AIBU to ask if you have a Student Loan, what is the estimated time-frame of clearing it? Was it worth it?

[christmastreesparklex]

Hi all

I graduated in 2013 and have £10,000 remaining on my student loan (Plan 1). I have calculated on my current salary that it will take me approximately 7 years (assuming a year out for maternity leave in the future) before I will have paid it off completely. On my current salary it is deducting approximately £150.00 each month, so definitely a noticeable deduction. The interest on the PAYE statements is currently 1.75%.

I am in two minds whether to start making additional payments to pay the salary off early to reduce the total amount paid due to the interest. I am also mindful that the earlier I pay it off, the higher my monthly salary will be in the future, particularly during the years I (hopefully) have children and nursery fees will be extortionate! I was looking for some advice if possible and also welcome a general discussion from those who also have a loan- if you are interested, you can calculate an estimate on when you will pay the student loan off via the link below:

www.student-loan-calculator.co.uk/

For those who don't mind sharing (AIBU!) what is your estimated time period for you paying off your Student Loan? Do you think it was worth the loan and would you have still gone down this route if you could go back in time? For me personally, I did a vocational university degree so I would not have been able to progress in my career without it, so I would say it was worth it! My DP does not have the same experience and is in fact in a completely different field which did not require any degree!

For those who have already paid their loan off, has it been noticeable on your monthly salary? I imagine it must have felt rewarding having made the last payment and finally free of your student loan!

I know with the Plan 2 student loans, the course fees and interest rates were higher and therefore; a considerable amount of students will not make the full payment in the time period before it is wiped. I suppose in this situation, making early payments would not be advised as you may end up paying more?

@ListeningQuietly

dsa Student loan counts as a reduction of income for mortgage purposes.

The amount you repay is tied to what you earn now what you owe
so paying bits off early
is UTTERLY pointless
as it will not affect your "affordability criteria"

I think we are misunderstanding each other.

@MyDucksArentInARow Apprenticeships are exploitative that’s why I’d never encourage someone to take one. Young people should be paid properly for the work they do and companies should invest in their future workforce.

Graduated in 2006 with a vocational degree and £13k worth of loans. Paid off the final lump in June 2015 when they wanted to switch me to direct debit so I cleared the lump sum then, but I did overpay a few times over the years. The interest rate was quite a lot higher at one point, and once we sorted out housing I just wanted to pay it off, particularly as I knew I'd have to pay it all off as it would only be wiped at 60, so it didn't seem worth paying extra in interest. I think a lot of it depends on your housing situation though, it's cheaper than a mortgage!

@carpettime, they are definitely both being paid back at the same time, my statement says that £x was received from HMRC and split between the two loans (not an equal split, more goes to the plan 2 loan)

[quote gillianan]@Tippexy have you ever applied for a mortgage??it's literally one of the first things they ask. how daft to think when asking your salary they wouldn't consider the fact that 9% of it is taken away alongside all other outgoings you have to list.[/quote]
9% of it isn’t taken away. It’s 9% over a certain amount - and the plan 2 amount that you can earn before deductions are made is even higher than plan 1!

From those few posters who explained they will likely be paying off their loans until their retirement.. I think its ludicrous! Its not a loan its a life time commitment and most of that payment will be interest

But some people's payments will be very very low because they only earn just above the threshold - like the poster who is paying £12 a month. On her current salary, she only has to pay £12 a month, any additional payments are unlikely to pay her loan off quicker, just pay extra money for no reason. £12 x 12 x 30 (or 25 years, not sure how long these loans run for) is about £4300, so probably less than she borrowed. The interest is immaterial, if you don't expect to pay much of your loan off, they could be adding a million pounds a year of interest and you'd still pay the same amount in total.

Unless you view the SLC or the government (not sure who the money actually benefits) as a charity case, it's misguided to overpay.

In your case OP, if you have other debt that charges more than 1.75% interest, you'd be best off overpaying that first and leave the student loan running along with the basic amount.

Those on Plan 2 loans that expect to earn more might want to look at it differently as they might clear all their loans, but people on average salaries certainly won't, so they need to view it as a graduate tax, that should be paid if you're earning above average, but not if you're not. If you decide to work part time, be a SAHP or suffer an illness or injury that means you step down or stop working, any extra money you've paid is wasted.

[quote DebbieFiderer]@carpettime, they are definitely both being paid back at the same time, my statement says that £x was received from HMRC and split between the two loans (not an equal split, more goes to the plan 2 loan)[/quote]
Oh! I’ve worked out why that is as DSis is only paying back plan 1. If you earn over the plan 1 amount but below plan 2 then yes you only pay back plan 1. If you earn over the £26k then your repayment is split between the two. (DSis is on £24k )

Ah, yes, that makes sense. I'm grateful for this thread actually as it has prompted me to check, and it turns out I will repay them a lot quicker than I thought.

oooh..at the present rate, I may get it paid off by the time I'm...120...
Seriously, low wages in retail, my age, later in life studying. Expect to get it written off eventually.

