To wonder why anyone rushes to pay off their student finance?

[ChoppedChorizo]

A couple of friends of mine make regular overpayments with a view to paying it off quicker. Some have used inheritance to clear it. I don’t understand the motivation? The lot gets written off if you haven’t paid by X number of years.

Mine has continued to increase - I started uni in 2012 so my fees were around £7k per year. Plus living. It sits around £23k now.

Ive earned well enough but did a post grad (self funded) two years of training on the job and then had children and so two years of mat leave.

I don’t see the motivation to pay it off sooner.

Also bought and sold 4 houses in that time and never been asked about it.

Not everyone’s will get written off, only if you don’t earn enough. If you expect to be forced to pay it off via your salary (because of your level of earnings) then you might be better off to pay it off sooner depending on the interest rate. What rate is currently charged on your loan?

No, I guess it would get quite complex to try and use capital gains to work out student loan repayments.

For people who know that they will pay back the loan during their working life, it makes sense as they’ll save on interest. For others, it’s probably the psychology of having the debt and feeling better when it’s gone.

If you know that you’re going to end up paying it all off I.e you’re a high rate taxpayer, then it makes sense to pay it off early as you reduce the overall repayment amount.

And you wouldn’t have been asked about student finance because it comes off our payslip, but it would affect your overall affordability when considering a mortgage (as it did in my case).

However, if you’ve no realistic prospect of ever paying it off in full, then I agree overpayments make little sense.

Not for capital gains - I just mean not being asked for a lender. I have had to pay extra off at times when I’ve done a self assessment though from property income - which I guess also captures capital gains but don’t know for certain.

I have the means to repay it I have just never considered it a priority because I understood it was such a “cheap” loan that it’s should be the last thing to clear. Ie AFTER paying off your mortgage but I am happy to be corrected if I’m mistaken.

Oh I see. When I had a student loan my mortgage broker asked about the outstanding balance, I’m not sure to what extent it impacted my ability to borrow though.

I guess that depends on the rate.

If you are on plan 2 then a quick google suggests you might be paying 7.3%… if so that’s obviously not cheap. However, if you think you won’t ever pay it off then obviously it could still be better to leave it. I’d take a look and run some calculations based on expected earnings etc.

It's not a cheap loan now though. I'm sure it's getting on for 8% now
I work in mortgages, we deduct student loans if you're above the threshold to repay

I’m on plan 1 so it’s 4.3%

Well it depends. If you are going to earn enough that you will pay it off eventually, then you save interest by paying it off sooner rather than later. It is a bit of a gamble though!

Are you sure? If you started uni in September 2012, that's plan 2.

I worked 3 4 years pre uni and in theat time parents allowed me to stay at home, 2 years was A levels and 2 years gap. I didn't pay rent grabted I saved every single penny. And i paid my way through uni gratudated with 0 debt and money left over to purchase a cheap car.
I don't get why no one did this when the fees were only 1.5-3k annually. Now it is 10k it seems near impossible.

Wow what a debt to carry about. I would hate it and that would drive me insane and to depression to be that much in debt.
My ethos if I dont have the cash in my bank then I don't do it. And I save up until I can afford it.

If the fact that it’s continued to increase can’t explain to you why some people pay it off faster maybe you didn’t gain much life experience from uni?

It’s definitely plan 1 - I’ve just checked. Whether it’s because it was “drawn down” in August of that year?

That’s not exactly cheap, but yeah - if your mortgage interest is even higher than that prioritise putting any savings into the mortgage.

Not if if NOT paying it saves more than the payments made. Its paid off after 25 years.

Also it’s the only loan linked to earnings, so if you can pay it you don’t pay it. Unlike any other kind of finance.

This only makes sense if you’ve actually done the sums and don’t expect to earn enough that you’ll ever pay it off (without overpaying). You haven’t stated this so we’re all confused.

You’d still save money though directing that money to your mortgage, not having credit cards or car finance? Unless you’re totally solvent it doesn’t make sense to pay it first.

Many incomes will pay it off and therefore pay more by taking longer to pay it off.

Many people will also still be on mortgages that are less than 4.something percent.

Student loans are never asked when you apply for mortgages etc. I probably only paid about £1200 off over the past ten years - only got it deducted on the pay when got 2-3% of my basic contract pay as bonus. As SLC think I got this pay every time (I bloody wish)

Each year, the T&Cs change and its based when you take it out.

Plus with mine, if I retire - either hit state pension age or too ill to work any further, it gets cleared. When I die and any outstanding balance gets cleared.

I started uni in 2000 and graduated in 2003.

Not everyone has;

• supportive parents
• living parents
• parents with space to put them up
• parents who can afford to sub them
• the ability to work in a job that pays enough to save
• the ability to work and study

You’ve been lucky - not everyone is so fortunate.

Mine doesn't get written off until I'm 65 :(