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silvercar

journeyman2 said:

Hi there

just want people’s take on this old conundrum 

I have 16k left on my student loan at an interest rate of ~6 %. Is it worth paying off a large chunk of this or paying down the mortgage (currently at a much lower interest rate and no renewa for a few years) ?. 

Paying it down will give me more disposable income and quickly get rid of a high interest debt.  If I continue as it stands I’d probably pay this off within 5 years. 

Many thanks! 

If you are confident that you will end up clearing the loan, including the interest, in the next 5 years then it makes sense to clear it earlier if you can afford to do so. The other question is what would you do with the money if you didn’t spend it on clearing your loan? Would that be more beneficial to you?

You won’t have more disposable income until the loan is cleared, reducing it just means you will clear it earlier. Your monthly repayments are determined by your income and don’t change by any partial loan repayment you make. They are 9% of earning over the threshold, irrespective of any partial loan repayment.

tinsoldier

I have 3k left on my plan 1 student loan, currently costing 6.5% in interest. I'm 40 and will almost certainly have to pay off the full balance in due course (the only circumstance would be if my earnings reduced drastically, which is very unlikely). I could afford to pay it off now from savings, none of which are earning in excess of 6.5%. So am I right in saying it's a no brainer for me to pay it off now rather than let me salary deductions run their course? Or is there anything I need to consider that I've missed?

Tucosalamanca

I would pay it off and redirect the usual salary deductions to a regular saver account. You'll replenish the savings and benefit from a decent interest rate. It does seem like a no brainer to me.