We’ve mentioned before that some people look to pension loans because they want to help out their children who are facing potentially crippling debt from student loans. With inflation rising recently, interest on student loans is reaching its highest ever levels (over 6%) and more parents are wondering whether to pay off their kids’ loans. YourMoney.com asks whether this is the right course of action. The main argument against paying it is that, in the long term, the majority of students never have to pay back the full amount that they owe –
“… there are reasons not to pay, notably that – according to the Institute of Fiscal Studies – two-thirds of students never pay off their debt. Students don’t need to pay back their loans until they reach £21,000 of income. From there, they will pay back 9% of their income. Only those earning £41,000 or more will be charged the full interest amount of 6.1%. Student loans are wiped out after 30 years, and for many people their salary will never catch up… As such, for many families it will be a tough choice as to whether their children will ever earn enough to have to pay it off. This might not always be the obvious subjects. According to the Department of Education, the top 10 degree subjects for high salaries are medicine and dentistry, economics, veterinary science, mathematical science, engineering and technology, nursing, computer science, architecture building and planning, business & administrative studies, medicine-related subjects. English, the creative arts and agriculture were near the bottom of the list.”