28k paid to Students Loan Company, outstanding balance only reduced by 11k. WWYD?

[LightBlueJeans]

I have a Plan 2 student loan (so taken out between 2012-2022, with the 'new' 9k a year tuition fees) and I am based in England.

The opening balance in 2017 was 50k and the current balance is 39k. The interest is variable rate and is so high!!! I've just added it up and since 2017 I have paid 28k to the student loans company (SLC), but 17k of that was interest.

These loans are written off 30 years after graduation and I am already 8 years in. If my earnings stay the same as currently, I would pay off the loan amount a few years before the 30 years is up. I would end up paying about 80k in interest on top of the original 50k loan.

The issue of course is the unknown... IF my earnings stay the same or increase, it makes sense to pay off the 38k now. I wouldn't pay any more interest and my take home pay would increase by about 5k a year. However, IF my income reduced in the future (SAHM, going part-time, illness, etc) I'd be kicking myself to have paid 38k of savings towards a loan I didn't actually need to repay.

I'm thinking to leave things at the status quo for now, and re-visit every few years or so as to what seems sensible as life circumstances change. Right now it feels like those savings could be put to better use e.g. on a mortgage deposit for a bigger family home / in a global index tracker S&S ISA.

So out of interest, WWYD in this situation? Are you or your DC in a similar situation?

Also, is anyone else slightly outraged that the student loan interest still accrues during statutory maternity leave? My outstanding loan amount went up by several thousand during maternity leave and the same will happen again if I have more DC... surely this is discriminatory to female graduates?

Why is it discriminatory? It increases regardless of the reason you’re not earning, it isn’t just because you’re on ML. You could be on sick leave or unemployed it would still have interest applied.

As to what would I do - the same as you. Assess every couple of years the likelihood of you remaining at your current salary against the likelihood of going part time or taking a long term career break.

It's why I wouldn't advise someone to a degree anymore if it wasn't leading to a specific career with higher earning potential. I did a degree because I was interested in the subject and I was good at it, but it was VERY different finances back then.

On the up side, it isn't like other debt and you would still have to pay a mortgage or loans if your income drops. It makes more sense to me to pay that sort of thing off first if you have them. Depending on interest rates.

Thanks for taking the time to respond.

In answer to your question, that is a good point and perhaps I should have said ''indirectly discriminatory' or made a more general point about it contributing to the 'motherhood penalty'.

This article puts it better than I could: https://theconversation.com/its-time-to-scrap-the-student-loans-motherhood-penalty-145194

"For those who started studying from 2012, most graduates are expected never to pay off their loans, male or female. But research has found that the difference in the treatment of men and women by the 2012 reforms is “substantial”.

The typical earnings profile of a woman – even when compared to a man in a similar job – means they tend to pay more and for a longer period of time, in particular through their middle working years. In other words, women are already paying more and the extra interest only adds to that.

Women also end up carrying longer term financial and career burdens because men are less likely to take paternity leave. The issue is then further intensified by the expenses associated with childcare, which often force women into part-time work.

[...]

We are calling for a freeze on student loan interest accruals during maternity leave in the UK. This would be a small step to reducing systemic gender discrimination."

A loan is a loan is a loan. You borrowed the money. Surely you were aware of the terms from the outset so you pay it back

Totally agree with this. Unhelpful to the OP but the fact is we really need to move away from this view and expectation that most kids should be aiming for uni

Have a degree that actually qualifies you to do a particular job, yes. Dont do a degree just because its a life stage/interest/indulgence. (well if your family arent going to pay the debt for you)

Get out into the world of work and work your way up.

The interest rates are disgusting and the government is appalling for not adressing this inequality.

It's no different to any other finance, your mortgage or car loan don't freeze the interest because you choose to have a child.

I am so sorry. This horrendous. You are basically paying a graduate tax and NOT a loan. It is nothing like a bank loan or mortgage. Even the old tory government realised that and reformed the formula for the interest because the proportion of students paying it back was so low. It is deeply unequal.

Anyway OP, I can only wish you sympathy and help you to make voodoo dolls of previous education secretaries. Or, give you the advice to move abroad (aus?) and stop paying them.

Because you will end up paying them a few times over if you stay here but never significantly increase your salary. It is a huge scandal.

I think if you can pay it off you should,both because it releases you for the future but also there is a moral imperative to free up resources for others- the loan has done what it was intended to, by allowing you to get a job that is enough to repay the loan so just get on with it now.

My son is 21 just graduated no chance of a job in his industry and is going to be in your situation, we have just inherited and I’m very tempted to use some of the money to clear his loan so he can get on with life. He lived at home during his degree so his is just the tuition fees but even so it’s a disgrace how these loans got sold. I’m sure down the line there will be an mis-selling or some kind of update.

My youngest is taking a gap year he has no clear direction so we are now helping him look for degree apprenticeships and encouraging him to start applying, while working in retail and bars.

OP I'm in the same boat as you. I don't look at my student loan statements anymore because of how outrageous it all is. It just makes me angry now.

To be honest I'd never consider paying it off early (not that I have the funds too). I saved up and ended up focssed on buying property.

To the poster that said you knew what you were signing up to. Nope. Interest rates weren't clear. Told the threshold for repayment would rise with inflation and this has been frozen multiple times since. I remember explicitly my mum asking a representative at the time whether it would affect mortgage borrowing and was told it wouldnt. Yet when I purchased my house, some banks let me borrow 4x my salary ignoring my student loan monthly repayments. Some let me borrow 4.5x my salary taking into account my monthly repayments. So basically that was a lie as well.

