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

tr3mor

anewman wrote:

Not read thoroughly through the thread. However, I do have my doubts about not paying it off if I am able to.

My loan is about £12k in total and costs about £30 a month in interest. The only way I could get £30 a month from having money would be to have savings of about £8k which is just not possible. If I am never likely to have enough money in savings to gain the same amount of interest the loan costs me, isn't it better to pay it off to help reduce the cost of the interest?

Although if I did have a mortgage or other loans and so on, it would be best to pay off the highest rate lending rather than the student loan - but if I do not have a mortgage and so on, I cannot possibly make up for the cost in interest.

The only possible get out clause would be to get to 65 with barely earning £15k, which seems quite likely as noone wants to give me a job

tr3mor wrote:

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.

With the interest charged on the student loan less than the interest in in half decent savings account there is NO reason to pay it off early!!!!!

Ted_M wrote:

If you have the means to make extra payments to your loan, without incurring extra debt, then I would take that opportunity ever time.

WHY?!

beeniemac

anewman wrote:

Not read thoroughly through the thread. However, I do have my doubts about not paying it off if I am able to.

My loan is about £12k in total and costs about £30 a month in interest. The only way I could get £30 a month from having money would be to have savings of about £8k which is just not possible. If I am never likely to have enough money in savings to gain the same amount of interest the loan costs me, isn't it better to pay it off to help reduce the cost of the interest?

Although if I did have a mortgage or other loans and so on, it would be best to pay off the highest rate lending rather than the student loan - but if I do not have a mortgage and so on, I cannot possibly make up for the cost in interest.

The only possible get out clause would be to get to 65 with barely earning £15k, which seems quite likely as noone wants to give me a job

Read the article again!

loveit

Anybody have any thoughts on which to tackle first. Im 27 renting, have a large student loan and wanting to start a pension before its too late. Im struggling to work out how to prioritise my money. the sums to have a pension at 13.5% of my wage, plus a First Time Buyer mortgage and try to pay off student loans exceesds my monthly income. any thoughts? should i forget about the stu loan and get a mortgage plus pension? or concentrate on the stu loan and mortgage and think about the pension later? what about just the stu loan and pension and continue to rent?

Ted_M

For what its worth -

Get the mortgage.

Start the pension.

Forget the student loan.

tr3mor

Ted_M wrote:

For what its worth -

Get the mortgage.

Start the pension.

Forget the student loan.

This man speaks sense! Do as he says!

sven945

Useful article, thanks. And, being an Economics student I understand the stuff about interest rates and inflation

I've just started my first year and I'm taking out the full student loan that I'm able to take (none of the means tested part). I've just received my first instalment of my loan (just over £1,500) and I was wondering if there was any savings account that people would recommend that I put it in. I'll be getting roughly £1,500 three times a year. Is there anything better than a fairly standard savings account? Since I've not got a huge lump sum now to put in an account and leave for two years or so then I assumed that there's nothing much better than a "normal" savings account, but I wanted to check to see if anyone had any experience with this!

jack

anewman

sven945 wrote:

I've just received my first instalment of my loan (just over £1,500) and I was wondering if there was any savings account that people would recommend that I put it in.

Check out the "Savings and Investments" link on the left

tr3mor

sven945 wrote:

Useful article, thanks. And, being an Economics student I understand the stuff about interest rates and inflation

I've just started my first year and I'm taking out the full student loan that I'm able to take (none of the means tested part). I've just received my first instalment of my loan (just over £1,500) and I was wondering if there was any savings account that people would recommend that I put it in. I'll be getting roughly £1,500 three times a year. Is there anything better than a fairly standard savings account? Since I've not got a huge lump sum now to put in an account and leave for two years or so then I assumed that there's nothing much better than a "normal" savings account, but I wanted to check to see if anyone had any experience with this!

jack

Even though you're not eligible to pay tax anyway I would use up your ISA allowance. Then when you finish uni you'll already have up to £9k which you'll never have to pay tax on again!

voguemonkey

I have a pre-1998 loan which currently stands at around £1800. I have been paying £93 per month by direct debit since I started work. I am leaving my job this week and moving overseas and I am likely to be out of work for at least four months. However, I do have some savings which could be used to pay off the student loan.

I have spoken to the SLC and they have advised me that I should apply to defer once I leave my current job on the basis that my earnings will be below the threshold. To do this I'll need to send my P45 and a letter of support from my partner to say that he'll support me while I'm not working.

Then, once my emigration plans are finalised, I'll send a letter to the deferment team, informing them that I'm going overseas and that I will not be working for the time being. I will send a copy of my ticket or itinerary with that letter and address details so they know where to contact me and the details of my deferment.

Once I get a job, if it is above the threshold I'll inform them and start repayments again. However, wages are generally much lower where I'm going so it might be that I won't earn over the threshold for a long time and possibly never if I stay there and eventually give up work to have children.

So what I think I'll do is put a sum of money sufficient to pay off the loan in full in a savings account here in the UK. If I return to the UK or earn enough overseas to start repaying, I'll do so direct from that account. I'll monitor the rates to ensure that the interest on the savings is more than the interest accruing on the loan. Plus, if I live out my days without ever crossing the threshold again, my loan will be written off when I'm [STRIKE]50[/STRIKE]* 46 and I'll have a nice little nest egg.

Can anyone see any flaws in my plan?


*Edit: it seems that the loans are written off after 25 years or when you turn 50 - whichever is sooner. Since I took out my last loan in 1999 the 25 years will be up while I'm only 46.

si1503

voguemonkey wrote:

So what I think I'll do is put a sum of money sufficient to pay off the loan in full in a savings account here in the UK. If I return to the UK or earn enough overseas to start repaying, I'll do so direct from that account. I'll monitor the rates to ensure that the interest on the savings is more than the interest accruing on the loan. Plus, if I live out my days without ever crossing the threshold again, my loan will be written off when I turn 50 and I'll have a nice little nest egg.

Can anyone see any flaws in my plan?

Sounds sensible enough to me. FYI the loan value rises in line with the rate of inflation, which is normally a good 2-3% lower than what the top savings accounts are offering, so the rate of interest should always be greater than that of the loan. I'd just keep a check on things every now and then to ensure your own savings rate is competitive with that of other accounts, I.E. keep up to date with the articles on this site.