Should I pay off my student loan?
Chris4
Posts: 177 Forumite
I have a student loan of £25,000 (starting 2009/10), which is costing me about £31.25 a month (1.5%) in interest.
I currently have £15,000 savings at 3% AER (2.4% after tax; Santander 123), earning me about £30 a month.
I'm earning a salary of £22,000 and paying off £50 of my student loan a month.
Should I pay some of my student loan off?
I currently have £15,000 savings at 3% AER (2.4% after tax; Santander 123), earning me about £30 a month.
I'm earning a salary of £22,000 and paying off £50 of my student loan a month.
Should I pay some of my student loan off?
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Comments
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I have a student loan of £25,000 (starting 2009/10), which is costing me about £31.25 a month (1.5%) in interest.
I currently have £15,000 savings at 3% AER (2.4% after tax; Santander 123), earning me about £30 a month.
I'm earning a salary of £22,000 and paying off £50 of my student loan a month.
Should I pay some of my student loan off?
Absolutely not. While you say the loan is 'costing you about £31.25 a month', the government are really paying you to borrow the money. This is because on pre-2012 loans, the interest rate is below inflation (as measured by RPI) and can be at most the inflation rate. So in real terms the value of the money you owe is falling, meaning the balance is future years will be worth much less than it is now (or was when you took it out). So the longer it takes you to pay it off the better. On top of that, you can actually earn even more by keeping the money in a bank account with an interest rate above that of the loan, as you are doing. On top of that, any balance remaining after 25 years is written off.
So no, keep paying off the minimum (i.e. that taken from your salary) but no more.0 -
Definitely not!0
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Absolutely not. While you say the loan is 'costing you about £31.25 a month', the government are really paying you to borrow the money. This is because on pre-2012 loans, the interest rate is below inflation (as measured by RPI) and can be at most the inflation rate. So in real terms the value of the money you owe is falling, meaning the balance is future years will be worth much less than it is now (or was when you took it out). So the longer it takes you to pay it off the better. On top of that, you can actually earn even more by keeping the money in a bank account with an interest rate above that of the loan, as you are doing. On top of that, any balance remaining after 25 years is written off.
So no, keep paying off the minimum (i.e. that taken from your salary) but no more.
Thank you very much, that's very insightful. :-)0 -
Most people never pay back the total amount of the loan - and if you do, you're earning enough that it really won't matter :P
So there's never really any point in paying any extra back than needed.0 -
If I won the jackpot on the Euromillions I still wouldn't pay it back any faster!“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0
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If I won the jackpot on the Euromillions I still wouldn't pay it back any faster!
If you won the jackpot on Euromillions you'd have a hell of a lot of unearned income and any unearned income counts for student loan repayments if it is above £2000 - so 9% of the jackpot would probably clear it anyway.0 -
Noooooooooooooooooo!!!!!!!!!!!
If you were on the new student loan rate (I think it is something silly like 6% their interest rate...) then I might say different. But you got it good, I'm on the same rate as you and they won't be getting anything extra out of me unless something considerable changes.0 -
Current student loan rate for plan 2 (post 2012) is 5.5%, income thresholds are slightly higher than plan 1.
It means that, assuming you took the non-means tested maintenance loan and tuition fees for 3 years you would have nearly £38k of debt and would be charged nearly £2,100 a year interest alone and would need to earn over £44k a year for the mandatory payments to even cover the interest!I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
Current student loan rate for plan 2 (post 2012) is 5.5%, income thresholds are slightly higher than plan 1.
It means that, assuming you took the non-means tested maintenance loan and tuition fees for 3 years you would have nearly £38k of debt and would be charged nearly £2,100 a year interest alone and would need to earn over £44k a year for the mandatory payments to even cover the interest!
Given that the OP is on plan 1 isn't plan 2 irrelevant?
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Given that the OP is on plan 1 isn't plan 2 irrelevant?
Yes it is. Well irrelevant to this thread anyway.I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
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