44 sats \ 3 replies \ @alt 9 Apr \ on: Are you in the UK and overwhelmed by debt? Personal_Finance
I'm in the UK and have made sure not to get wrapped up in significant debt. Credit cards are paid in full every month.
Only significant debt is my car loan, but I'm still positive-net-worth thanks to Bitcoin. I'm ignoring my student loan due to the way they work here, I don't have to pay it all back.
Thing is, I know I'm in a much better place than some of my peers who are bad with money, but it does sting a bit when I see them living a better lifestyle despite having less money. I know it'll pay off in the end though, and the other half is completely on-board with how I manage our finances.
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The important differences are that a) Student loan payments are only deducted after a certain salary threshold and b) The debt is written off after period of ~20-30 years (depending on when the loan was issued).
So, UK student loans behave much differently to conventional loans. They operate more like a "graduate tax". The terms of the loan mean that there's little incentive for paying them back early, and the vast majority of holders will not be paying the full amount back before they are written off completely. As of now, graduates in the UK owe around £220B of student debt.
While the US system is predatory, I believe it to be at least fairer than the UK's system where the general public will be left to pick up the tab.
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A key thing to make clear is that not only are payments only made after certain salary thresholds, but also that the amount paid back each month is dependent on what you earn in that month, not on what you owe.
So, two graduates earning £30,000 per year will pay the same towards their loans, even if one owes £45,000 and the other owes £90,000. This means you can effectively borrow as much as you need, and not have to worry about making payments later that are too expensive. In theory, you should be earning more with a graduate salary than otherwise, even when loan payments are factored in.
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