Recieving a sum of money - your opinions needed (ref student debt)

kr15snw

Ive been discussing this with family and although Im pretty sure what I want to do, thought Id get some opinions from you guys. I thought you would have some decent advice on this.


My nan died a few months ago and her estate is to be split between her 7 grandchildren / step grandchildren. Her house is worth about £180k but she took out an insurance policy on it around 10 years ago and we have no idea how this was done. I.e. we dont know how much money we are actually going to get!

But realistically weve been told the minimum is a few grand and the max is 20k. Obviously me and my brothers have started to think about how we could spend this / what we can do with it.

My situation:

Ive just finished my first year at uni and so already have £6000 in student debts. This will double next year and may go up again after a 3rd year (Im on a 2 year course but have the choice of doing a 3rd year). I am 'nearly' living with my OH, but not officially due to lack of cash. He currently lives in a house worth 120k and has a 20k mortgage on it.

My mum straight away has said 'pay off your student loans!!'. But Im not so sure. After talking to my OH I would like to put the money with the value of his house and buy somewhere together. (Hes looking at moving in 12 months anyway).

So what would be the cleverest thing to do? Should I pay my debt off? Or should I invest it into property with my OH?

My mum says its silly to start in life with debts, but I think its silly to pay them off when the interest is so low. When I could use this cash to get a nicer house for me and my OH.

What do you think guys? If Ive not explained anything then please feel free to ask questions!

Blacksheep1979

The interest rates on student loans are low and therefore if you actually need the money or can use it productively elsewhere they are an excellent form of low interest borrowing.

Better to be paying the student loan rate than an extra 10k or so on a mortgage.

Oldernotwiser

Plus it would belong to you both (even if in different proportions), rather than being just his home.

Broke_Student

Don't pay back your student loan. Take out more!!! It sounds as if you will be taking out more debt in the near future (mortgage with OH). Use your extra student loan cash on the house. Many many advantages:
- LOW interest rate. Lower than savings accounts and lower than interest on a mortgage.
- LOW monthly payments (when you eventually start paying)

If I was in your situation I would discuss moving in with your OH properly. Tell him how much you want to put into the property. The best time to move would probably be after you graduate as you will have abit more time and will know what your are doing career wise.

TeaBoy_2

before today i would always agree with not paying it. however, its not always best. i went to sign on for doll today and realised that having savings over 6k would reduce what i got as they dont consider your debts. lcukily i dont have that much saved but in your case u could lose out on benefits if u were out of work for a bit.
the amount u make by putting in a savings account (or investing) rather than paying it off is very small.

Broke_Student

TeaBoy wrote: »

the amount u make by putting in a savings account (or investing) rather than paying it off is very small.

You must be loaded then!

Difference in rate of loan and a good savings account = atleast 3.5%

Y1 - £6000 debt: 6000*0.035 = £210 made in the following year if you do not pay it off

Y2 - £13500 minimum total debt if you take full loans: 13500*0.035 = £472.50 made

So for two years of saving money whilst at university instead of paying off loans early the OP would make atleast £685!!! And that's tax free.

Aliss

My friend was in a bad car crash at uni and won £2000 compensation. She paid it into her student loan. This was four years ago and she still hasn't had a job over the pay-back threshold so hasn't paid any more off and just wishes she'd saved the money!

Oldernotwiser

TeaBoy wrote: »

before today i would always agree with not paying it. however, its not always best. i went to sign on for doll today and realised that having savings over 6k would reduce what i got as they dont consider your debts. lcukily i dont have that much saved but in your case u could lose out on benefits if u were out of work for a bit.
the amount u make by putting in a savings account (or investing) rather than paying it off is very small.

You can't organise your life and finances around the possibility that you might one day have to claim benefits. Most people never have to claim anything.

xycom1

IMO save the money and buy a house. I've just taken a £173K mortgage and when I start getting inheritences they are coming straight off the mortgage, the student loan can take a jump and hopefully anything that's still left when I retire will be cancelled.

pinkshoes

I've got £15k student debt, which is about £30/month interest, and I pay it back at the minimum rate. I took the full loan out, and invested any spare in an ISA, which is now my back up payment if I couldn't pay my mortgage for any reason (i.e. i plan to have kids in the next few years, so will need some time out from work!!).

melancholly

just on a slightly different tack, i'd try living with your OH before you put all your money into buying a house together..... i'm a cautious person though!

can i just check what your student debts are? are they all student loan or do you have credit card debts/overdrafts etc? i would leave paying off the student loan for now, but definitely pay off higher interest debts as soon as you can.

also, as soon as you get the money, you should put as much of it in an ISA as you can, then the rest in a high interest savings account - if you're not a taxpayer then you can get gross interest rates on your account and therefore make the most of the money for now - there will probably be a delay between you getting the money and finding a house anyway so make the most of the money for that period!