Student Loan Debt

nic82

Apart from a £200 overdraft which will be paid off very shortly, the only debt I have is my student loan.

However, after reading various bits on this forum, I'm not sure whether to pay it off. The balance is currently somewhere between £9000 and £10000 :eek: which is an awful lot of money and I don't like knowing that I have such a large amount owing.

I only graduated this year, so don't start paying back until April. However, I will only be paying back £270 a year out of my wages, which is a ridiculously low amount (I probably will end up paying more interest than that each year).

After the mortgage and my share in all the household bills, I have approx £250 left a month. Out of this, I spend approx £100 on contact lenses, going out and new clothes. Therefore I have £150 left each month.

My dilemma is...do I throw the £150 at my student loan each month, or do I put it into savings (the only savings I have at the moment are £700)? I would prefer to put it into savings, as I don't really have anything to fall back on or for a rainy day, but then my student loan won't really be decreasing.

Any advice would be great!

moolah_2

Put £150 a month into a savings account. The interest rate on the savings is higher than the rate on the student loan. As well as this, the student loan is the cheapest you will ever get, so if you need a lump of money in the future then you can take it from the savings rather than needing a expensive bank loan.

Rache_2

Your student loan - if it's anything like mine - is collecting interest at a very low rate (2-3% off th top of my head). You would get far more than that if you had cash in a savings account - tax free if you save in an ISA. Student Loans are the one thing it's not worth paying off early.

(I had £35000 of student loans when I graduated and am still paying them off 10 years after starting uni, but my other debts come first. In fact when I pay off my other debts, I'll be saving rather than paying off student loans early.)

nic82

Thank you for your replies.

A savings account is definitely the best way forward then!