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.

My husband now has about £300 a month extra after paying his off. I’ll never earn enough to pay mine so it’s not worth it for me but it definitely was worth a few extra payments to clear his!

If you’re making a decent amount of money and your only other debt is a mortgage or low-rate car note then it often makes financial sense to pay it off. And yes it can affect your ability to borrow for other things.

But people generally just don’t like carrying debt. Having debt payments, even if they’re income-based, means you have less control over your spending and saving so clearing it off their books is a relief. This is particularly true for a debt that isn’t tied to a tangible, salable asset like a mortgage. Your mortgage goes away when you decide to sell your home, and people receive a very direct, calculable benefit from home ownership and paying on a mortgage - you can look at the cost of rent and the equity you’re building and that debt feels productive. And if you realize it isn’t productive enough to justify the ongoing expense you can sell. You can’t sell off your degree if you decide it isn’t bringing you enough financial benefit to offset the loans and it’s difficult to measure the marginal income having it provides, so the debt just feels like a purely negative burden.

Do you really think that’s the only reason people go to university?

Your first paragraph makes sense but not the second. If you stop earning you stop paying.

Yes - as a lower earner - each year I had to defer repayment by filling in a declaration and earnings form and sending it back to student loans company . Six years ago I moved house and forgot to do the deferment .
The debt was then sold on to Link financial who contact me every three months to ask when an I gonna start paying the debt - I am still on low income and in utility use debt so have not yet been forced to make any payments . Funny thing is I woukd stil be eligible for deferment if they hadn’t sold my debt to another agency !

I paid mine off long before I had a mortgage; lived in London so a mortgage was a far-off dream but paying off the loan was manageable. And gave me one less thing to fret about and more money in my pay packet – aside from the mortgage I have now, I have no debt and don’t like debt. The more choices you can make with salary the better; think I used the money I “saved” by no longer paying the loan and used it on pension payments instead.

DH paid his off in one go when he inherited money. He has a relatively low income so might have never paid it off otherwise (however, he was on the old Plan 1 where you had to pay until you're 65, so 40+ years in his case), but just wanted rid of it - like @OneShoeShort says.

You're economically productive, sure. Just below the threshold for repayments. Which is fine. Circumstances do change though. In the many, many years before the debt is written off. Interest keeps applying annually wether you're paying or not. Wouldn't be a risk Id be prepared to take. But it's up to you.

I had one of the old style ones that was written off after 25 years, taken out in the late 90s. I didn’t pay a penny towards it as I never earned above the threshold so was able to defer each year. In the couple of years before it was due to be written off whoever held the loan wrote to me offering for me to pay a proportion of it to have it written off sooner but I never bothered knowing it would be written off soon. I don’t feel guilty about is as the reason I never earned over the threshold is because I chose a ‘worthy’ but not well paid career that benefits wider society so I have paid my dues that way.

But interest keeps accruing. So what you owe increases.

I don't know if yours is cheap, mine taken out in 2015 is 9% interest so about as expensive as it gets. Currently I am not even covering annual interest so the loan keeps growing. If I were a higher rate taxpayer, I would absolutely prioritise paying it off.

But people don’t want to stop earning money and they don’t plan to do that.

They want to increase their income as they get further into adult life and to have as much control as possible over what to do with that income. Carrying debt that you can’t dispose of with payments that will increase as your income goes up is a financial inflexibility that many people don’t want. They’d rather deal with a some extra discomfort paying it off in the short term and then move on to other financial goals and priorities without that non-discretionary expense to work around.

Cool story, bro

Mine is cheaper than that at 4.3% and my tuition fees less.

It really isn't "the whole point of a degree". It's actually a fairly new concept that university education is vocational and any specialism that isn't is labelled "Mickey mouse" degree.

Do you earn above the threshold? Or are you just not paying it?

I’m on plan 1 so it’s 4.3%

That's higher than the interest rate on my mortgage so it isn't exactly cheap for a long term financial product.

I guess it depends on what other debts you have.

I earn above it. I pay around £262 pcm, it varies slightly as I have SE income. This is only relatively recent though as I’ve only been back at work 3 years after my last baby.

It’s similar to my mortgage. I don’t have any other debts, but figure my mortgage is the best one to clear as it won’t get wiped and the rates are similar.

Plus I can reinvest £23k but can’t if I’ve used it to pay off a loan.

My point was obviously that it hasn’t been a barrier to mortgages. Although I know you’re being deliberately obtuse.

@Catza I was the year before the tuition fees went up again - I timed it well, despite not having meant to. The cost of uni is eye watering now.

So you earn 60k doing 3 days a week and you can’t figure out that you’ll pay less interest if you pay it off early?

My student loan debt is currently 93k, plan 2. I'm a part time FE teacher so I earn under threshold to repay. Balance goes up and up each year. Crazy system really. It will get written off eventually.

It doesn’t mean it makes the most financial sense to pay it back early though does it?