student loan ~~~~

siuron

moozie wrote:

Just my 2p worth - this doesn't seem right. £40 interest every month on a student loan? :eek: When I was paying mine, about 5 years ago, it was nothing like that. Are you sure this is correct????

3.2% interest rate at the moment?

3.2/100 x 15000 = 480 a yr = 40 a month

morg_monster

The interest on a student loan is very low, only 3.2% at the moment. This is pretty much the cheapest loan you will ever get in your life. (Apart from those 0% cc's etc). If I were you I would keep just paying the minimum (ie what is deducted automatically from your pay) and then make extra payments into your ISA every year, or a high interest savings account. Then sometime in the future, your savings will match how much you have left near enough, and you could pay it off in a lump sum.

Of course, in the future you will probably prefer to use the money as a deposit for a flat, or to pay for things like a car or a sofa rather than putting things on a credit card, which would have a much higher interest rate.

Obviously at the moment your finances are pretty good. But, I would just start saving for now. Then when you have a lump you can pay off you can decide what to do with it. As village_life says, this is one loan you will never need to worry about being able to afford the repayments.

climbgirl

siuron wrote:

thats a very good point..but we cant keep thinking we will be redundant..otherwise we can forget all these house mortgages and whatever 5 years no interest buying cars, right?

and can i ask what is overpayment? keep everything the same just add lump sum to it when i have the money? or a higher monthly payment?

You'll need to ring the student loans people and ask them how you go about overpaying (I had my student loan in another country so the exact details might be different!)

It may be that you authorise them to take more directly from your pay, or that you can pay a lump sum at the end of the year by cheque, or that you can dripfeed them amounts through the year. Find out what they'll accept.

You can't keep thinking you're going to be made redundant, that's true! But you do have to be careful about things like that if you are going to go down the credit card route. You probably won't lose your job, sure. But if you do, that will still need to be paid whereas the student loan wouldn't.

I paid my student loan off as quickly as I could after I graduated. Don't regret it in the slightest.

Loubeelou_3

I am still paying off my student loan - 10 years after having left university. Personally the amount of interest on the 'loan' is small and I speak from experience that you should NOT go down the credit card route - avoid them at all cost.

I don't really count the student loan as a debt like a credit card or store card - I know it technically is but this is just my opinion.

I would pay a little more off each month if you can (every little helps and the amount I'm sure can be reduced if you find that you can't keep up the increased payments) but I would seriously just start saving for that house, wedding, pension and old age and your own kids to go to uni!!

It sounds to me like you could save a bit more and not worry about the student loan so much.

But that is just my opinion and I'm not one to talk seeings as you are younger than me, earn less than me but have more saved than me!!!!

L

morg_monster

Another thing is that overpayments are a little complicated - not massively, but enough so that it would not be worth making an additional payment every month. Do it no more than once a year if you really must.

Plus the interest on a savings account is greater than the interest on this loan, so you're better off leaving your savings there to earn interest so they can pay off more of your loan. There's really NO point overpaying the student loan when the interest is this low.

morg_monster

Sorry I was wrong - you can set up a standing order to overpay, see here

http://www.slc.co.uk/noframe/lr/sss/repaydet.html#increp

Still don't think its worth bothering with, though.

CLAPTON

interest on student loans is currently charged at 3.2% so if you can open an saving a/c with gross of more than 4% is makes no real ecomonic sense to pay it off, however the wish to be debt free is most commendable.

climbgirl

morg_monster wrote:

Another thing is that overpayments are a little complicated - not massively, but enough so that it would not be worth making an additional payment every month. Do it no more than once a year if you really must.

Plus the interest on a savings account is greater than the interest on this loan, so you're better off leaving your savings there to earn interest so they can pay off more of your loan. There's really NO point overpaying the student loan when the interest is this low.

Yes, sorry I didn't realise the interest rate was quite so low. The interest rate on mine was about 3% higher than the average savings account, hence the urgency to get it paid off asap!

siuron

right...i'm getting a better picture now

i guess i need atleast £15000 saved somewhere that also has over 4% interest in order for me not to worry about it. BUT i dont have £15k saved anywhere!...
so in theory i will be losing interest for the first few yrs atleast before i have £15k?

moozie_2

siuron wrote:

3.2% interest rate at the moment?

3.2/100 x 15000 = 480 a yr = 40 a month

Thanks for that, I stand corrected. My loan was at around 2%, luckily.

I see plenty of good advice has been posted already. I have to agree with not paying any more on a debt that has such low APR and concentrate on other areas that you can improve/save.

Good luck.