Student Loan

Greg

Greg

Greg

Soldato
Joined
18 Oct 2002
Posts
8,973
Ok, I was wondering if anyone can give me any clear answers about student loans. My Girlfriend finished Uni last year and has only just had her first payment come one. The troubling thing is, for each month since she's been away from Uni, they've charged her £36 interest. We've calculated with her wage that her monthly payments are only going to be £22 so I don't understand how she'll ever pay it off.

Questions:

1) Is this normal?
2) Can you pay more off in chunks
3) Is the point of the loan to even pay it off, or just wait till its written off after X number of years?
4) Does this loan affect her credit score?

Sorry for the noobie questions, I never went to Uni!

TIA

GR
 
1) Yes
2) If you want
3) Everyone treats it differently, depends if your girlfriend hates the idea of any kind of debt.
4) Nope
 
From my experience (although I've had my loan for 12 years now so may be different)

1)Yes
2)Yes
3)If you earn enough you will, if you don't you won't.
4)No
 
If the loan was taken out recently they changed the rules on when it gets written off, so may no longer be an option.

As above really, if it bothers your to lose the money then pay it back early. Otherwise leave it be.
 
1) Is this normal? - Yes, as you earn more, you pay more off, at the moment I am repaying about £70-75 a month from my monthly salary

2) Can you pay more off in chunks - You can pay lump sums yes

3) Is the point of the loan to even pay it off, or just wait till its written off after X number of years? - Just pay off what comes out your salary, unless you have thousands of pounds of unused cash lying around, but don't stress, most people just let it come out their salary.

4) Does this loan affect her credit score? - No
 
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Greg said:
1) Is this normal?
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Interest is charged as on any loan, at the current rate set by the Student Loan Company.

2) Can you pay more off in chunks
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Yes, but you'd usually earn more interest putting it in a bank.

3) Is the point of the loan to even pay it off, or just wait till its written off after X number of years?
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I'm sure they'd love for you to pay it back.

4) Does this loan affect her credit score?
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It doesn't affect her credit score but it will affect the size of mortgage she can take out as the brokers will use her net pay (i.e. after the deduction for student loan).
 
Remember when you first start earning, you are usually on a small wage. Most people after a few years will start paying it of at a decent rate.

So yes it's totally normal. I didn't start paying off any capital for about 3 years after uni. But know paying it back at a decent rate.
 
I've been paying mine for about 6 years now, I think I should have only another 1-2 years to go. Looking forward to seeing that extra £120 (minus tax of course) in my pay every month :)

Sooo yes it takes a looong time, gets quite boring after a while.
 
Excellent, many thanks. I think that she's getting a little worked up over nothing. I'll just let her run her course then explain to her that its perfectly normal!

Ta!
 
Greg said:
Ok, I was wondering if anyone can give me any clear answers about student loans. My Girlfriend finished Uni last year and has only just had her first payment come one. The troubling thing is, for each month since she's been away from Uni, they've charged her £36 interest. We've calculated with her wage that her monthly payments are only going to be £22 so I don't understand how she'll ever pay it off.

Questions:

1) Is this normal?
2) Can you pay more off in chunks
3) Is the point of the loan to even pay it off, or just wait till its written off after X number of years?
4) Does this loan affect her credit score?

Sorry for the noobie questions, I never went to Uni!

TIA

GR
Click to expand...

This is why student loans are subprime.
 
Greg said:
1) Is this normal?
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Yes.

2) Can you pay more off in chunks
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Yes but this would be a very silly thing to do - pay only the minimum and forget about it.

The interest rate is set at either the base rate +1% or the RPI, whichever is LOWEST.

So the amount you owe is currently DEPRECIATING in real terms anyway due to inflation, and you can almost always earn more putting the money you'd use to pay it off into a savings account.

4) Does this loan affect her credit score?
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No, it does not appear at all.

Some people will say it can affect you getting a mortgage. Whilst this is true in theory because your lender will assess your net income, which your student loan repayments reduces, the negative effect this has is FAR outweighed by the positive effect of having the amount of money you would have used to pay the loan off available for use as a deposit on the property anyway!

There are lots of silly opinions and rubbish spouted on this subject.
 
Theophany said:
This is why student loans are subprime.
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But the taxpayer should not be worried, because the government sells the student loan book in chucks to private investors (OMG SECURITISATION, isnt this what caused the credit crunch in the first place!!!), allbeit at a reduced capital sum on it's value, so if people don't pay it is not the taxpayer that loses out.

Also if you still owe anything when you reach age 60 it is written off (the horror of having a student loan that long!).
 
I dont know if this is still the case but it used to be that savings accounts used to generate more interest than interest on the debt, so it was better to invest the money than paying it off.

Hell i know students that took the maximum loan out(even though they did not need to) and invested it, and ended with a net gain by the end of it.
 
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UK-AL05 said:
Hell i know students that took the maximum loan out(even though they did not to) and invested it, and ended with a net gain by the end of it.
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Exactly what I did, back when ISAs paid a good % interest. Made quite a bit of money off my student loan.
 
BDEE said:
But the taxpayer should not be worried, because the government sells the student loan book in chucks to private investors (OMG SECURITISATION, isnt this what caused the credit crunch in the first place!!!), allbeit at a reduced capital sum on it's value, so if people don't pay it is not the taxpayer that loses out.

Also if you still owe anything when you reach age 60 it is written off (the horror of having a student loan that long!).
Click to expand...

Aye, subprime by definition is just a loan made to somebody unlikely to meet repayment schedules. Most students don't have credit ratings, so it fits. :)

Didn't know the government sold off the student loan book though (never looked into it tbh). Is that just through the usual channels of government bonds through NS&I?
 
I disagree with that statement - the majority of student loans will never get paid.
As you earn more, so you pay more back.
The "majority" of people leaving university will move into emloyment and the majority again will move into employment which means that their repayments will eventually pay-off the loan.

I'd say a minority of the loans will never get paid back.
 
UK-AL05 said:
I dont know if this is still the case but it used to be that savings accounts used to generate more interest than interest on the debt, so it was better to invest the money than paying it off.

Hell i know students that took the maximum loan out(even though they did not need to) and invested it, and ended with a net gain by the end of it.
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Exactly what I have done with mine. I have also worked so I dont actually need it and have just stuck the loan in my ISA every year. Should be a nice chunk of a deposit when I need it In the region of £25k depending if I can continue to work through my final year.
 
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