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.

I guess if you are a sahm or earn under the threshold for making payments then you wouldn't rush to pay it back if you never expect to be a high earner. Anyone else, especially given it is a pretty small amount by today's standards would be wise to pay it back as quickly as possible otherwise you will end up paying back much more than you borrowed.

I’ve mostly paid it off recently because the rate is higher than my savings or mortgage payments and I would have cleared it in my working life. I’ll be glad to have the extra money each month and be rid of it.

Yes exactly and I think the threshold is £24,990 and you only pay on earnings above that, so you’d have to be earning well over an average salary (which isn’t the majority) to clear it much earlier than 25 years based on repayments alone.

The reason many never pay it off is because the interest is so high that you are paying long after you have cleared the original sum borrowed.

If youre a high earner and will pay it off eventually then it makes financial sense to pay it as quickly as possible.

If youre a low earner than I guess no mad rush. It really does depend on the plan though. The rules on the current plan are such that it isn't cancelled for a very very long time and far more people will pay it off.

The interest rate was at 6 percent not so long ago. The interest depends on the base rate. I want to pay mine off ASAP because I don't want to be paying the interest and I want rid of the big chunks of money coming out of my wage every month. It also has an impact on any affordability assessments.

It was very low for many, many years because it’s the same rate as inflation? I’ve just read it’s RPI linked plus 1%

I can see your point re the chunk, I’ve never had an issue borrowing what I need and never been asked by a lender what the balance is.

Surely anyone who has bothered to get a degree in the first place should want to be earning well above an average salary.

Our student loans have significantly impacted our ability to borrow on our mortgage. I’ll never be able to pay mine off as my fees were so high and interest is insane. We can pay my husbands off and this will help as they’re looking at monthly commitments not balances

You can calculate what you will pay back here:

studentfinancecalculator.co.uk/

I put into the system a 4-year course starting in 2020 with a £100,000 loan and a salary of £35,000. This person would pay back N estimated £81,000.

When it gets wiped is down to when you went to uni. Those of us who started between 1998 and 2006 (in England, Wales and NI) will be saddled with ours until 65.

www.gov.uk/repaying-your-student-loan/when-your-student-loan-gets-written-off-or-cancelled

I had an issue with my mortgage. I needed a bigger deposit because of it. I also looked at shared ownership years ago and knocked back on affordability because of it. The interest rate used to be so low and it was great but I don't trust that it won't increase again. I just want it off my shoulders.

I’m plan 1, after years of paying some off then it going back up due to sodding interest/me being on mat leave or part time I’m finally getting it down. I’m going to overpay. Mine doesn’t get written off after 25 years sadly. I now earn around 50/60k (self employed) It’s only about 5k now anyway.

Plan 2 is 7.3% though. My son paid his off. He is high earning and will pay in full. However interest was racking up especially when he was earning less with some years interest being higher than his payments that year. Now he is in the situation where he will pay it all back after 13 years of loan he decided to make a lump sum payment to save 4 years of interest from a bonus. His loan was over 30 years.

Those going to uni this year will pay over 40 years. Low earners will never pay it all back, High earners will pay it back quicker and minimise interest. Middle earners will be squeezed middle again. Pay it all and with loads more interest because of the term.

Historically 18% or so would pay in full - under new plan 50-60% will!

Mortgage companies take it into account in terms of affordability (rather than as a capital debt).

You forget too that under plan 1 your tuition was probably only about £3k rather than over £9k. Thus the monthly payments for those plan 2 would go on for far longer even when they earn more.

Yes, couldn’t believe it when I discovered this as wasn’t far off the 25 years

Almost everyone has a degree. I earn more than the threshold (and actually quite a way in excess) I only do 3 days so I actually pretty good!! Nonetheless the interest on my mortgage debt is 5x more than my student finance per month - so we overpay that instead.

My thoughts exactly.

Mine gets written off when I'm 65. I'm determined to get there without paying it off!

Top tip: if you have two jobs, you get two thresholds so have to pay back less.

Because no-one likes a debt hanging over them - same as a mortgage, get it paid off as quickly as you can.

Why will yours not get written off? I’m plan one aswell. I am in a similar position re earnings. Just as I started making progress I had two mat leaves where I was obviously below the threshold and then it accumulated again.

No wonder the economy is on its arse..

Mine won't ever be paid off.

I owe more now than when I graduated and it'll be written off in 9 years.

If you were realistically looking at paying it off due to your salary, it would he worth overpaying and saving on the interest.

I didn’t know this? I have self employed and employed income and simply “top it up” with my tax return on the SE part.

I was earning 21k straight out of uni 25 years ago (and with a 2:ii, not even at a fancy graduate program or anything - just a job which used my degree), I started loan repayments very quickly (can't remember when) - I only had about 10k of loans though (because I was old enough that I even got a grant the first year).

It was pointless stringing it out and costing myself interest, so I paid it off as soon as I had the spare cash.

If I'd done all that, and a postgrad, and still was barely earning enough to repay it, I'd be questioning why I bothered TBH.

Yes those pesky students.

I paid off mine in full 3 years ago. I was the last year on 1k fees, followed my 4 year masters with a funded PhD. I would have paid it off before it got written off (not by loads though) and had the cash available from a covid-time micro business. My other half is an accountant and confirmed that paying it off made sense for us. He hasn't paid his off though as historically earned less than me.

For some people it does make sense, if it would be paid off anyway, to avoid the interest. Depends entirely in income, loan plan, etc.