{"id":21587,"date":"2021-12-09T11:56:04","date_gmt":"2021-12-09T11:56:04","guid":{"rendered":"https:\/\/smh.group\/?p=21587"},"modified":"2023-02-15T13:46:35","modified_gmt":"2023-02-15T13:46:35","slug":"student-loans-normal-debt-rules-do-not-apply","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/student-loans-normal-debt-rules-do-not-apply\/","title":{"rendered":"Don&#8217;t rush to pay off your huge student loan &#8211; normal debt rules do not apply"},"content":{"rendered":"<p><strong><span data-preserver-spaces=\"true\">Student loans weigh heavily on students and their families, and even political parties \u2013 remember the Lib Dems? But the name itself has created misunderstanding about how they operate and the best way to manage them.<\/span><\/strong><\/p>\n<p><span data-preserver-spaces=\"true\">A recent article published by MoneySavingExpert.com debunks some of these common myths. Surprisingly, because standard debt rules don\u2019t apply, it is recommended that a student loan be taken instead of self-funding fees, and it is generally not worth trying to pay a loan off early.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Of course, this approach to student debt is the complete opposite of the approach towards typical debt, such as borrowing to buy furniture! The misconceptions surrounding student debt are because the amount borrowed to pay fees and living costs are largely irrelevant; what is important is how much has to be paid back. Also worth noting is that regarding student loans:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">There are no debt collectors;<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">There are no entries on credit files; and<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The impact on mortgage affordability checks is not the amount of debt but just the value of the repayments.<\/span><\/li>\n<\/ul>\n<h2><strong><span data-preserver-spaces=\"true\">Repayment<\/span><\/strong><\/h2>\n<p><span data-preserver-spaces=\"true\">English and Welsh students don\u2019t make any repayments until annual income exceeds \u00a327,295, with repayment at the rate of 9% on the excess. So only those with reasonably well-paid jobs pay back the debt. After 30 years, any remaining debt is wiped out.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Anyone nearing retirement is in a very appealing position if they take out a student loan to study for a degree. Unless they have substantial pension income, they will never have to repay.<\/span><\/p>\n<h2><strong><span data-preserver-spaces=\"true\">Do not self-fund<\/span><\/strong><\/h2>\n<p><span data-preserver-spaces=\"true\">Given how student loans are repaid, self-funding university costs can be a bad idea. Self-funding means 100% of the costs are paid, but someone who earns less than \u00a327,295 will effectively get their degree for free.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Even worse is where parents borrow to avoid taking out a student loan \u2013 it is much better to help out children later in life with a mortgage deposit.<\/span><\/p>\n<h2><strong><span data-preserver-spaces=\"true\">Early repayment<\/span><\/strong><\/h2>\n<p><span data-preserver-spaces=\"true\">Although it is usually a good idea to repay debt as quickly as possible, this may be the wrong decision for a student loan.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Overpaying a student loan each month is pointless if that person will not fully repay the loan within 30 years. Even someone with a good income may not make full repayment given the relatively high rate of interest that can be charged.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">You can find more guidance on repaying student loans\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.gov.uk\/repaying-your-student-loan\" target=\"_blank\" rel=\"noopener\"><strong><span data-preserver-spaces=\"true\">here<\/span><\/strong><\/a><span data-preserver-spaces=\"true\">, and you can, of course, contact our\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/devstagesite.co.uk\/smhgroup\/chartered-accountants\/\" target=\"_blank\" rel=\"noopener\"><strong><span data-preserver-spaces=\"true\">Accounting &#038; Business Advisory<\/span><\/strong><\/a><span data-preserver-spaces=\"true\">\u00a0on\u00a0<\/span><strong><span data-preserver-spaces=\"true\">0114 266 4432<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0or\u00a0<\/span><a class=\"editor-rtfLink\" href=\"mailto:info@smhca.co.uk\" target=\"_blank\" rel=\"noopener\"><strong><span data-preserver-spaces=\"true\">info@smhca.co.uk<\/span><\/strong><\/a><span data-preserver-spaces=\"true\">\u00a0for further advice.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The issue of student loans weighs heavily on students and their families, and even political parties \u2013 remember the Lib Dems? But the name itself has created misunderstanding about how they operate and the best way to manage them.<\/p>\n","protected":false},"author":4,"featured_media":21669,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[3],"tags":[314,191,870,871,250,321,197,19],"class_list":["post-21587","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smh-accounting-business-advisory","tag-debt","tag-finance","tag-higher-education","tag-loan","tag-self-assessment","tag-student-loan","tag-students","tag-tax"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Don&#039;t rush to pay off your huge student loan - normal debt rules do not apply - SMH Group Accounting &amp; Business Advisory<\/title>\n<meta name=\"description\" content=\"The issue of student loans weighs heavily on students and their families, and even political parties \u2013 remember the Lib Dems? 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