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AIBU?

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Original poster

It's daft to pay off student loan

281 replies

Home77 · 06/03/2019 15:09

with inheritance when you are SAHM? friend says they did this...can't help thinking it is a shame as they could do with the money. they are in their 40s and surely student loans get wiped off after a certain number of years.

OP posts:
Original poster
Home77 · 06/03/2019 16:12

Might need top cut and paste as MN seems not to like that link- it says can get paid off early due to benefits such as PIP / ESA if ongoing, before the 30 years..

OP posts:
Hanab · 06/03/2019 16:13

If you can afford to please do so .. what some people dont realise is if no one payed back their student loans for the future generations there will be even less help in this regard.

RedRiverShore · 06/03/2019 16:14

Maybe if you didn't need a degree to do jobs that previously needed only GCSEs or A levels, then many people would not have bothered to go to university and used up all the money.

TalkinPaece · 06/03/2019 16:20

I have no problem with student loans
but putting a 6% interest rate on them is criminal
as is charging that much interest while the kids are still studying

also, Universities should only get all of the money once the student graduates
to stop them paying £££££££ to vice chancellors with £9250 fees for shit courses

grannieanne · 06/03/2019 16:21

I've got no intention of paying mine off, ever. Due to ill health I had to leave before I finished my first year, didn't actually pass that year but I still have a debt of 12k ish...

HoustonBess · 06/03/2019 16:23

Lots of the loans have been sold off to private companies so if you pay them off you're not replenishing the public coffers at all, you're giving money to a load of shareholders. I'm in no hurry to pay mine off, you're better off building up savings.

user1471426142 · 06/03/2019 16:24

Financially it is stupid. Most people but especially a SAHP would make far better use of an inheritance by building their financial security than paying of their student loans when they don’t need to. I say this as someone who has actually paid back their loan but I wouldn’t have paid back a penny more than was required of me.

The loan as it stands now is a graduate tax in all but name. There are not many people lining up to pay tax that they don’t need to. It would help enormously across the board if people stopped thinking of it as debt in the traditional sense.

Home77 Ignore the posters getting at you. You would be making an utterly ridiculous move financially if you did pay back student loan when you’re not earning enough to do so. You are adhering to the terms of the agreement you took out.

prh47bridge · 06/03/2019 16:24

My view (without having read the full thread)...

A student loan isn't really a loan. It is a graduate tax with a lifetime limit on the amount you will pay. I believe I'm right in saying that the only reason it is structured this way is so that we can charge EU students for attending English universities. If, like Scotland, English universities did not charge tuition fees, they would have to provide free education to students from any EU country (but not Scotland!).

I therefore agree with the OP that it is daft to pay off the loan if you don't have to.

Cyantist · 06/03/2019 16:25

Depending on age and when she went to uni it might not get wiped until she is 60 or 65.

She will no doubt have seen the amount she owes go up year after year.

If she is planning on going back to work at some point and will start paying it back she will be paying a lot more due to all the interest.

Confusedbeetle · 06/03/2019 16:26

Interesting rhetoric, not a loan a graduate tax? So you get some money to help you get a tertiary education and then there is no moral code that this is a debt that should be paid back? I must be very old fashioned. In fact, I paid for my degree out of my own money, how very crazy. Who benefitted? I did. Just because you don't have to pay it back until you are earning enough to do so, does not mean you should avoid it. Wonder where all the money comes from? The money tree

45andahalf · 06/03/2019 16:29

I have one of the first old-style loans, and because I'm part-time, I have never earned above the threshold for repayment (around £30k). I'm in my 40s now, so it will probably get written off before I have to repay. But earlier this year they offered to write off the whole thing if we paid a one-off payment of £4,000. We decided not to take them up on their kind offer.

goingonabearhunt1 · 06/03/2019 16:31

Its daft to pay it back early; better to put it in an ISA or use to pay down some of her mortgage or something (use for a house deposit if she's currently renting?) Most ppl don't seem to understand how student loans work, as PP say it's not the same as credit card debt etc.

Original poster
Home77 · 06/03/2019 16:31

Ok- To add to the situation friend is a nurse, and is hoping to go back part time. Probably would still not over the threshold. I think she shouldn't have had to have loans anyway for her nursing courses, and is now paying it back from the 1990s while at the same time having to do a back to nursing course.

