Student debt - what you should really know
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To be perfectly honest as a student, you need to use your loan, unless your parents have the savings. It is so expensive being a student. The bottom rate halls are over 2,800 and a loan can just be 3,500 giving a student just over 700 to survive the year on. And is just for one year. Renting houses is no better at 325 for a room in a student house with bills on top.
So the question is, with a maxed ISA and savings in stocks and shares, do I pay off my loan first, or keep the money in savings? As the compound interest may still rise, and whilst my maxed ISA will raise some interest, is it worth it in the long run?0 -
Savvy_Sue wrote:Well yes, but the general idea is that at the end of the mortgage you have a house you can sell if you need the money, whereas at the end of the tenancy all you have is your deposit back, if you're lucky!
(Sorry for off-topic)
Nope - there is this idea that buying is ALWAYS better than renting, which is untrue.
There are two parts of the mortgage repayment, the interest and the capital, my rent is less than just the interest portion of the mortage required to buy where I rent - so its better for me to rent...0 -
Another thing to bear in mind is that student loans may be cancelled if, for example, you become disabled, or they may be paid off if you become a teacher, for example.
If you already paid them off by making extra payments when you didn't have to, then you don't get this benefit.
My vote goes with saving any extra you can, but putting it in a savings account (or using towards higher-interest debt) rather than paying it towards your loan.0 -
The student loan has well and truly confused me. I haven't done the maths (but I will!) but the interest rate is 3% which is lower than hig interest savings, isa etc etc. However, I graduated in 2002 with approx 9k of debt (and I lived at home! whoops) and began paying pack in apr 03. I called for an outstanding balance just before xmas 04 and was told I hadn't paid anything off yet as it is tallied up every April.
ok. With april 05 looming I recieved a letter detailing how much I'd paid off between 2003 and 2004. So it seems they don't take any money off your debt until april, and theyre a year behind. In the mean time you are losing potential interest earnings (however small it may be) and paying higher interest than you should on your debt because they dont do the accounts until the end of the year (financial).
I may have the very wrong end of the stick so can someone hit me with the right end!.
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I don't actually know, but I would guess that although they don't calculate the balance till April, they will work out the interest based on when the payments were actually made. (Similar to savings account interest which may be calculated annually, although it is based on when the money actually goes in and out of an account).
It's just my guess though, if anyone has any more authorative information then please share it...
student100 hasn't been a student since 2007...0 -
plymouth_janner_boy wrote:ok. With april 05 looming I recieved a letter detailing how much I'd paid off between 2003 and 2004. So it seems they don't take any money off your debt until april, and theyre a year behind. In the mean time you are losing potential interest earnings (however small it may be) and paying higher interest than you should on your debt because they dont do the accounts until the end of the year (financial).
This is exactly the sort of thing we need to figure out. Calculating in this different way means we pay different rates.
Tell me, how much did you get charged in one year and for how much?Order of events: Banks lose our money -> get bailed out -> were inflating GBP to cover it -> now taxing us -> next will grab your funds direct -> things get really desperate to balance the books. What should have happened?: banks go bust and we lost our money much quicker0 -
I shall dig out all my slc correspondence and investigate the maths. maybe I should have read the t&c's before I took out the loan.....0
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I've read some of the bumph and still not got a clear answer.
The "guide to terms and conditions" says:
"Remember that from the moment your loan is paid to you and until you pay it off in full, interest will be charged on a daily basis. The interest will be 'compounded', that is, added to the total amount you owe, every month."
The SLC website says:
from http://www.slc.co.uk/noframe/lr/sss/repaydet.htmlWill I be able to request a current balance? You can request a current balance from SLC if you have details of all repaymnets you have made, however SLC are only told by the Inland Revenue of the total deductions from your wages, or self assessment tax returns after the end of the current financial year.
However, you can calculate your current balance yourself by deducting all the loan repayments collected by your employer, as shown on your payslips for tax year, and then adding interest. The interest rate from September 2004 to August 2005 is 2.6% per annum.
Previous interest rates are listed in the Facts and Figures section of this website.
If you really want to know the answer then the full details are, I believe, given in the Education (Student Loans) (Repayment) Regulations 2000, as amended. (you might want to find a friendly Law student...) student100 hasn't been a student since 2007...0 -
The only thing that need be considered when comparing interest charged on Student Loans and what can be earned by putting it in savings is the APR. The fact that interest is added monthly is irrelevant, because the amount of interest charged is the same. From Sept 1st 2004 the interest rate is 2.6%, which is based on the RPI in March 2004. The new interest rate from Sept 2005 is likely to be higher, because the RPI in Jan and Feb 2005 has been 3.2% so March is likely to be very similar. See the bottom line of this table table. The past March RPI figures match the interest charged from the following September by SLC over recent years.
As long as the rate of return from savings (after tax if applicable) is better than the charged APR on the Student loan, then you are better off never making additional repayments to SLC. Save you overpayments in an ISA instead. Its a shame the mandatory PAYE repayments to SLC only get applied at the end of each tax year but thats the fault of the Inland Revenue not the SLC - or maybe of the government who set the rules!
My outstanding loan is earning >£300 a year by being in a Cash ISA at 5.25%, even taking into account the interest charged by SLC.Cider Country Solar PV generator: 3.7kWp Enfinity system on unshaded SE (-36deg azimuth) & 45deg roof0 -
Well I have about 20k in debt to the student loans.
once you reach debt as high as that you cease to worry about the effect it will have on you later in life.
Put simply unless I earn about 60k.year my loan is effecively unpayable. I can't pay the whole thing back and never wlil unless I hit 60k+ salary threashold and even then it's pretty unlikely I'll be able to pay it back.
My only concern is how it will affect my ability to get a mortgage and whether the repayment history will affect my credit rating because as with all student loans if I don't earn above 15k/year (and atm i'm happy to do that) I won't pay any of it back for years. I'm under the impression the repayment history of your student loan doesn't affect your credit rating, only the amount of loan.
I've just accpeted that basically I'll be on a higher rate of income tax than everyone else for the rest of my life. Our income tax is fairly low for Europe anyway 22% (some places are 30%), but even then only on a high rate above 15k/annum.0
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