STUDENT LOANS UK EXPLAINED: Should You Pay Off Early? 2024

[@TheHumblePenny]

This was a tough video to make. Please LIKE and SHARE with one other person :). What other questions do you have about Student Loans?

[@TheAlexis123987]

Finally, a channel that discusses student loans in the UK !!! That 9k a year was worth it. I enjoyed learning and enjoyed having 4 years to learn so many different things. Studying Engineering was one of the best things I did. It was hard and I struggled financially but I made the most amazing friends, had so much fun, improve the way I solved problems and gain me so much confidence. Lost confidence in the first year because of the workload and financially strain(balancing a job and uni is so hard) but by 4th year, I was stronger. After 3 years of working as a consultant and a year of running a startup, I would do university all over again.

[@TheHumblePenny]

😊🙏🏽.Please share with others

[@bartekdgpl]

Since people don’t know their income, inflation rate, and possible changes in the repayment schemes for the next 30 years in advance, the question “should I overpay my student loan” is usually impossible to answer except after the fact. And it was made this way on purpose because it gives all the power to make adjustments to the government and none to the people.

[@TheHumblePenny]

Hi Bartek You have a fair point. The necessary inputs favour the powers that be. However, for the 1 in 5 people who are more likely than not going to become and remain high earners, making some sensible assumptions about these inputs is worthwhile.

[@ct3826]

Finally a video that actually debunks SL! I had tons of questions that several videos did not answer and you guys managed to respond to every single one of my questions in one video! Well done gained another subscriber btw my goal in live is to be as classy as the lady ahah

[@TheHumblePenny]

Amazing 😊. Please share with others and huge thanks for subscribing.

[@froggy2341_]

You should always pay your student loan off as quickly as possible. There's no such thing as a free lunch, and often, if you just pay the minimum payment for the entirety of your working life, because of the applied interest (compounded) you'll end up pay double or even x4 your principal loan (depending on how much you earn). Also psychologically and emotionally you'll be better off, not having that debt hanging over your head will improve your wellbeing enormously. The other thing aswell, just because the current rules are favourable to students, in that they can get away with not paying back the full loan(s), the country is in huge debt and what's to say a future government wont try and retrieve this money from you in the future? Nothing is for free....

[@Bringon-dw8dx]

My currently solution is finish my training and move abroad where the pay is significantly better! Finishing uni approximately 65-70k debt. I won’t even be paying off the interest until I’m on a significant wage :’)

[@chrisbaker91]

Great video for plan 2, I think the interest rates on plan 2 are extortionate, it seems like they only serve to make uni less accessible for those from lower income backgrounds. So while not everybody should go to uni when we have a massive skills shortage in other areas (see all the current issues). Uni still needs to be affordable so we don't end up with professions like Dr's, lawyers, teachers only coming from privileged background (I know not the topic of the video but fees and loans are linked to mobility in my mind). For anyone asking I would say Plan 1 should never pay off early as the most interest they would ever pay is the rate of inflation. So yes by not paying off early I lose £2-300 extra from my paycheck but at an interest rate of 1.1% the excess cash I have is better spent on other savings / investments or paying down mortgage etc.

[@TheHumblePenny]

Thank you, Christopher. Great contribution.

[@Theduchesskimmy]

Well now the interest rate is 6.3 percent might be worth paying it off

[@chrisbaker91]

@kimberlypetros8961 of I had about 6k left on my plan 1 middle of last year and I decided to pay off early as I had maxed accounts I could beat the interest and my "personal" rate of inflation is much lower than headline due to solar panels/ batteries and a long term cheap fixed mortgage. Sums were about equal but just getting rid of it and seeing saving increase via increased take home vs potentially drawing on savings when required and seeing it decrease thought just pay it off from a psychological aspect.

[@adrianwright8685]

If a student pays course fees of £9250/year then their final debt of £27750 will, at 10.1% (current rpi, 2023) accumulate £2803/year interest. To pay off this interest the £2803 will need to be 9% of their salary over £25,000. This means they will need a starting salary of £56,142 just to pay the interest; any less and their debt will be increasing every year. Borrowing to pay for accommodation and other costs might of course increase the debt considerably

[@doodleesq]

I found this myself, having accumulated 25k of debt over the decade. Due to circumstances, I had to change universities and redo years, finally graduating in 2008. I've had steady jobs, etc, over the decade, but only recently has it become an issue - simply bc I'm now a higher earner....it hammers me. But it's the interest that gets me. Most folk never pay it off because whatever they pay, they never reduce the loan amount. I think in my case Im starting to consider paying it off in full. Any thoughts.

