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?

@titchy

Why is it discriminatory?

Perhaps because older people didn't have to pay so much tuition fees and living costs so didn't need to take out such huge loans for exactly the same services that people a decade or two older paid far less for or nothing at all? That's age discrimination in my book.

Nail on the head. It's a tax on middle earners. The lower earners will never pay it off and will only pay minimal repayments. The higher earners will pay it off quickly so interest will be massively less. The middle earners will probably take the full 30 years to pay off most of it but will have probably also paid 2 or 3 times the original loan in compound interest. General advice has to be that if you are liable to student loan repayments for most of the 30 years on average or slightly higher than average incomes, then pay off extra to try to get the interest down otherwise you'll be making full repayments for the full 30 years including tens of thousands of interest!

I was questioning why OP felt that interest being added during ML was specifically discriminatory to women. IMO it isn’t - any more than it’s discriminatory to disabled people of those of BAME heritage who are likely to earn less or be unemployed for longer.

You could argue the opposite - at least they don’t have to repay during periods of unemployment/low pay/part time work/ML/ sick leave!

I don’t agree with loans btw - I just don’t accept they discriminate against women particularly.

And age discrimination is legal, and I certainly don’t think things should remain the way they were in the past simply because older people had things differently.

Going to uni is a mugs game for most people. Not worth it. Just a way for the government to load you up with debt for your whole life and keep you grafting in some shit job you used to be able to do without a degree like office admin or something.

If you're made of money and you can afford to saddle yourself with thirty years of debt to spend three years drinking and reading the odd French novel, then have at it. Sounds like a great laugh. But for us normal people it's a con.

Thanks everyone who took the time to reply, you raised some really helpful points.

A couple of people mentioned that young people should consider routes other than the traditional degree, especially if their degree isn't leading to a specific career. I agree to a certain extent and I think there are some really good apprenticeships and degree apprenticeships out there now, as well as people building successfull careers as tradespeople or entrepreneurs without needing a degree. For me, my degree allowed me to move onto further study and training in my chosen profession so I have no regrets there. Also, I think it is a big issue for social mobility if people without parents able and willing to fund tuition fees and maintenance costs for university choose to opt out of university purely for cost reasons. Yes, I have a big loan to pay back but if I wasn't earning as much I wouldn't need to pay back as much. Also, although my repayments are high they aren't putting me in any financial hardship. So, I wouldn't want this thread to put anyone off going to university if that's what they want to do.

A couple of people made the very sound point that other debt should be paid off first especially if it has a higher interest rate. That's a bit nuanced for me as I have no other debt other than mortgage debt and our interest rate is very low at the moment (offset mortgage that is close to being fully offset). However, given that our current house is a small-ish terraced house and we have started a family, we'll probably want to take on a bigger mortgage in the future. So in all likelihood I'll be putting the theoretical student loan repayment amount towards a new mortgage deposit at some point, rather than taking the plunge to pay off the student loan now.

Someone made the point that the threshold for paying back the student loan has not increased in line with inflation (due to threshold freezes), whereas the interest payments have very much increased in line with inflation (+3%!!). I hadn't considered that before and it is a big factor especially considering the additional fiscal drag we have seen with tax bands not moving either.

I like the couple of suggestions of moving abroad!! The practicalities of me and DH both finding suitable jobs in our industries in the same foreign city and also moving us and our little boy away from our wider family and support network make it less attractive though. Also, I believe we would still need to declare and repay the student loan while abroad especially if we planned to move back to the UK eventually without getting into trouble! So I wouldn't move abroad for student loan reasons (it is tempting for tax and salary reasons of course, but that's a whole other thread...).

You pay your student loan from taxed earnings too… you don’t pay less tax because some of your salary is being paid to SLC…

Ah I see I got it incorrect as it is calculated on pre tax earnings but paid out of taxed earnings. Worth paying off then!

I did the calculations for plan 5 of the student loan which is now 40 years to recoup the loan and interest. It's not a traditional loan, but the compound interest is eye watering. It's a lifetime graduate tax...my DS will be saddled with paying 49% tax pretty early on as he is likely to be highly paid! But he is lucky in that he will pay less interest overall. I did push the idea of degree apprenticeship.

My plan for DS is to take out the tuition fee only and pay off the interest so it doesn't compound.