Student Debt repayments

skyepark

Only a minimum payment of £4 a week goes out of wages by way of paye when im working, which is not lot since i don't earn a lot.

I have a few thousand saved up and my student debt is oh 13,000, How much should I pay off in a lump sum to reduce debt and keep control of the interest/inflation rate?

:rolleyes:

pivotalgubbins

As far as I understand it, nothing! As the interest rate is so low, you'd be better off sticking the money in a high interest savings account. That way, you'd make more money than paying off your loan. Also, it is a good idea to bear in mind that, with a stack of cash behing you, if you were made redundant or had the oppurtunity to put a deposit on a property, buy a car, etc, you'll appreciate the pile of money that a lower student loan.

Of course, it is a debt and I admire your resolve to pay it off, I have often thought of it in the past (don't pay a penny off mine at the moment). However, you should really think things through before making your decision.

I hope that helps, I am sure otehrs will give their opinion as well... good luck whatever you decide.

Batfink

Definitely nothing.

The payments for student loans come out of your wages before tax is taken off - effectively meaning you're saving 22% on them.

I'm not sure if its possible to voluntarily pay more than the minimum out of your wages? If it is then do it that way, subsidising the income with your savings if you need to for a while.

Phil

skyepark

Ta, I saw on the SLC site that it is possible to make a payment by cheque. I have £3000 in an ISA and £2000 in a reserve reward account(crap interest and I will soon transfer it into another ISA)

Hmm seems the ISA interest is higher. However, I don't have the luxry of choosing any new current/isa.savings accounts, only my Natwest as I dont have a drivers license any bills with my name on it. I only have my passport.

CLAPTON

the current rate of interest charged on student loans is 3.2%

why do you say you can't open a saving account? ...what stops you?


also BATFINK says the student loan is reduced by 22% i.e. comes off before tax..I've never heard that before ...are you sure

skyepark

Clapton, banks always seem to ask for two pieces of ID asking for both to have addresses on them, i dont pay bills or have a drivers license, i did read somewhere else that medical cards adn tax notifications are excepted so i may shop around now.

CLAPTON

you can open savings accounts online that only require a cheque for the opening amount (can be nominal). as they send forms throught the post the cheque account address has to be your own....they may of course carry out other checks like electoral roll but i wont know that....why not check out an online a/c ..they generally pay the best rates anyway

bommer

Just being a little bit contraversial here - surely as this is the debt free wannabe is it not better to pay off the student loan whatever the interest rate. I have £12k plus in student loan which is raking up intrest but will not have payments taken as I am still earning under the £15k limit for making repayments. Hopefully once my immediate debts are paid I will be making repayments - which you can do by sending them a cheque.

kne

Sorry about hijacking this thread but does anyone know if its possible to take a break from paying back the student loan for a year or something? Money will be tight as I have just bought a house. Just a thought!

kathfisch

bommer wrote:

Just being a little bit contraversial here - surely as this is the debt free wannabe is it not better to pay off the student loan whatever the interest rate. I have £12k plus in student loan which is raking up intrest but will not have payments taken as I am still earning under the £15k limit for making repayments. Hopefully once my immediate debts are paid I will be making repayments - which you can do by sending them a cheque.

I know what you mean about aiming to be debt free but surely its better to put any extra money you have into a savings account. It will grow at a faster rate than your student loan because of its high interest rate and eventually the money in your savings will exceed the amount of loan you owe. Then, psychologically, you are "debt free" and can keep that lump of money in a high interest account, thereby earning interest. If you can't afford the payments at any time you can simply take a bit back from your savings, it is never possible to take anything back if you have made overpayments to your loan.

This is the strategy I plan to use and it seems to make the best sense to me! I know that if I need the money at any point for something unexpected it will be there rather than being required to take out a loan or credit card at a much higher rate. A student loan is the cheapest loan you'll ever get so why not make the most of it?!

I'd be interested to know if payments are deducted before tax, even better if they are!!

kathfisch

kne wrote:

Sorry about hijacking this thread but does anyone know if its possible to take a break from paying back the student loan for a year or something? Money will be tight as I have just bought a house. Just a thought!

As far as I know, the answer is no! They only take the small amount out of your wages and if you are earning enough to pay this you are deemed to be able to afford it. Happy to be corrected if I'm wrong!