student loan ~~~~

siuron · 5 April 2006 at 12:20PM

Hi all,
I would like some advices on the best way to pay off my student loan.

I have £3000 in a mini ISA.

Income monthly:
£1100 salary with £250 goes to regular savings account and £20 to student loan repayment.

total= £830

Expenditure monthly:
£20 life insurance
£20 mobile phone
£45 petrol
£25 internet
£40 lunch (£2 a day)
£100 leisure/going out

total = £250

In theroy i have £830-£250= £580 to play with monthly.

The way its going for repaying student loan..i got 42 years of paying £20 a month = £10080 before i retire which i then dont need to repay anymore.
But thats if thats how the system works in future and me still on the same salary.. because the amount to repay is 9% of (salary-£15000).

I owe student loan about £15000 and interest of about £40 are added on every month. So i guess i need to repay £40+ to effectively reduce the capital? other wise the capital will keep growing?

These are the ways i can think of..
1) Repay monthly in larger amounts to cover the interest charge and reducing the capital. for eg. £200 a month straight from salary so in about 6yrs time? i will have finish repaying the loan. Can of course adjust the amount when i have promotion etc.

2) Use the 0% interest credit card transfer some of the money.
for eg. £3000 from cc transferred to student loan and then to pay off in 12 interest free months = £250 a month which i can afford.
Then student loan interest will be calculated at £12k (£30 a month) instead of £15k (£40 a month).

3) combination of both

Broken_hearted · 5 April 2006 at 12:24PM

You don't seem to be earning enough to need to repay your student loan. Could you not defer it till next year and in the mean time pay off acouple of lump sums.

siuron · 5 April 2006 at 12:27PM

i am earning £2000 more than the threshold, and i am repaying automatically at about £15 a month

climbgirl · 5 April 2006 at 12:30PM

I don't know what the interest rate on student loans is (low I understand?), but if you're keen to get rid of it ASAP, I'd do a combination of both.

As long as you trust yourself to pay off the credit card by the end of hte 12 months, using the 0% to cut the interest is good (you'd need a superbalance transfer card though, so check out any balance transfer fees etc. This might make the savings on the loan interest redundant).

And then throw as much money as you can afford to get it down in the meantime. It sounds like you're still living at home (no living expenses like rent or food in your budget!) so it's good time to make the most of not having to pay for things like that.

Broken_hearted · 5 April 2006 at 12:35PM

I might have read it wrong but thought your monthly income was £1,100, mines £988 ever 4 weeks not monthly if that makes sense and I don't have to repay yet.

Murray · 5 April 2006 at 12:42PM

Remember that student loan repayments are based on your income so if you arent earning anything then you dont have to repay anything.

Might be worth bearing in mind if you are considering another loan/mortgage in the near future.

siuron · 5 April 2006 at 12:43PM

1100 is after tax, NI, and student loan repay! i'm on £17000 a year.

opps i forgot the 1100 income already counted the student loan repay!

village_life · 5 April 2006 at 12:44PM

from my perspective (currently paying off student loan) the repayments are just an increased level of tax (in basic terms) - i would NEVER consider overpaying and definately not putting into onto a visa card.....

for example, assume you got made redundant tomorrow - your visa would still need paying, but your student loan would not!

i dont tend to worry about this "debt" - it didnt stop me getting car loans, a mortgage or enjoying spending the leftover bit of my salary each month.

climbgirl · 5 April 2006 at 12:46PM

village_life wrote:

from my perspective (currently paying off student loan) the repayments are just an increased level of tax (in basic terms) - i would NEVER consider overpaying and definately not putting into onto a visa card.....

for example, assume you got made redundant tomorrow - your visa would still need paying, but your student loan would not!

i dont tend to worry about this "debt" - it didnt stop me getting car loans, a mortgage or enjoying spending the leftover bit of my salary each month.

Viewing them as another form of tax is one way to handle it - but they are debts and if you want to pay less in interest in the long-run, I'd treat it like any other debt.

If you're worried about the possibility of redundancy or lower earnings, I'd forget the credit card option. Make overpayments on it while you can, and if something does happen in the future, you're not committed to overpaying so you can stop.

moozie_2 · 5 April 2006 at 12:49PM

siuron wrote:

I owe student loan about £15000 and interest of about £40 are added on every month. So i guess i need to repay £40+ to effectively reduce the capital? other wise the capital will keep growing?

Just my 2p worth - this doesn't seem right. £40 interest every month on a student loan? :eek: When I was paying mine, about 5 years ago, it was nothing like that. Are you sure this is correct????

siuron · 5 April 2006 at 12:52PM

thats a very good point..but we cant keep thinking we will be redundant..otherwise we can forget all these house mortgages and whatever 5 years no interest buying cars, right?

and can i ask what is overpayment? keep everything the same just add lump sum to it when i have the money? or a higher monthly payment?

student loan ~~~~

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