How I owe a £53k debt at the age of 22
MONEY Supermarket Expert Martin Lewis told me to rip up the statement for my student loan – which currently stands at over £53,000 – but is it as simple as that?
I’m 22 years old and I already have a massive debt hanging over me.
It’s more than the mortgage my grandparents took out when they bought their three-bedroom house back in the 1970s.
I’m not a frivolous shopper, I don’t have gambling debts and it isn’t from buying property.
It’s the price I – and millions of others – have paid to continue studying since tuition fees were introduced in 1998.
For those of you who were lucky enough to be able to borrow from Student Finance Wales (which I believe has a slightly better system where the Welsh Government contributes towards tuition fees, meaning students only pay £3,000 a year) or were able to pay the fees without needing to take out loans, I’ll briefly explain how the English system worked when I took out my loans in 2013 and 2016.
I paid £9,000 a year to study a bachelors degree in English language and linguistics at the University of Sheffield. This cost me £27,000, which I borrowed.
I was also given money in the form of loans (which I have to pay back), grants and bursaries to cover things like rent, food and books.
I think in total I had about £8,000 a year to spend.
Some students studying now are even worse off after the Government scrapped grants and introduced a second loan for students whose parents are on a low income.
But after added interest, which started being added to the already hefty bill in April 2017, I current owe £42,711.43 for my undergraduate degree – a lot more than my Welsh friends.
I then decided to do a master’s degree in journalism at Cardiff University, so took out a £10,000 from Student Finance England and it barely covered my tuition fees.
So I actually ended up with overdraft debt and had to rely on my parents (sorry Mum and Dad) and savings.
At the time, Student Finance Wales didn’t offer a postgraduate loan, so in a way, I was better off than some of my coursemates. (Although now Welsh postgraduate students are entitled to borrow up to £13,000).
I start to pay this back when I earn £25,000 and what I pay is based on how much I earn, not how much I borrowed.
But after four years of university, I now have a debt that, unless I win the lottery, I doubt I will ever fully pay back.
I didn’t really think about how much I owed and I didn’t know the exact figure until a few days ago when I checked my statement online a few days ago.
I’d almost forgotten that I owed money because it’s almost an invisible debt.
I thought it would be somewhere in the region of £40,000 because naively, I didn’t really understand interest rates when I took out the loan at 18.
It’s actually £53,409.20 and will continue to go up each year when interest is added.
The interest rate for my postgraduate loan has also been increased to 6.1%, which is higher than the interest rate for a lot of mortgages and is probably going to go up again.
So, after seeing the huge figure I asked finance expert and Money Saving Expert Martin Lewis what I should do. After all, it’s a huge amount of money but it doesn’t seem like anybody really cares.
He said: “Rip up your statement – it’s totally irrelevant – and shouldn’t be sent.
“Just consider that you’ll pay 9% extra tax if you earn above £25,000.
“Why on earth would you try and pay it off?”
When I eventually start paying the debt, I’ll pay 9% of whatever I earn above £25,000 until the bill is paid, or wiped clean.
For example, if I earn £35,000, I will pay an extra £900 in tax every year – or £72 a month – on top of the tax and national insurance payments everyone who doesn’t have a student loan that size would pay.
I will be paying that for 30 years – that’s until 2047.
Mr Lewis also recommends in an article that if I, or any other students in my position, come into money and have some spare – we shouldn’t pay it off because it probably won’t affect how much I pay monthly.
The debt won’t even go on my credit report, so unless anything changes I don’t need to worry.
And like 83% of other graduates with English student loans, I probably won’t clear the debt anyway.