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Student Loan & Mortgage weigh up...
13 Answers
I finished university in 2003 with the maximum loan possible to repay. It took me a few years to find myself in a job where i have a salary which i can afford my bills and live the life i want - i may scrape the overdraft at the end of each month but i am sensible with my money and good at saving.
However I have since discovered that my student loan has multiplied over the years, despite making salary contingent repayments and it now feels completely out of control. For the past year I have worked overtime and paid £200 into my student loan to attempt to get rid of it. I calculate that i will be doing this for a fair few years yet to clear the sum. My boyfriend, who i rent with, thinks this is ridiculous and i should pay this money into savings for a mortgage. My worry is that while im saving for a mortgage the student loan will grow again and i will be paying it for the rest of my life, ultimately paying 10 times (or more) the amount i originally borrowed!! I understand it is important to be thinking of mortgages but surely it is better to get one mess out of the way before I start with a new one?! please help!
However I have since discovered that my student loan has multiplied over the years, despite making salary contingent repayments and it now feels completely out of control. For the past year I have worked overtime and paid £200 into my student loan to attempt to get rid of it. I calculate that i will be doing this for a fair few years yet to clear the sum. My boyfriend, who i rent with, thinks this is ridiculous and i should pay this money into savings for a mortgage. My worry is that while im saving for a mortgage the student loan will grow again and i will be paying it for the rest of my life, ultimately paying 10 times (or more) the amount i originally borrowed!! I understand it is important to be thinking of mortgages but surely it is better to get one mess out of the way before I start with a new one?! please help!
Answers
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Martin Lewis considered this very point in Money saving Expert. This might help.
If all you are paying is 1.5%, since mortgage interest payment are higher, I'd be putting the excess into paying off a mortgage (there is...
If all you are paying is 1.5%, since mortgage interest payment are higher, I'd be putting the excess into paying off a mortgage (there is...
18:26 Sat 07th Jan 2012
Martin Lewis considered this very point in Money saving Expert. This might help.
Assuming you have a post-1998 loan you are far better off in terms of the interest paid on the outstanding balance than your predecessors.
If all you are paying is 1.5%, since mortgage interest payment are higher, I'd be putting the excess into paying off a mortgage (there is a minimum sum you have to pay off on the Student Loan driven by your salary level - but I guess you know that).
http://www.moneysavin...s/student-loans-repay
Assuming you have a post-1998 loan you are far better off in terms of the interest paid on the outstanding balance than your predecessors.
If all you are paying is 1.5%, since mortgage interest payment are higher, I'd be putting the excess into paying off a mortgage (there is a minimum sum you have to pay off on the Student Loan driven by your salary level - but I guess you know that).
http://www.moneysavin...s/student-loans-repay
The rate of interest on student loans is very low and if you have been repaying through earnings AND made some additional payments it's hard to see how it can be increasing and there is certainly no chance of you "ultimately paying 10 times (or more) the amount originally borrowed".
The student loan differs from many loans in that you only need to pay it back when you income exceeds a certain figure (it was around £1250 a month), and if you never work again you won't have to repay another penny. I would just regard it as an extra tax rather than a loan.
I suggest you put your mortgage, overdrafts and credit card bills first before you consider making additional voluntarystudent loan repayments
The student loan differs from many loans in that you only need to pay it back when you income exceeds a certain figure (it was around £1250 a month), and if you never work again you won't have to repay another penny. I would just regard it as an extra tax rather than a loan.
I suggest you put your mortgage, overdrafts and credit card bills first before you consider making additional voluntarystudent loan repayments
As I understand it - you're saving for a mortgage, not actually paying one off.
Just compare the interest rates and pay the money into whichever one has the highest rate (just remember that your savings will be taxed, so take this into consideration).
So, say for example, your student loan is being charged at 1.5%, if you can find a savings account of 2% ish and above - pay the money into that (assuming you pay tax at the basic rate).
Just compare the interest rates and pay the money into whichever one has the highest rate (just remember that your savings will be taxed, so take this into consideration).
