Should you repay a child’s student loan


Posted by: Nicola Macdonald, on August 16, 2016.


Parents and Grandparents often have the very best intentions and interests of their children and grandchildren at heart when it comes to paying off or ensuring their offspring don’t leave University with any debt, but is this the wrong thing to be doing?

The FT’s Clear Barrett and Naomi Rovnick made this brilliantly concise 2 minute video, explaining why repaying the student loan is not the correct option.

 

In short, outstanding student loans only need to be repaid once earnings £21,000 per annum, at that point 9% of any income will be deducted. Crucially, if the loan is still outstanding after 30 years it will be written off.

Martin Lewis of Money savings expert fame has calculated to clear borrowings and interest on the average student debt of £44,000 within 30 years graduates would need a starting salary of approx. £40,000 with 2 per cent above inflation pay rises each year and take no time off for travelling or raising a family in the next 30 years!



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