I owe them more on my plan 1 than I did when I graduated over a decade ago.
I am a teacher and I have always worked full time 🙃

You can actually pay those off though.

If you’ve got the cash to pay it off, I’d consider it. But depends on your wider circumstances. It makes sense to pay highest interest rate debt off first.

It doesn’t have to be all or nothing. You could save at least some interest by making monthly overpayments if you don’t want to pay the whole thing off in one go.

The advantage of a student loan vs other debt is that it doesn’t affect your credit score. Something to factor in if you’re going to want to remortgage at some point.

You could reduce your repayments by paying more into your pension if you can do salary sacrifice.

Also factor in the repayments that you won’t be making if you paid it all off - you could divert the money you save to build up savings again.

Except when you’re on ML if your income is below the threshold you don’t pay. Your mortgage and car loans still need to be paid - quite a big difference!

Just checked mine after seeing this. Originally it was 55k, now it’s 68k. I’ve been paying it for 8 years and it shows 0 repayments. So that’s me on the phone to them tomorrow 🙃

These loans are a disgrace.

So many careers like teaching, social work and nursing will require a degree with the huge financial commitment from individuals. No wonder that there is a recruitment crisis. Especially since wages are set in bands / tiers, hardly a career choice to make huge amounts of money.

... and yes I know that there is a 5k bursary for NHS careers. But it's not even covering tuition fees.

OP, in your shoes, I would just let it run it's course.

Some people commenting here do not understand students loans. It is NOT a loan if you are a low or middle earner. It is effectively a graduate tax, taken from your salary. You can choose to overpay, but not underpay or default (obviously). It just sits there effectively ensuring degree-holders pay a "university" tax.

Unless a student gets a very high earning job quickly (very few) or has rich parents (more likely). Then it works as a loan.

I work with two people. One colleague did 5 years at a uk university and parents paid all the fees and living costs. He does not pay back the student loan, obviously.

The other colleague did a 1 year masters (having previously paid off her first degree from years ago). Because of maternity leave (as mentioned in the OP) and the higher tutuion fees, she will paying off this one year for many years, if she ever does. Probably, at least double the original loan.

There has been many revisions to the repayment interest. Simply, it was for 10 years: inflation + a couple of extra percent. Coupled with a very large repayment capital, it builds up so that it can never be cleared. Unless you have rich parents, of course.

It is a huge scandal that has totally been ignored.

Sorry OP. Honestly, the best advice i can give you is to leave the country.

I have feeling this maybe one of the reasons that the conservative government did reform the student loans' interest to just inflation again in 2022. Because too many graduates were saying "fuck this" and leaving.

I had a remaining 17k on my loan. The interest rate was something like 6.8% so I took a loan out for 2 years to get it gone. It's costing me over £700 per month to pay.

I found that the repayment amounts were less than what I wanted to pay (if I made adjustments) and could just never see the end of it.

These last 6 months have made me a little short at times but come 18 months time I will finally be free.

It was so demoralising paying and paying monthly without the figure barely moving. Throughout periods of maternity and part time working it was growing.

More transparency and up front easy to understand information is needed for potential students. To expect them to understand the gravity of a 40/50k loan and the realisation of a 30k per year job at the age of 17/18 is unrealistic. It needs to be laid out in plain and simple terms.

This is rather different to a normal loan though. If I were to stop earning then I would have no obligation to pay another penny of it back. And if I were to take a job or part-time job only a little over the repayment threshold of 28k then my monthly repayments would be minimal and the loan would eventually be written off.

If I pay off the loan now, I run the risk that I wasted the money on something it turns out I didn't need to pay. If I let things run their course with my current earnings, I will pay off the loan in around 20 years time and unnecessarily pay about 50k in interest that I could have avoided by taking action now.

Yes, I was aware (broadly) of the terms of the loan when I applied for student finance at age 17. However I considered the loan as a graduate tax that I would be unlikely to pay off. Now that I find myself in the (privileged) position of earning enough that I am likely to pay the loan off, it makes sense to consider whether it should be paid off ahead of time.

Oh gosh! Well I'm glad my post helped prompt you to log in and check. Hope they can sort that out for you ASAP! It's very easy not to think about it and check as they don't send out annual statements or any other communications (as far as I'm aware). I think they sent paper statements back in the day but I've not received one in years and they do have my up to date address.

Personally, I rather be debt free. The mental freedom is worth it.

The thing is when I took out my student loan (Social Worker, have to have a degree), the interest rate was 1.6% and I was told it's the cheapest loan you will ever get. The interest rate has Sky rocketed and it's around 7% which is the most expensive loan I have ever had!

It isn't worth paying off the student loan with a cheaper loan as you pay the student loan with untaxed earnings- any loan you take out will be with taxed earnings and you have to take that extra 20-40% of tax into account when working out if it saves money taking out a regular loan instead (it doesn't).

It's not a graduate tax.

If it were, nurses and investment bankers would each pay off the same percentage of their income for however many years, and investment bankers would pay a lot more than nurses do.

What actually happens is that investment bankers pay it all off quickly because they earn ginormous salaries from the outset, and nurses spend 30 years paying off far more than the investment bankers due to decades of compound interest.