Student Loan

louise_1981

HELP!

Thanks to this site, and my OH having us living at his gran's rent / bill free, while he buys a house, I have finally paid off my university overdraft. Which I have lived on since graduation in 2004.

The idea is that he and his family buy the house, then me and my OH save up and buy them out. But, unlike him, I have a student loan. Found out today it is a lot less than I thought (by 1000's) and today stands at £15,779. Which is a lot of money. Especially when it has interest accruing on it.

However, OH wants me to start saving for the house, eg every penny and get his family out of the equation quickly. However, I see this as an opportunity for me to pay off my loan as our outgoings are at a minimum. There is no mortgage or rent to be paying, and in the long run it would be better paying off the loan and the interest, than saving to pay off something with no interest (although they want a share of the profits made from the house.)

I am currently below the threshhold for beginning to pay this off, I am going to start early. my current pay is at £650 per month, after bills etc I will be left with £400. If i put all of this in to paying it off it would take 3 1/2 years to pay off, not taking into account the interest.

However, I have applied for another job, which will double my income.

In my current position which should I see as more important.

And is there any others with similar positions, in paying off student debts early.

Louise

SamPriest

From a strictly mercenary point of view, you are presently in a very enviable situation - i.e. no mortgage or rent repayments. Therefore it would be ideal to perpetuate that as long as possible and if you can use that time to clear existing debt then great.

However it depends on how long your OH's family is prepared to subsidise you living there rent and mortgage free and also your own keenness to be independant of them.

Personally I have just bought my first home and really value my independance (although bank of Mum & Dad still comes in to play more often than my pride would like!) so you may place a high importance on getting a place thats just yours as quick as poss.

My understanding is that interest on student loans is minimal (inflationary), therefore I don't think its the most important thing for you to worry too much about repaying it just now. If you are able to put away £400 a month you can pay into a mini cash ISA or high Savings a counts and really reap a whirlwind of interest until you have enough to buy the property.

Bear in mind though that once you buy, you will have mortgage payments to account for and hence not have so much money spare for student loan repayments.

SamPriest

Oh and I think martin has an article about Student Loans on the main site.

CLAPTON

its probably nothing to worry about but do look into the tax implications of your OH and his family buying the house and then you buying them out. you'll probably be below all the thresholds but in principle the deal may incur a capital gains tax element and stamp duty and some solicitors fees.

mrslawrence2003

louise_1981 wrote:

HELP!

Thanks to this site, and my OH having us living at his gran's rent / bill free, while he buys a house, I have finally paid off my university overdraft. Which I have lived on since graduation in 2004.

The idea is that he and his family buy the house, then me and my OH save up and buy them out. But, unlike him, I have a student loan. Found out today it is a lot less than I thought (by 1000's) and today stands at £15,779. Which is a lot of money. Especially when it has interest accruing on it.

However, OH wants me to start saving for the house, eg every penny and get his family out of the equation quickly. However, I see this as an opportunity for me to pay off my loan as our outgoings are at a minimum. There is no mortgage or rent to be paying, and in the long run it would be better paying off the loan and the interest, than saving to pay off something with no interest (although they want a share of the profits made from the house.)

I am currently below the threshhold for beginning to pay this off, I am going to start early. my current pay is at £650 per month, after bills etc I will be left with £400. If i put all of this in to paying it off it would take 3 1/2 years to pay off, not taking into account the interest.

However, I have applied for another job, which will double my income.

In my current position which should I see as more important.

And is there any others with similar positions, in paying off student debts early.

Louise

but the interest rate on your student loan is most likely to be very low, certainly lower than the interest rate you could be earning on a savings account......

CLAPTON

the current rate of interest being charged is 2.4% for a student loan

pudding06

I have 'only' about £8000 under the present system ( tax) and had aobut £4000 under the first ones that come out of the bank, and its a nightmare trying to keep track of it all.

I see all of the interest goes on monthly, but the payments only come off once a year, and I've just had a statement For the 2004/5 year in which my payments hadnt even been applied and I had to query it!!!

Theyve sent another but ive only paid off about 200 pounds and all the rest was interest. SO on 15000ish it is going to be quite costly in the longterm.

I would certainly get all of your pay statements with payments to the slc in a file and keep them forever!!! Its ages before they apply them to your loan, and they do 'lose' payments too. I am paying off the first lot that could have been deferred but I decided to pay back at £65 per month, ( only another 13 months to go) and when these are finished I might pay the rest back.

The interest does mount up though - even at 2.4% its surprising how much it is.

good luck with whatever you decide.

pudds

irishwench69

SamPriest wrote:

Oh and I think martin has an article about Student Loans on the main site.

Indeed he does........here you go! --> http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1157645184,28030,

HTH!

IW x

louise_1981

thanks for that!

irishwench69

NP

IW x

dinkylou

OK, thinking about this practically, arent you going to need a fair amount of money to furnish/decorate your new house? Even if its done cheaply?

I have a student loan too which I would like to get rid of but its much better to put the extra money into an ISA (a savings account) and then if you want to pay off your family early you can, or if you want to pay off your loan early, again you can. But this way you will be earning more interest than if you paid it directly to your student loan.

Only you can decide which is better but remember that it is a very cheap loan and you dont have to pay it back as quick, unlike other debts.