Student Loans: "Should I pay mine off?" article Discussion Area

[Deleted User]

I must say, I've got a nice warm feeling inside knowing I've paid off my student loans. In the time I paid a year of student loan off, I'd saved 10k up. Now i'm ready to get a mortgage, with no other debts to worry me.

tr3mor

There really is no reason to ever pay your student loan off early. You'd always be better off putting the same amount of money into a savings account or paying off other debts!!

mattsaze

Not true.

The interest on my loan each month is a few pound. I won't make that on a savings account if I put the money in there. I'll make pennies on a £75 a month deposit account from scratch. granted it will be more over the years but so will loan

tr3mor

mattsaze wrote:

Not true.

The interest on my loan each month is a few pound. I won't make that on a savings account if I put the money in there. I'll make pennies on a £75 a month deposit account from scratch. granted it will be more over the years but so will loan

Rubbish!

Of course you won't cover the whole interest on your student loan with one payment into a savings account!!!!

By paying £100 off your student loan you'll save £2.40. By putting £100 in a savings account paying 4% you'll make £4.

Hence £1.60 better off.

si1503

tr3mor wrote:

There really is no reason to ever pay your student loan off early. You'd always be better off putting the same amount of money into a savings account or paying off other debts!!

Totally agree.

SPoh

I have student loans that I borrowed between 1997 and 2001. They're the mortgage-style loans described in Martin's article and the repayments kick in when you go above a certain salary level.

The interest is meant to be fixed to inflation, also as Martin says, but last year I was informed that the rate had been put up from 2.6% to 3.2%. This seemed like quite a hike to me, but there's nothing I can do about it. As a result, I've resolved to pay them back as quickly as possible before they decide to put the rate up again.

AddieH

The current interest rate for both old and new style loans is 2.4%

MSE_Martin

SPoh The problem is the rate is set based on the figure in a set month. If that month is anomolously high (as it was in that year) the rate will seem high for a year. Then again if its a low month.

This is just a timing anomaly

Over the long run it irons itself out.

Martin

Ted_M

UK National Student Debt stands at approx 19 billion british pounds. Thats a lot of zeros.

When you receive your first student loan instalment, interest is applied from that point on. And you want to study for how long.

Once in employment, your salary needs to exceed approx 23k in order to start reducing YOUR student debt. This is based on a average student debt of approx 10k.

AddieH

Ted, there is an interest rate, but the interest rate is only equivalent to inflation, so while you are correct that interest is applied, in "real terms" the debt is not increasing, unlike commercial debt!