Should You Pay Back Your Student Loan Early in UK?

Although there are different types of student loans in the UK depending on when you graduated, the short answer is no. In the UK, the Student Loans Company only collects repayments once you earn over a certain threshold. Even then, they only deduct 9% of whatever you earn above the threshold. If you are unfortunate enough not to earn enough to pay back the loan in about 30 years (that’s 83% of us), then we simply don’t have to pay it back anymore.

Knowing this, student loan debt doesn’t really behave like real debt. It’s more like a graduate tax or contribution you make for the funding you got towards your studies at university.

But, you might argue that there’s interest on your amount owing, and you don’t want to pay interest if you don’t have to. The good news is that the interest rate is so low compared to conventional debt interest that you’d be better off investing or saving the money and getting higher returns. It’s also important to prioritize contributing to an emergency fund in case you lose your job for instance, instead of paying back the student loan. If you voluntarily pay back the student loan in full and then realize you needed the money for something else, you won’t be able to get that money back and you may be forced to go into real debt if you borrow money conventionally.

In Today’s Information Age, Execution Is Key

Back in our parent’s generation knowledge was power. In the 1970s only 8% of young adults were going into higher education, while nowadays the figure is closer to 50%. On top of that, the rest of the world are becoming more educated, with more access to resources. The rise of the Internet means we are now in an information age where knowledge is abundant. If you don’t know a simple fact, Google will tell you.

So if knowledge is no longer as powerful, what has replaced it? Execution. The abundance of information in the environment nowadays means that individuals can pretty much choose any vocation that they wish to. The problem for young people now is choosing something to do, and following through on it.

Those who have the courage to execute reap the rewards in comparison to those who are continually seeking knowledge only. A lot of insight can actually come during the experience too, and this type of insight is more impactful if you’re out there in the arena of life instead of simply studying theory.

Entrepreneur Gary Vaynerchuk consistently advises millennials to “stop thinking and just do.” Your young adult life is supposed to be about trying new things, figuring out what you like and don’t like, what you’re good or not good at, and having the advantage of time to course-correct. The way to achieve more in the modern day? Think less, do more.

Is It Better to Be a Big Fish in a Small Pond?

Malcolm Gladwell writes in David and Goliath of bright students who apply to university. These students typically apply to a range of universities, some more prestigious than others. If we were to imagine that a bright student applied for five universities and got offers from them all, which should she choose?

Our default strategy would be to accept the offer from the university highest in the rankings, and decline the offers from the lower, less prestigious institutions.

The issue with this, Gladwell says, is that most students that get accepted into prestigious universities go from being top of their class for their whole lives to being average or below average amongst their peers in this new environment. And this can be difficult to deal with.

The drop-out rate in the bottom third of high-tier universities such as Harvard are the same as the drop-out rates in the bottom third of lower-tier universities. But the students that would be in the bottom third at Harvard would be at the top third of almost any other university!

The truth is, there’s so many smart people in places like Harvard, it’s hard to feel smart there. Instead of being dragged up by the standard of the others, being in the bottom third of a top institution can demoralize the student and lower self-belief.

So should the student choose a lower-tier university? It depends. The student has to accept that if he chooses the top-tier school he should be prepared to potentially be near the bottom of his class. If he’s not willing to accept that, the lower-tier school may be better for him, where he can shine as one of the best students in his cohort.

In my personal experience as a bright student, I applied for Oxford University and was interviewed there. Even in the couple of days I was there, I could feel how smart everyone was, as well as how extremely posh they were too! In a way I was relieved to receive a rejection letter and ended up going to the University of Manchester – a less prestigious but still reputable university.

At Manchester I didn’t have to adapt so much – I went from probably the best in my college class to second-best in my university class. Being in the upper percentile of my class meant that I was able to be picked for an international work placement, which would have been unlikely in a place like Oxford University. In the end, I still had thoughts of dropping out as one of the best students, so I’m quite grateful I didn’t get selected for Oxford University – I would have probably been too flattered to decline.