Taking a loan is essential for the majority of students. When I went to University the tuition and maintenance loans (outside London) were around £6500. This is a significant amount of money and by the time I graduated the total had risen to over £20,000. I didn’t have a choice about taking a loan. I simply couldn’t have paid for it outright and the vast majority are in the same situation.
The student loan company send annual statements and it was in my second year when I saw how much I owed and started to worry. When I discussed this with people I received the following replies:
“You don’t have to pay it back until you’re earning over £15,000”
“It’s not a real loan though so it doesn’t count”
“It wouldn’t be taken into account when you get a mortgage”
“Eventually it’ll be written off”
“The interest rate is really low”
“It’s deducted from your salary so you don’t even notice it”
So lets respond to these points:
1. The interest is still accumulating every year.
2. A loan is a loan. Okay so you’re not going to have bailiffs turning up at the house but you still owe money that you need to repay.
3. It IS taken into account when you get a mortgage. Before the “Credit Crunch” most lenders were not interested but when I was first looking at a mortgage they did take it into account.
4. It can be written off after 25/30 years depending on when you graduated. But you still have to make repayments for 25 years until this point.
5. The interest rate was 1.5% when I was making repayments which is very low but it still builds up. You pay interest on the interest.
6. I noticed it. Even when I was earning just over the threshold and paid £1 per month I still noticed it.
I’m not saying that everyone should pay off their student loan immediately because it’s not always possible but I do believe that everyone should be making efforts to reduce their overall debt, whether it’s student loans, car loans or mortgages. I wanted to be out of debt before I bought a house so it was extremely important to me to pay off my student loan. Do I look back now and think that I could have put that money towards the house? Yes of course. But I don’t regret it.
Looking at what I’ve written I can see how someone reading this may think I sound arrogant, boastful and preachy. That’s not my intention at all but I really feel so passionately being debt free and I sincerely wish everyone can experience this at some point in their life. These are my personal reasons for paying off my loan as quickly as possible.
I was, however, incredibly lucky. I went to University when tuition fees were just over £3000 a year. If I went today it would be £9000 and there is no way I would have been able to pay off such a high amount. I was horrified when they increased tuition fees and I hope these will be reduced to more reasonable levels in the years to come. If the fees were £9000 I don’t think I would even have gone to University which is very sad. I’m sure there are so many people out there who have chosen not to go and I think future generations will suffer. I’m not going to start ranting about the implications of this because I could go on forever and you’d be very, very bored.
Thanks for reading
Lots of Love
x Beth x