[@Shayoyeye5223]

Thanks Ken & Mary🙏🏾🙏🏾. You both always manage to tackle difficult/confusing topics. I was so confused when I started a new job in June & was asked if my student loan falls under Plan 1 or Plan 2. I got mine from 2001-2004. Unless I win the lottery, not sure I will be able to repay the loan 🤔

[@TheHumblePenny]

Thanks so much, Clara 😀. Please share with others. You're definitely Plan 1 :)

[@puckishpixie]

It would also be useful if you explained the different interest rates between plan 1 and 2. As plan one are RPI or bank of England base rate+1% (whichever is lower). Your video had me rushing to check about that extra 3%.

[@TheHumblePenny]

Ah, good shout 🙏🏽

[@Anil75987]

Thank you for this video, but this video is catered for students on Plan 2. What about for Plan 1? Should we pay back the loan early?

[@TheHumblePenny]

The same principle would apply generally, although there are different repayment thresholds for Plan 1. If you don't mind me asking - Are you currently a high earner? How old are you? And how much do you owe?

[@zeztro]

I think it's important to note that for people with plan 4 student loans in Scotland under the current rules the interest rate is significantly lower than for the rest of the UK. The Scottish student loan interest rate is pegged to either RPI or the Bank of England interest rate plus 1% (whichever is lower). This means that currently the interest rate is 1.1%. Given that RPI is about 3.8% at the moment (assuming your salary increases with inflation) then the value of your loan in real terms will actually be decreasing over time.

[@TheHumblePenny]

This is a very important point. We value your contribution.

[@jimbojimbo6873]

Im lost if its pegged to rpi + 1% Then how is it decreasing

[@MrRoyck10]

So sad for the generation of my son who has taken the route of university on both tuition and maintenance loan, apprenticeship is a more viable option. Effectively government have financially ruined generations of young citizens for degrees that are worthless in some cases. Thanks for beaming your financial search light on this topic.

[@catrionaduncan9034]

Hi Ken/Mary, This video is so helpful. I'll be sharing it with family friends who have soon to be uni students. As someone under Plan 1- I took out a loan for one course, did the first year, switched unis so I have two notification letters from SLC- one from 2005 and then the subsequent year, for when I started at uni #2. Q-Should I pay off the remainder rather than wait until I'm grey and old?! Why should I pay more over time with interest?😉

[@smia7130]

Though ppl who are on low income and don't have to pay loan remember the interests are building up and it is most like over the 30 years period you will be paying the interest with high loans

[@TheHumblePenny]

This is a very good point.

[@loma9326]

Thank you so much for this amazing video! Always very detailed and helpful!

[@TheHumblePenny]

You're most welcome :). Please share with others

[@kat3400]

Hey guys, have you ever done a video on if it’s worth paying off the uk post grad loans early. I’ve been trying to figure it out and it feel very complicated. I’d be really interested in hearing your opinion. X

[@consciouslyawake6051]

Thank you Ken and Mary even though I found this video seven months later, you both have really made my day by answering all the questions I was stressing about in regards to student loan. 😮‍💨 #⃣WhatARelieve!

[@TheHumblePenny]

Awww, that's amazing 😊

[@OnlyTheTruth-ti9ex]

It's crazy am actually paying my student working in a role that had nothing to do with my degree.

[@TheHumblePenny]

That is a crazy reality.

[@williama-d6]

From what you are saying their is no way I’ll be paying my student loan back yes it is a good idea to get student loans and go to uni

[@timewithruth]

I am looking forward to watching this, as I have ask myself this question

[@TheHumblePenny]

It's a difficult question to have an exact answer on :)

[@timewithruth]

@@TheHumblePenny definitely, I had a watch and it was really helpful information! 😊

[@LatinArtemis]

This is the first comment I ever put on a KZbin video: thank you so so much!!!🙏

[@TheHumblePenny]

Diane, wonderful ❤️. Comment more often 🤗

[@LatinArtemis]

@@TheHumblePenny Well here is a second comment then 😂: Thanks for answering! Do you know if after the recent changes made this year debts still get cancelled after 30 years for plan 2 and not 40 years? Thanksss! 🙏

[@toyosi_sho]

Fantastic video‼️

[@TheHumblePenny]

Thank you 👍. Do share with others.