OP posts:
Original poster
Home77 · 06/03/2019 16:33

Of could have opened junior ISA as think they did not use the child trust fund for children which was available when they were born. We put a little into that so they will have some when turn 18...

OP posts:
Godowneasy · 06/03/2019 16:33

My daughter is at uni currently in London. I'm considered to be on a low income for the purposes of the loan, and a single parent. DS has had to take the maximum loan for fees and maintenance. After three years, her student loan will be approx. £64, 000. I've advised her not to ever worry about it.
I'd very much hope that she'll not pay any of it back in a lump sum from any inheritance she may get in the future, but just view it as a graduate tax when she works until it eventually gets cancelled.
She could invest the inheritance instead and that would either cover, or at least off set the graduate 'tax'.
It's very sad that there's still people around who think they can't afford for their child to go to university.

Milliways · 06/03/2019 16:34

My DS is 23 and paid his off. He is earning a very high salary for his age, and ran the numbers and calculated it would save him a load in the long term as he was always going to be making payments, but the interest was mounting up fast. His bosses all checked and agreed with him as the interest rate is ridiculous. He overpaid for a while then lump sum paid it off from savings. He now puts that to saving for a mortgage and has an increased disposable income to use in any calculations.

However, he agrees you need to be confident in your earning capabilities before doing this, and working with financial experts helps!

squeezysparklyballs · 06/03/2019 16:34

@Confusedbeetle

You're not old fashioned at all. Previous generations got their degrees paid for.

It's a tax. I didn't pay for my a-levels and I won't pay for the majority of my degree.

TalkinPaece · 06/03/2019 16:42

squeezy
Not only did we not pay tuition fees
but we got a living grant from the government
and we got to claim housing benefit on our rent
and we got unemployment benefit in the holidays

I feel no guilt at all that my kids may not pay back the extortionate loans that have been spent on vanity projects at many universities

Cromercrab · 06/03/2019 16:43

Squeezy - the repayments ARE a tax. That's the whole point and it's what makes it a reasonably fair system (on paper). Those who benefit from their additional years of education by getting a wage above the national average, pay back a portion of the costs of their education. If you want to educate a big slice of the population to tertiary level and beyond, it's not otherwise sustainable, is it?

And, no, I wouldn't have used a windfall to pay it off, I"d have continued to pay off during my working years. And if it gets written off before I paid it all, well, I guess I just didn't earn enough!

ajandjjmum · 06/03/2019 16:43

I agree that it is sensible to view it as a graduate tax. But if you are able (no other borrowings etc.) to pay the 'tax' upfront, therefore avoid extortionate interest fees, why wouldn't you. Especially if you expect to be earning a decent salary over a number of years.

RandomMess · 06/03/2019 16:43

The thing is you look at the terms and conditions of the loan and decide whether to take it on or not.

The original loans, I always thought I would above the threshold within a decade but I never did because of the economy, wages haven't kept up with inflation etc 🤷🏽‍♀️

Loanhelp · 06/03/2019 16:44

What effect does increasing interest actually have though? 2 years post graduation, I owe £40k. I'm never going to pay that off, I'm a teacher and my earning power will never be enough. So what impact does increased interest have on someone like me?

lazymum99 · 06/03/2019 16:45

No-one should use an inheritance of that amount today off a student loan. She is not breaking the terms and conditions if she does not earn over the threshold.
When people say they never intend to pay it back I assume they will never being earning over the threshold.
I think if you are on PAYE you would have to lie in order to not pay it back. No-one is saying to do this.

AliceAforethought · 06/03/2019 16:46

I still have a student loan from a postgrad course in 2000-2001. It’s less than 2K, and the interest is titchy. I’m not working at the moment for a variety of reasons, and in my previous job I earned just below the payback threshold.
If I’m ever required to make a payment or pay it back I will, but I’m certainly not going to volunteer it when there are better things I could be doing with my money. Can’t imagine wasting an inheritance on it.

TalkinPaece · 06/03/2019 16:46

loanhelp
So what impact does increased interest have on someone like me?
Absolutely none at all
The interest is just a random number.
You will only ever pay 9% of your earnings over the limit.
Whether you owe £1000 or £100,000

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