Advice Required ~Re. Student Loan!

getgobby

I've recently graduated and have accumulated £20.5K worth of student loan debt from a 4 year degree...I've just checked my statement from the SLC, and its mounting up by ~£44 a month...by my estimates, thats about 2.6% annual interest rate - quite low.

I've managed to save a substancial amount, abt £4k but thats put away in an ISA and a high rate savings account.

Should I continue to do this, or should I pay off a lump sum? The payments from my monthly wages are pitiful, just enough to cover the interest rate for the month, lol!

Or...is there another way, would it be possible to transfer this debt onto interest free credit cards? Any advice is much appreciated! :j

Bargain_Rzl

I would think it a very bad idea to transfer any of the debt onto interest free credit cards. You cannot guarantee that you will be able to keep the debt at 0% in the long term, because you never know whether these cards will continue to be available (or your circumstances could change and affect your credit rating). You might well end up in a situation where you are paying credit card standard interest rates on a debt which was formerly on a nice cushy inflation-linked student loan rate. Also (and somebody will correct me if I'm wrong) I don't think student loans show up on your credit file - so if you transferred the debt to cards which do show up, that will restrict the amount of further credit that people are prepared to give you.

As it is, your ISA and high interest savings are undoubtedly earning more interest than your student loan is costing.

I would strongly suggest that you leave the situation as it is, and keep saving as hard as you can.

WSO

The student loan is probably the cheapest form of long term lending there is and in my experience the rate earned by savings has always outweighed that I've been paying on my loan.

I have thought about repaying extra off my loan but decided to keep the money in my ISA instead since it was more efficient use of the money. However, my loan is the old mortgage style so I can work out exactly when my last payment will be. This is one thing I don't like about the new system because you "can't see the light at the end of the tunnel" so easily.

While it might be more efficient to save your money and pay it off when it is asked for - paying some extra should reduce your term and the total cost you pay to the SLC and you will probably feel better for doing so...

I still pay my loan even though I qualify to defer because I've got just over a year to go - if I didn't know how long it would take to pay back I would probably not have bothered.

If I was in your position, my head would say "leave it", but my heart would say maybe... and as for juggling on credit cards, I wouldn't even go there as it would affect the level of repayments significantly.

In response to the query about the credit file - my student loan is not on my files but like I've said before I'm on the old system so don't know if this has changed.

dinkylou

Ok,

I've looked into this quite a bit as I'm the same as you and have thought about what to do with this loan.

The rate for this year is 3.2% but it was lower than that last year.

It doesn't show up on your credit file and so I wouldn't transfer to a 0% card as that will run out before you can pay it back, and your file will show a very large debt.

As for paying it back, well, yes your ISA is paying a higher rate of interest than the loan is charging you.

And so its really your decision whether you would feel better knowing that the balance is being reduced rather than having the cushion of money there if you need it.

If you think that you may need a small loan any time in the future, then I definitely would nt pay the extra money to the SLC, as you wont get a loan as low as 3.2%.

In theory you should leave the money in the ISA, until you have saved enough to pay the whole lot back.

Heth_2

I'd keep it as a student loan if i were you - at least if you lost your job you don't have to keep paying it as the repayment comes straight off your pay doesn't it. Whereas with a credit card you don't have that protection. Also when you apply for a mortgage some lenders don't seem bothered by student loans, whereas they will want you to put down the outstanding balance on cards.