[@PreciousPromises101]

Very informative. Thank you

[@TheHumblePenny]

Thank you 😀. Please share with others

[@abrahamkamara3093]

Hey, Ken and Mary just wondering if investment money can be emergency found? Because I invest in vanguard each month and I have a good amount there but no money in my saving as emergency money

[@asemotablessingtv3070]

Great information, you have done a great job 👍

[@user-yt9zs6tg4h]

Ah perfect timing!

[@TheHumblePenny]

😊🙏🏽. Please share with others

[@KA-hw4ec]

Thank you for this very informative video! Would it be possible to avoid repaying student loans if you become a business owner? 😂

[@TheHumblePenny]

Haha, that would be a neat exit 😄. Nope!

[@angelwings1]

My daughter has just started uni. Her course is 3 years and she only got a little over 5k due to my husbands wage. I’m having to help with her food while she looks for a job. Watching this with interest.

[@angelwings1]

I believe the 5k is maintenance btw Her rent will be 7k altogether 😟

[@TheHumblePenny]

Fascinating to hear your practical experience of what we shared in the video.

[@TheHumblePenny]

Oh dear.

[@marupa1506]

Every where I go the perspective are same , they never talk about student loans and high earners , ie is it better to pay them off or not

[@TheHumblePenny]

If you're a high earner, it makes sense to pay it off.

[@sanjaymanu1]

Fantastic video.. thanks for all the insight. Just one question , can the student pay a lump sump amount once he is 30 yrs old or more ?

[@act1460]

When you say "high earner" by 30 do you mean those earning in excess of 100k? Or does that mean those earning between 50 to 100?

[@TheHumblePenny]

The latter.

[@samanthasavedbygrace8203]

Been asking myself this question forever so thank you for breaking it down for us. Question I have is if I pay back all my student loan will my tax code change? I have a friend who this happened to and they ended up having to pay even more tax than they were before going on to regret paying off their student loan....

[@TheHumblePenny]

Your tax code typically changes when your earnings (or taxable income) change or your personal allowance changes. The issue that your friend experienced sounds like a timing difference and not a permanent issue. Or did it persist?

[@hawaiitongie8671]

I still know people who are in student loan when they have grandchildren. 😷

[@TheHumblePenny]

That's terrible

[@ruthofori5058]

Hi my name is Ruth, I love the content that you post on KZbin. I don’t know if this is the right place to message you but I have online business which offers virtual assistance services, I have been trying to get more clients, would you do content on this topic any time soon?? Is there anyone you know who would need a VA?? Sorry for asking so many questions. I hope to hear from you soon x. Kind Regards Ruth

[@bestymusic4845]

Hello I am currently studying a level 2 course and soon to be level 3. I was wondering is there any funding or loans I can get as I desperate need for a laptop and struggling with living costs. I also have really bad credit . Thanks

[@sadikicole3444]

Question re repayment : When you talk about income is this wage only or total income inclusive of salary, capital gains etc?

[@sadikicole3444]

Is 9 percent deducted from all forms of income over the payment threshold? I ask as on the SLC website it says total income.

[@osirisofthesouth2853]

Ngl I want that 150£ deduction to stop right now 😂

[@TheOpenmindStudio]

So, what actually happens if you pay it off in full? If it just gets wiped off in 30 years anyway...? What's the benefit of paying it off.

[@marcusnelson3520]

You pay less overall due to paying less in interest payments.

[@tania354]

I'm a bit confused. I started uni in 2010 and finished in 2013. Am I under plan 1 or plan 2?

[@TheHumblePenny]

Plan 1

[@tania354]

@@TheHumblePenny thanks!

[@angelwings1]

If you’re earning over the 27k + and repaying your loan each month, does it still get written off after 30 years?

[@TheHumblePenny]

Yes, if it's not yes paid off and assuming you started your degree after September 2012.

[@angelwings1]

@@TheHumblePenny thank you! My husband said otherwise, so wanted to check with the pro!

[@bestymusic4845]

Thanks for the video. Is there any grants for students with bad credit In the UK?

[@TheHumblePenny]

Hmm not that I'm aware of 🤔

[@hawaiitongie8671]

I heard a over 50 yrs old woman work in the library still boosting they got degree for free in her time and still get good paid job still working. 😷 😟😖. Greedy and failure government never make sense. 😷

[@mydog3627]

can someone tldr me please?

[@maureenweah8228]

@TheHumblePenny this has been very helpful, thanks, is there a way to contact you if we have any further questions about this?

[@TheHumblePenny]

Please book a Power Hour here: thehumblepenny.com/coaching

[@funmilolaabiola-kuti3787]

Thank you so much for this educative video

[@TheHumblePenny]

You're most welcome, Funmilola. Please share with others :)