it's cancelled? I can never get through to them, and they're not very helpful when i do!!

satriales · 30 July 2008 at 3:01PM

jamtart6 wrote: »

Can someone explain to me why I shouldn't pay it off in full now? I would be most grateful

If you put the money that you would have used to pay off the loan into a savings account you will be earning more interest than the 4.8% (soon to be 3.8%) that you are currently paying on your loan.

So by saving that money instead of paying off your loan you will be better off and you have some money available in case of emergency.

lwt2006 · 31 July 2008 at 12:19PM

I have read Martin's article and understand what he's stating (I think), but does this make sense to anyone?

Have today received my final revised statement.

I pay currently £41 per month, (started repaying in Jan this year).

The monthly interest is £54 on average.

In Sept 2007, I owed £13500 and now I owe £13700 approx.

So my loan is going up. It feels like minimum payment - will it ever start coming down?

Or is it just because I've only just started repaying and I will see it come down in future years?

I hope this makes sense and thanks in advance if anyone can offer clarification.

kerrij · 31 July 2008 at 3:30PM

lwt2006 wrote: »

I have read Martin's article and understand what he's stating (I think), but does this make sense to anyone?

Have today received my final revised statement.

I pay currently £41 per month, (started repaying in Jan this year).

The monthly interest is £54 on average.

In Sept 2007, I owed £13500 and now I owe £13700 approx.

So my loan is going up. It feels like minimum payment - will it ever start coming down?

Or is it just because I've only just started repaying and I will see it come down in future years?

I hope this makes sense and thanks in advance if anyone can offer clarification.

yeah this is the same kind of thing i was confused by, so i'm asking in my last post would it be cheaper simply keep repaying the minimum amount each month until they cancel it in twenty years time than actually try to pay it back in full.

lwt2006 · 31 July 2008 at 5:50PM

Just re-read your post kerrij!

It's the thought of paying for the next 25 years, every month, without seeing it go down, that is bugging me.

As I was a mature student, I will be 65 then, anyway!:(

Should I Pay Off My Student Loan? 2008/09 article discussion

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