Paying off your student loans in most countries is a very good idea paying off your student loans in the uk, however, is one of the biggest financial mistakes you could make and it could cost you thousands paying off. Your student loans in the uk could mean wasting tens of thousands of pounds that you might have been able to save for other things.
So there may be other post mentioned in this one. That will help you on your journey to financial freedom, and if you need any insight at all, then please don’t hesitate to comment, because I am here to help student loans in the uk should not be paid off early.
Student loans in the UK vs Student loans in Other Country
And here is Why student loans in the Uk are not the same as student loans in the us and most other countries. Student loans in the uk are not actually real loans.
They simply do not work like that, and so, if you have any fear about your student loans here in the uk, please read to this because it’s likely i’ll be able to alleviate some of that fear. For you, a lot of people choose not to go to university in the uk and that’s absolutely fine. It really isn’t necessary for some people, But if you’d like to go and are scared of the debt that it might require, please keep watching and if you already have the loan and are thinking of paying off early, this video is absolutely for you.
Please do not do anything before read this, so why are student loans in the uk not something to be feared, like other kinds of debt and, more importantly, why shouldn’t you pay them off early? Like I briefly mentioned student loans in the uk. Do not work like Debt and here’s why student loans in the uk do not have to be paid back? How much of your student loan you have to pay back does not depend on how much student loan you have.
Paying off your student loans in the UK could cost you more than £50,000
It depends entirely on how much money you earn i’ll go into more detail in just a minute about the actual numbers, but having 10 000 pounds or 50 000 pounds or a million pounds in student debt does not affect how much you have to pay in the Uk, it is almost completely irrelevant and it is almost Entirely dependent on how much you earn you’ll understand later.
Why i’m saying almost, but for most people in this scenario almost just means always so student loans are only paid back. If you are earning above the threshold that needs to be met in order to pay it back, otherwise, you pay absolutely nothing. This makes student loans in the uk far more comparable to tax than debt and a far more appropriate name, for it would be something like graduate tax rather Than student debt.
Not only this, but no matter how much you’ve paid back whether it is nothing or almost everything. Your student loan is wiped 30 years after your graduation and if you die before this, the student loan dies with you, so none of your family members will be left with the loan when you’re gone. This also means that the interest rate on the loan is largely irrelevant, because it is almost guaranteed that you’d never even pay back the principal, let alone the Interest on top of it.
But the most significant thing is what I said: first, you do not have to pay back your student loan unless you earn enough to do so, so your interest rate doesn’t really matter because the loan gets wiped after 30 years anyway, and you will probably pay back. Hardly anything over those 30 years unless you are a stupidly, high earner and i’ll, go into more detail about what this means in just a minute. But here’s a quick example.
The threshold you must Meet depends on when you took out the loan. So if you took out the loan before september 2012, you have to earn 19.895 pounds per year in order to start repaying, and if you took out the loan after september 2012, you only have to earn 27.295 pounds per year. Both of these figures are as of 2021 and 2022.
Once you are earning above the respective thresholds, you then pay just nine percent per year of the money that you Make over the threshold. This means that if you took out your loan after september 2012, which I imagine will be the case for most of you watching this video, you will have to earn 27.295 pounds a year to start paying anything at all and when you are earning above this Threshold, you only pay nine percent per year of the money that you earn over that 27.295 pounds.
So suppose you earn 28 000 pounds a year. This is 705 pounds over the 27 295 pound Threshold. This means you will then only pay nine percent per year.
Of that 705 pounds, which is just 63 pounds and 45 pence annually or 5 pounds 29 per month, if you multiply this 63 pounds or 45 pence per year by 30 years, you get 1903 pounds and 50 pence. This means that you only paying one thousand nine hundred and three pounds and fifty pence over thirty years compared to the often fifty thousand pounds, plus that you would have had to pay by paying it off Early.
Of course, your income could go up over those thirty years, and so you may pay slightly more than one thousand nine hundred and three pounds of fifty pence, but it’s unlikely that your income would increase enough to end up paying it all back.
I’ll explain more in just a sec about how much you need to earn in order to actually pay it all back and so paying it off early would almost always result in paying more money than you would have had to pay. Otherwise – and you Don’t have to worry about debt collectors either, because if you don’t earn enough, you simply don’t have to pay. This is as close to risk-free as you can possibly get when it comes to using money that isn’t really yours to begin with.
But, as I briefly mentioned, this isn’t necessarily applicable to every person. So when is it a good idea to pay off your student loan early? It is very rare that paying off your student loan early would be a good idea, and it is way More common that it will be a huge financial mistake that could cost you upwards of 50 000 pounds as we have demonstrated so far. But there are times when paying it off early could make sense, and those times are when you earn so much money that you will end up paying off the loan within 30 years, just by making the payments that you’re required to make.
In order. For this to happen, however, you would have to earn more than 70 000 pounds per year for 30 Years. From the day you graduate that’s 70 grand a year from the day you graduate for 30 years.
This is beyond unlikely, and most people in the uk will never earn 70 grand for a single year in their career, let alone 30 years from the day they graduate. So unless you make mega books specifically over 70 000 pounds a year for 30 years or the equivalent in averages, it is likely that doing nothing is the best thing to do. If you happen to make enough to pay off Early, then doing so is highly recommended, because you could actually save yourself tens of thousands of pounds by preventing any more interest from accruing.
But, as you can see, paying off your student loan in the uk for most people is a massive mistake that would likely waste tens of thousands of pounds that could have been kept for yourself and your family. So please, if you do not make enough to pay off your student loan early, simply do nothing, however, paying Off most debt, regardless of the country you live in, is absolutely a wise thing to do.