Ah..! Pay off student loan? Savings? Leaving the country...

hugamy

Ah!

Please help! I recently received an inheritance of £14000 and had planned to invest this in my first property. Unfortunately, it's all fallen through recently and house buying is no longer an option.

I have a student loan of £11000 and am leaving the country in August for 2 years.

Everything appears to suggest paying off my student loan would be a bad idea, but what do I do with the money instead? As I'll be abroad in a few weeks, I'll get a tax relief for that period, and so I don't know if an ISA is the answer? Or a savings account? I won't be adding to the money while I'm away so a 'regular savings' account doesn't seem the answer...

Basically I have no idea! Please help! :huh:

dawyldthing

i wouldn't pay off your loan as its the cheapest loan you will ever have and if you don't earn over 15k you'll never pay it back. if you know you won't need it why don't you put it into a 2 or 3 year bond ready for when you get back to put a deposit on a house then as i think you can get 3.8% so you would make around 1700 after tax on it which is better than it just sitting there (plus if your out the country you won't be using your tax allowance so you can claim any tax back on it anyway)

malik999

hugamy wrote: »

Ah!

Please help! I recently received an inheritance of £14000 and had planned to invest this in my first property. Unfortunately, it's all fallen through recently and house buying is no longer an option.

I have a student loan of £11000 and am leaving the country in August for 2 years.

Everything appears to suggest paying off my student loan would be a bad idea, but what do I do with the money instead? As I'll be abroad in a few weeks, I'll get a tax relief for that period, and so I don't know if an ISA is the answer? Or a savings account? I won't be adding to the money while I'm away so a 'regular savings' account doesn't seem the answer...

Basically I have no idea! Please help! :huh:

It basically comes down to the maths.
If your student loan interest is X and a 2 year fixed rate bond interest will give Y i.e. more interest. = Youre better off taking out a 2 year bond.

masonic

malik999 wrote: »

It basically comes down to the maths.
If your student loan interest is X and a 2 year fixed rate bond interest will give Y i.e. more interest. = Youre better off taking out a 2 year bond.

It's important to consider the future as well as the present. There's no point paying it off if you end up borrowing the money back later at a higher rate. Similarly, if savings interest rates improve relative to the loan rate in the future, you may be better off keeping the student loan, even if rates aren't in your favour right now. Historically, it has been better to keep student loans for as long as possible, so it is most likely the same will hold true on average moving into the future.