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Student Loan thoughts...
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nm123_2
Posts: 251 Forumite
I graduated in 2002 and slipped through the net until May 2008 in terms of repaying my loan. I stupidly thought I'd got away with it, and I'm kind of kicking myself that I could've had it pretty much paid off by now! But anyway...
Currently, I pay just under £200 per month but I'm thinking of making a higher one-off payment with some spare cash (bonus from work), not a lot, just a few hundred to start chipping away at the £12k I've got left to pay.
After reading the Don't-Pay-Off-Your-SL-Early article, I get the whole thing around the interest rates, but my point is that I could really do with the extra £200 pm so paying it off early for me would be great because I'd have that extra little lump each month (thinking mortgages and babies next year possibly).
So am I missing something here? Whilst in theory the article is sound advise, surely in practice some people who would benefit from getting it paid asap?
Currently, I pay just under £200 per month but I'm thinking of making a higher one-off payment with some spare cash (bonus from work), not a lot, just a few hundred to start chipping away at the £12k I've got left to pay.
After reading the Don't-Pay-Off-Your-SL-Early article, I get the whole thing around the interest rates, but my point is that I could really do with the extra £200 pm so paying it off early for me would be great because I'd have that extra little lump each month (thinking mortgages and babies next year possibly).
So am I missing something here? Whilst in theory the article is sound advise, surely in practice some people who would benefit from getting it paid asap?
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Comments
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Why? I don't think you quite understand the article. I have a post which I've made but I'm at work atm so can't find it. 2s and I'll search and edit this post. *cannot find it anywhere*
Basically its better to save.
At the moment if you had £1000 you could either save it or put it towards student loan.
£1000.
How much would you save in interest from putting it in student loan?
The student loan rate is currently 2.8%.
So if you pay it into student loan, you are saving £28 worth of interest.
How much would you save putting money into an ISA?
You can get ISAs from around 3.5%.
So if you put money into the bank, you have £35 worth of interest.
So bank account end of year you have £1035. You can use £1028 of it and pay off student loan, and profit £7. But you can keep it in bank account and keep doing the same.
Over time, if you made no repayments, your savings would overtake your student loan....
And also, 0% from September for a year for most, for some its negative rate, its awesome good idea to svae rather than pay off.0 -
I could really do with the extra £200 each month so in my mind, if I can pay a little extra over the coming couple of years (probably no more than an extra £300 per year) I would then be able to reap the benefits of having my £200 each month earlier...0
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I could really do with the extra £200 each month so in my mind, if I can pay a little extra over the coming couple of years (probably no more than an extra £300 per year) I would then be able to reap the benefits of having my £200 each month earlier...
Or you could keep the loan sitting there gaining little interest and use the £200 to put into a higher rate account gaining more interest than you would save from student loan.....
I have put my maintenance loan into savings. I take both maintenance and tuition. Due to interest rates being good in the past, I can now pay off part of my tuition loan because I gained more interest in savings than the student loan did.0 -
So I'd effectively stop all my payments via work and then put the cash into a different account then pay off a lump sum in a couple of years time? How worth it is this given the current interest rates on savings accounts? My cash ISAs are full each year...0
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At the moment rates are lowish. I managed to fix mine at 4.2% so its ok for me. When September comes when the student rate goes to 0% (or negative depending on when you took loan) you can find rates which are 2-3% higher than this.
This is the link btw:
http://forums.moneysavingexpert.com/showpost.html?p=14617685&postcount=3
Finally found it.
Erm if the work contributions are the voluntary ones you may as well stop them, but there are ones you can't stop as these are compulsory.0 -
Current payments are through made automatically through my employer's payroll...0
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I could really do with the extra £200 each month so in my mind, if I can pay a little extra over the coming couple of years (probably no more than an extra £300 per year) I would then be able to reap the benefits of having my £200 each month earlier...
I do see where you're coming from, I too would like the "full whack" of my pay packet ASAP. No matter how you wiggle the numbers, though, you're just not better off paying it off.
If you've got 12k left, you'll have to pay 12k before you start getting your £200/month extra.
Alternatively, you can save any of that 12k that's an "overpayment" and give yourself that cash back each month instead - but with better interest on it while it's sat in savings.
The difference is probably relatively small, so if it's really bothering you, go ahead and clear the thing - just keep in mind that it's not the cheapest way of doing things and lots of people have problems stopping their repayments once they've cleared the loan anyway...0 -
Paying what you do now, when will you finish paying off your SL?
With the extra you are thinking of paying in, when will you finish paying off your SL?
Is the difference in time really worth it when you could be putting that £300 a month into an ISA and earning more interest than you are paying on your SL?
Providing you ensure you save the £300 year into an ISA worth more than 2.8% it's going to be better for you as in the short time you are thinking of (next year) an extra £300 payment to your SL is going to make very little difference to the SL term.
Plus, unlike savings accounts, once you've paid the money to the SLC you cannot get it back.0 -
I'm not so bothered about doing it the cheapest/most profitable way... As I say, having the extra each month is more worth it for what my outgoings will be over the next few years.
However, I've just looked at my calculations for what I could potentially afford to make in "overpayments" based on this year's salary and bonus, it means I would pay off the SL approx 3 months earlier..... I guess it's not really worth it.
Mrs Manda - My ISAs are full each year come 6 April, so that's a no go. I have another savings account too, I guess I need to get the most out of that and perhaps use my interest earnings for overpayments as my little monthly overpayments squeezed out of my already tight budget (I save approx half of my net salary) aren't really worth it just to pay the loan off 3 months early.
Thanks though guys!0 -
Lets say you spent all your savings (£6000 for arguments sake) on paying off your loan early, then you have an extra £200 a month but no savings. You get made redundant or your partner goes on maternity leave and you have nothing to make up the shortfall in income.
Alternatively you carry on as you are paying £200 a month for your student loan and £200 a month into your savings. You get made redundant or your partner goes on maternity leave and you have £6000 in your savings account of which you can pay off your student loan, draw as a lump sum and travel the world, take £200 a month to boost your income or ... basically you have options!Declutterbug-in-progress.⭐️⭐️⭐️ ⭐️⭐️0
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