Chris asks: “Maybe a stupid question, but I was wondering if I should include my student loans as part of your net worth calculation or not?”
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Q&A 39 – Do You Count Student Loans In Your Net Worth? – Shownotes
Today’s question comes from Chris:
Maybe a stupid question, but I was wondering if those of you with student loans consider them in your net worth calculation or not?
Thanks for your question Chris. It’s not a stupid question, but it is a fairly easy one to answer.
Student Loans Are Liabilities
Your net worth is the difference between all of your assets, and all of your liabilities.
Student loans are a liability and hence they would be included.
I suppose that you are asking because for the majority of outstanding student loans (those taken out between 1998 and 2011) you don’t actually have to repay your student loan until you earn over £17,335 per year (£17,495 from April 2016). Moreover, they are forgiven after around 30 years (or if you die).
However, the vast majority of people will repay their student loans in full and hence everyone should include it as a liability in their net worth.
You Should Want To Pay Them Off
If you went to university and your aspiration is to earn less than £17,000 per year just so that you don’t have to repay this debt, you have probably got your priorities a little mixed up.
You should, however, consider the repayment flexibility and the interest rate on your student loan when deciding which debts to repay and in what order. In the majority of cases, your student loan in the UK should be the last debt that you repay (although in the current low interest, low inflation rate environment), this may not always be the case.
For more information on whether you should repay your student loans early, see the following detailed article.
Help With Your Net Worth
Equally, if you want more help and guidance completing your net worth (and your monthly budget and goals) then visit the Moneystepper Savings Challenge page where you will find the Tracking Template that you can download completely free of charge.
See you all next week for another three questions. Thank you for listening and have a great weekend!
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