Should I Pay Off My Student Loan? 2008/09 article discussion

sly_dog_jonah

I'm guessing this page will be updated in the next few days hopefully:

http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,3866911&_dad=portal&_schema=PORTAL

argood

The loan rate for the forseeable future is up:

http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,3866911&_dad=portal&_schema=PORTAL

2% from February 6th.

MuffyMan

It's still 2% which is more than I can get on my savings.
I have 2 children at Uni and I promised to pay their tuition fees. I am a net save (paid off the mortgage last year) and I'm getting fed up of switching savings accounts every few weeks to get a reasonable interest rate. I'm still only getting around 2% and as a higher rate tax payer what I get is much less than that. Even with the latest reduction in student loan rate (2% promised) I'm making a net loss. The loans are always 1% higher than base rates, or matching RPI whichever is higher, so I'm not going to make more on my savings than I will be paying on the loans.
Can anyone advise me why I shouldn't use my savings to pay off the loans? It seems to me that by keeping them I'm creating more hassle in worrying about switching savings around and even then losing out.

Chris2685

How can you be responsible for your childrens student loans?
But anyway, the way I see it is that they will never get a loan as cheap as the student loan, but the chances are that they will need to take out a loan in the future at some point to buy a house or a car or whatever. The interest paid on that loan will undoutedly be higher than the interest being paid on the student loan.
So the student loan may only be at a parity with your savings amount, but it is better than having to take out a loan in the (probably quite near, 5 years or so?) future that is 3 or 4 times more expensive...

Lokolo

If you taught your children how to handle money and gave them money they could then save it in their accounts where it will be tax free (assuming they don't work heck loads at university too) so you could get waay above 2%.

I still use my ISAs up and have a 4% fixed (1 year) and a 3.5% fixed (2 years)

rb10

The trick is to plan in advance, and grab a good account while it's available. I have my student loan in a fixed account at 6.25% until June, then have another account standing by which will give me 5% fixed from then until November. So I am earning loads from my student loan with these rates. Keep an eye open, and when you see something good, take it!

As the money should really be your childrens', then, as Lokolo said, why are you not letting them take care of it, so they can have tax-free interest on it? There are still good rates above 2% around. If you don't want to switch around all the time, consider a fixed rate account, or an account that seems to generally give a good rate - see http://www.moneyfacts.co.uk/money/consistent/1/consistent-internet-savings-accounts-18.aspx for these. For example, Yorkshire Building Society's account is 3.25% at the moment. So there are still rates around that are well above 2%, a profit is still possible.

Also remember that RPI for December (the most recent figure published) was a tiny 0.9%. As the student loan rate for 1st Sept '09 - 31st Aug '10 will be based on the RPI for March 2009, we could well be in for a low rate for the whole of the next academic year.

melancholly

MuffyMan wrote: »

It's still 2% which is more than I can get on my savings.
I have 2 children at Uni and I promised to pay their tuition fees. I am a net save (paid off the mortgage last year) and I'm getting fed up of switching savings accounts every few weeks to get a reasonable interest rate. I'm still only getting around 2% and as a higher rate tax payer what I get is much less than that. Even with the latest reduction in student loan rate (2% promised) I'm making a net loss. The loans are always 1% higher than base rates, or matching RPI whichever is higher, so I'm not going to make more on my savings than I will be paying on the loans.
Can anyone advise me why I shouldn't use my savings to pay off the loans? It seems to me that by keeping them I'm creating more hassle in worrying about switching savings around and even then losing out.

the person who signed the loan agreement should be the one worrying about paying it back - it's genuinely lovely that you are that close to your children and want to help them, but the best thing you can do is make them deal with these things themselves.... in the long run, being so responsible for all aspects of their finances will do them no good - they're adults now and need to learn financial skills (which will be argueably more crucial than the skills they're learning on their degrees!)

Chris2685

Interesting bit in the news today...

http://news.bbc.co.uk/2/hi/business/7893873.stm

Some analysts expect Tuesday's figures to show that the Retail Price Index (RPI) - which includes housing and mortgage costs - has already fallen into negative territory.

If the RPI is still negative when they take their next 'rate level setting reading' (or whatever you want to call it), would that mean that they would have to set the student loan rate to that? If so, does that mean we would be getting paid for our student loan?

If the RPI is down to -2%, that would mean we should theoretically be paid interest at 1% doesn't it?

neas

RPI is down to 0.1%

One more month until the entire years worth of interest rate is set . IF it stays at this rate or goes below 0 i'll be happy... as that means no interest accrued for one year. So Get paying down your loans .

BigJonnyB

RPI should have gone negative by March, which means they will be paying us. No way out of it for them...they made the rules

JB