So, say for example, your student loan is being charged at 1.5%, if you can find a savings account of 2% ish and above - pay the money into that (assuming you pay tax at the basic rate).
I generally agree, Gizmonster, but there is a further consideration, and that is for some people they may never have to repay their student loan so it would be effectively written off when they stop working, and some may never have to repay a penny. This is particularly the case for students who will be hit by the £9000 a year fees from 2012 when repayments won't start until earnings are around £21000 pa (I've forgotten the exact figure). So in some cases it'll never be a good idea to pay off any more than the student needs to.
Thank you so much for all these answers. Factor30 my apologies I haven't explained myself very well - I have made monthly salary contingent repayments, but these have been minimal as my salary is only just over the 15,000 mark so the loan amount has grown significantly. This last year i have been earning more and worried about it so made the extra payments. Buildersmate the website you have suggested is great, i have thoroughly read through all the information and made the decision to stop breaking my back paying the £200 and just let the it come out of my monthly salary. Then if i have some extra cash left over i will put it in savings. Thank you all! :-)
I assume your loan was for around £15000 (as I think the fees element was only £1000 in 2003) so with indexation it would be growing by around £250 a year now if you had made no repayments.
Assuming your earnings were below the threshold of £15000 and are now around £16000pa, you will now be paying off only around £90 pa from income. So yes, it would now be increasing in absolute terms each year-by around £160.
But in real terms, after inflation, it is not increasing.
If your earnings stay at £16000 (increasing by RPI) you'll never pay much off but you don't need to.
Assuming your earnings were below the threshold of £15000 and are now around £16000pa, you will now be paying off only around £90 pa from income. So yes, it would now be increasing in absolute terms each year-by around £160.
But in real terms, after inflation, it is not increasing.
If your earnings stay at £16000 (increasing by RPI) you'll never pay much off but you don't need to.
Different scheme for different loan deals.
Loans pre-1998 that have not ever been in arrears are wiped clean 25 years after your repayments started (even if payments have previously been deferred) when you reach the age of 50 (or 60 if you were over 40 when you started the loan), or if you become permenantly unfit to work, or if you die.
Post 1998 loan debts that have not been repaid, including because of payroll earnings consistently less than the payments threshold, are wiped clean once you reach 65 for loans taken before September 2006, or 25 years from the first April of graduation for loans after September 2006.
They are also cancelled if you become permenantly unfit to work.
Loans pre-1998 that have not ever been in arrears are wiped clean 25 years after your repayments started (even if payments have previously been deferred) when you reach the age of 50 (or 60 if you were over 40 when you started the loan), or if you become permenantly unfit to work, or if you die.
Post 1998 loan debts that have not been repaid, including because of payroll earnings consistently less than the payments threshold, are wiped clean once you reach 65 for loans taken before September 2006, or 25 years from the first April of graduation for loans after September 2006.
They are also cancelled if you become permenantly unfit to work.
No, I don't know anything about that - nor can I find any reference to it.
But it would seem logical that pension income is treated no differently from earned or investment income when it comes to repayments - assuming that age or other criteria do not allow for cancelling the outstanding sum.
A specific question to SLC perhaps?
But it would seem logical that pension income is treated no differently from earned or investment income when it comes to repayments - assuming that age or other criteria do not allow for cancelling the outstanding sum.
A specific question to SLC perhaps?
Taking a loan today is not the best decision. A lot of students think of it as a great opportunity, however, I the end you will have to pay more. Sure, it's good to think that after graduation you can find a job and will have a chance to repay everything. Some students even get essay papers online to start working part-time already in college. But wouldn't it be better to abstain from taking a loan in the first place? Staring your independent life with a debt is depressing, so it's better to taste the life and save up first.
Student loans can certainly add up due to interest rates. I myself was a victim of having to repay triple the amount of what I originally borrowed. Fortunately after much researching on how to alleviate this burden I cam across http://
I hope this helps Renny!
I hope this helps Renny!
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