Timeline for Should I pay down my student debt early?
Current License: CC BY-SA 3.0
26 events
| when toggle format | what | by | license | comment | |
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| Oct 24, 2017 at 7:34 | comment | added | Иво Недев | Indeed not many people understand the student loan ... Its designed in such a way that you shouldn't feel its hit at all and if you can't afford to pay it, you don't. Its brilliant! | |
| Oct 24, 2017 at 5:22 | comment | added | JBentley | @DavidTheWin No, that's a misunderstanding. It's not in the terms that the threshold will ever increase. The lack of increase was merely a broken government promise from 2010. Governments break promises all the time but get away with it because they're not legally binding. Plans should be based on what the loan terms say, not what a government minister promises for the future. | |
| Oct 23, 2017 at 11:43 | comment | added | DavidTheWin | @JBentley the government have already changed the terms once by not increasing the repayment threshold from £21k with inflation. | |
| Oct 23, 2017 at 11:40 | comment | added | DavidTheWin | @jermenkoo the interest rate is calculated at a scale of 0-3% based on income plus inflation which is currently 3.1% so it may go down in future | |
| Oct 23, 2017 at 7:44 | comment | added | thelem | @jermenkoo Not if it will eventually be written off or you have better use for the money. See my answer. | |
| Oct 22, 2017 at 11:19 | comment | added | jermenkoo | @MD-Tech the current interest rate (at least on my debt) is 6.1%, which is quite a lot - would not it be better to try to pay it off early, if one can? | |
| Oct 22, 2017 at 9:43 | comment | added | JBentley | @marcelm Banks are generally interested in three things when it comes to debt: (1) are you responsible with debt (student loan isn't an issue here vs. e.g. multiple maxed out credit cards), (2) will the debt affect the bank's ability to get back it's money if it repossesses your house (no for student loan), (3) does it affect your ability to afford your monthly payments (here only the repayments matter, not the loan amount - and £10 a month is nothing). | |
| Oct 21, 2017 at 16:12 | vote | accept | Callum Maguire | ||
| Oct 21, 2017 at 10:01 | comment | added | marcelm | "... will not affect your chances of getting credit." - Is this really true though? Honest question, I don't know the UK system. Here in NL, student debt is also government-backed, and is indeed not included in (our equivalent of) a credit report. However, when getting a mortgage, banks tend to ask "do you have debts?", and if you say Yes (for your unreported study debt), this will affect how much they'll lend you. But if you say No, that's a lie, and that could exclude you from mortgage insurance, and technically is probably fraud. Maybe similar concerns are at play in the UK, maybe not. | |
| Oct 21, 2017 at 7:17 | comment | added | JBentley | @MD-Tech Agreed. It is very unlikely (for political reasons) that any detrimental changes would be made retrospective (and this is why we now have multiple rules depending on when your loan was granted). Just to be pedantic though, parliament could technically apply any retrospective changes they want and the courts would be powerless to intervene (if done correctly) due to parliamentary sovereignty. It's not really worth considering such scenarios though because they are so unlikely, especially given how political of an issue this is. | |
| Oct 21, 2017 at 6:43 | comment | added | MD-Tech | @alephzero this is a contract so the government would have to retroactively change every contract which is difficult under UK law and would result in a lot of large court cases. Remember that the judiciary is both independent and many have or had student loans in their family. The biggest political risk currently is that the opposition get in and cancel all student debt. Ceteris paribus my answer stands | |
| Oct 21, 2017 at 6:04 | comment | added | alephzero | This logic behind this answer assumes the government of the day will never change the rules, which is not at all guaranteed - especially if they first discontinue the existing loan system and replace it with something else. The problem is of course that the government is a monopoly here - you can't move your loan anywhere else if they change the rules. | |
| Oct 20, 2017 at 15:09 | comment | added | MD-Tech | @PeterGreen I am aware of this which is why it was just an example but my point is independent of the interest rate. If you pay nothing towards a loan (by earning too little) what difference is 1% interest vs 100% interest? | |
| Oct 20, 2017 at 15:05 | comment | added | Peter Green | Note that recent student loans have significantly higher interest rates than your "Plan 1" loan. | |
| Oct 20, 2017 at 14:48 | comment | added | MD-Tech | As an example I earn... some money... currently and pay £270 per month on my student loan. I'm on "plan 1" which is to say the older plan (I graduated 7 years ago) but when you earn more your payments will go up from £10 (ish) to the grand old sum of £270 and probably more! | |
| Oct 20, 2017 at 14:38 | comment | added | MD-Tech | In fact you'll be taxed more when you can most afford it and won't pay as much when you can least afford it. | |
| Oct 20, 2017 at 14:36 | comment | added | Callum Maguire | ahh I see what you mean when I earn more I will be tax more because of the high-interest rate but if I pay more now I will get tax less | |
| Oct 20, 2017 at 14:27 | comment | added | MD-Tech | @CallumMaguire that depends quite a lot on your attitude to these payments. if you see them as a tax on education it probably isn't worth it, if you think that you are likely to pay the whole balance off then paying it earlier is better than later due to the interest. Check that you really won't pay it off by considering how much you expect to earn in 10-15 years time! | |
| Oct 20, 2017 at 14:26 | comment | added | Callum Maguire | @MD-Tech so would be paying 200 pounds a month be pointless seeing I won't pay it all back? and it doesn't count and I might as well stick to the monthly payments | |
| Oct 20, 2017 at 14:25 | comment | added | MD-Tech | @BenMiller after the minimum the repayment amount per month is a function of your salary, I should have mentioned that as well; most people should end up paying the majority of it. Think of it as a progressive tax with a maximum total | |
| Oct 20, 2017 at 14:22 | comment | added | MD-Tech | @BenMiller if you never earn more than the minimum to start repaying you may never repay ANY of it! | |
| Oct 20, 2017 at 14:21 | comment | added | MD-Tech | @Grade'Eh'Bacon that £10 payment will count against the repayment schedule but by about £10 a month... | |
| Oct 20, 2017 at 14:20 | comment | added | Ben Miller | Does that mean that it never has to be paid back? At OP's level of debt and interest, even at £200 per month he will never pay it off. | |
| Oct 20, 2017 at 14:20 | history | edited | MD-Tech | CC BY-SA 3.0 |
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| Oct 20, 2017 at 14:19 | comment | added | Grade 'Eh' Bacon | Would it impact the bank's calculation of "ability to pay", ie when determining the size of a mortgage to approve you for? I would assume a bank would still want to decrease income by mandatory debt payments, but I suppose if minimums truly are £10, then this is irrelevant anyway. | |
| Oct 20, 2017 at 14:13 | history | answered | MD-Tech | CC BY-SA 3.0 |