While going to university is an experience I can’t recommend enough, there’s that existential dread when you have to start paying back your student loan. Spending three years drinking shots and eating late-night pizzas might seem like a good idea at the time, but when you’re in crippling debt afterward, it might not seem so smart.
Whether you start paying it back straight away or simply chuck the letters in a pile and pretend they don’t exist, there’s no escaping your student loan. Well, unless you run off to a different country and change your identity.
Money Saving Expert’s Martin Lewis is something of a monetary Superman, swooping down to save us all some serious dollar over the years. Lewis isn’t just good for finding restaurant deals and 2-4-1 cinema tickets, he can also give you some solid financial advice.
This week, he spoke to Good Morning Britain and explained everything you need to know about student loans. Lewis gave some wise words when he was asked whether older graduates should accept a deal to settle pre-1998 loans that are still outstanding.
He explained: “Some university leavers who started studying between 1990 and 1998 have received letters from Erudio (the company that manages their student loans) offering them the chance to settle their loan by paying off as little as 20 percent of the amount outstanding.
“While this may sound like a good offer, if you get a letter, be wary of accepting.”
Lewis then revealed when your student loan will be wiped out if you haven’t managed to pay it back: “It’s important to understand that the loan may be wiped before you fully repay it, and partially settling your debt could affect your ability to get credit in future.
“If you’ve still got one of these loans it means you haven’t paid it off in at least 20 years, and in most cases means you’re unlikely to pay any of it back, and even more unlikely to pay it off in full.
“While it may seem tempting to pay a lower figure than the outstanding balance, the loan will eventually wipe.
“While most shouldn’t take up the offer, it may work for some.
“As Erudio has upped the percentage it is offering to wipe (from 50 percent to around 80 percent for some), there are now likely to be a decent chunk of people who are temporarily deferring and have a reasonable chance of earning over the £30,737 threshold, for whom Erudio’s offer will save them money.
“The question to ask is, how long will you earn over the threshold for before your loan wipes? Then work out how much you’d pay over that period, and do the maths.
“If you’d likely pay more than the settlement figure, then settle.”
It all sounds pretty confusing, so let’s break it down into a handy table before you go reaching for the calculator. Here’s what age you will be when your student loan is wiped out:
Studying between 1990 and 1997: If you are under 40, it will be 25 years after the first payment or at the age of 50
Studying between 1990 – 1997: When you turn 50
Studying between 1998 – 2005: When you turn 65
Studying between 2006 – 2011: 25 years after the first April of your graduation
Studying between 2007 – 2011: 35 years after the first April of your graduation
After 2012: 30 years after the first April of your graduation. 35 years in Scotland and 25 years in Northern Ireland.
Is that a little clearer? Good, now let’s all go down to the pub!
[Featured Image: Pixabay]