Student Loans

This is based on the UK student loans for English students.

I’ve not explored every option for this so I will update this if I find I’ve misunderstood something. As far as I understand the rules:

(1) There is a lower threshold and you pay 9% of what you earn above that threshold. This payment reduces the balance.

(2) Interest is added to the outstanding balance. When still studying the interest is RPI+3%. When earning below the low threshold the interest is RPI. When earning above the high threshold the interest rate is RPI+3%. And between the thresholds, the rate is pro-rata between RPI and RPI+3%.

(3) If you get the balance down to zero in less than 30 years, then there’s no more to pay.

(4) After 30 years the loan is cleared by the government.

This means that “loan” is a misnomer. It’s a means-tested charge with some extra features.

It seems amazing to me that a reasonably well paid career such as Chartered Engineer (Engineering Council survey suggests median CEng salary is around £70k) will probably not clear the loan. Still, I guess the idea is to have a long term means-tested charge.

It would be great for providing clarity if the SLC issued a statement that showed 31 years – like my spreadsheet. As usual, yellow cells are inputs:

The example in the image is for a well paying job. Paying off the loan early only seems to make sense for very high earners. Even in this example, it seems better to let the “loan” run its course (assuming charges and thresholds remain sensible).