If you’re thinking about mat leave don’t be at it off faster. It was very helpful to see contributions drop to 0 when I was on 0 pay. You never know what the future holds especially if you are yet to have children. Putting the money into savings would be much better use than overpaying student loan. That said, the day I paid mine off was lovely.

I'm on Plan 1. Although my savings accounts earn basically nothing right now, I still don't think it's worth repaying it early. I only have about 5 months of payments left - I'm looking forward to the extra cash when it's paid off next year! It's equivalent to my monthly food bill. I think right now it's more sensible to have the extra savings in the bank ready to access if I need it for an emergency. With covid and all that shizz.
I have switched to the direct debit scheme so it's not possible to overpay on my last payment.

@christmastreesparklex I remember reading on the Martin Money site that it’s actually not the beat idea to pay your loan off early. I don’t remember the ins and outs of the reasoning but they’d done an in-depth breakdown of it all.

@Biscuitz whilst some may be exploitative, many are not. Especially degree level ones. My DP did one to get his degree, was paid a fair salary throughout and was in a much better position financially and skill wise than if he'd gone to uni. Same as an old school friend of mine, she's leaps and bounds ahead of anyone else career wise because she got 4 years of experience whist doing her degree and is now very successful.

A student loan is not like any other form of debt. You only ever pay a small (relatively) % of your wage on repayment. If you stop earning enough to repay it, you don't repay it.

Given that a majority of people will never repay their loans before they are written off there is a strong argument to scrap the system entirely and just move to a graduate tax, and therefore remove the confusing and stigma of accuring debt in order to pay for higher education.

I paid my loan off early. On the one hand, I felt a definite sense of emotional relief. On the other hand, I took some time off work the following year to care for a terminally ill relative and that period would have been easier had I had more savings. That said, other relatives chipped in to help because they appreciated what I was doing, and it might have been more difficult to make the decision to do it had I not been debt-free.

Graduated 2000, and paid off loan by 2008. It was ‘only’ £7.5k though. Even though to this day I’ve never had a salary where I had to make a contribution, I did so because I didn’t want it coming back to haunt me for whatever reason.

I owed about 16k when I graduated in 2002. Earned enough to have a small amount deducted from my salary for a few years, then had DC and became a sahm. I used to get a yearly statement from them but haven't for years now. I have no idea what my account number is and I can't find it via an email address because I didn't have one when I took the loan out in 1998

DS has a Plan 1 for his main degree and a Plan 2 for his post grad. Unfortunately you have to pay them off in tandem. The Plan 2 loan though much smaller has a far higher rate of interest so it would have been nice to get rid of that one but it's not worth forking out the cash from his savings as he needs it for a deposit if he buys a property.

Wow, I'm in awe at the high salaries that must be going on here, to be looking at being done in 7 years!

Had I had to do a student loan (I didn't, I'm from the days of grants), I'd never have paid it off(allowing for inflation). I doubt DS will ever pay his off, as history degrees don't tend to bring the money rolling in.

I think so long as you have no other debt, then it's clearly better to pay it off sooner to avoid interest. But student loans are usually really low interest, so if you were having to use any other credit, then it wouldn't make sense to pay it off?

I will never pay mine off! ! (32,000) I've either never earned enough or been on three maternity leaves. 😂😂 I'm now on M6 teaching salary but working part time ! I'm at peace with it 😊

Modern student loan interest rate is currently 5.6%
www.gov.uk/government/news/student-loans-interest-rates-and-repayment-threshold-announcement

and as kids are incurring up to £60,000 in a standard 3 year degree
they would be MAD to pay more than the 9% mandated

People worrying about paying it off and this stops people from lower-income families going to university. Think of out as a student TAX, a percentage that you pay when you earn enough, the balance of which gets written off after a certain amount of time. Why would you want to pay the government money you don't need to?

I don’t know how much I owe but I’m also plan 1. I didn’t start paying it back for at least five years after I graduated.

I have lots of debt that I’d clear before this, but if I didn’t have that debt yes I think I would overpay into my loan.

The amount taken from your salary is taken into account when applying for a mortgage!

@ProfessorofCunning

Graduated 2000, and paid off loan by 2008. It was ‘only’ £7.5k though. Even though to this day I’ve never had a salary where I had to make a contribution, I did so because I didn’t want it coming back to haunt me for whatever reason.

So you essentially wasted 7.5k on a debt that they won't chase and you're unlikely to ever be eligible to pay back...