Two years ago, Eleanor Peake's student debt was £55,683.94. Today it's £60,994.92 and it's still rising with an interest rate of nearly 8 per centEvery month, £124 is taken out of my salary to pay off a debt pile that only gets bigger and bigger.
My sister, who is nine years older than me, also reassured me. Her student loan was a total of £9,000 and her repayments were so low that she believed I wouldn’t even notice the small amount coming out every month. How was she to know what was to come?and Clegg had raised the fees to £9,000 a year on Plan 2, instead of £3,000 on Plan 1 .
As we earn more, the chunk will get bigger, and our interest will keep rising but most of us are simply treading water . “Yes, you won’t be able to pay it off,” says Ian Dempsey, financial adviser at TheMoneyMan. “The reality is that your mortgage will be based on your gross salary and what you have coming out ,” says Dempsey. “Typically, mortgage companies will look at a debt-to-income ratio. The general limit is 36 per cent of debt compared to what you take home what you’ve got coming in. If you have 40 per cent, that would be a red flag.”
There is one silver lining – it isn’t the total amount of debt that is considered in the mortgage calculation, rather the amount coming out of your salary each month. Funmi Olufunwa, a qualified consumer finance lawyer, mortgage adviser and Founder of financial education provider, Hoops Finance, says: “I’ve never known a lender to ask for the total amount of student debt.”