Is it better to pay off student loan quicker if ogoing to be higher earner

brenda10

Hope I haven't posted in wrong place.
If I have I apologise
My daughter owes 20k plus on loan, she is earning 27k at present before tax and recently started to pay back loan, she may be doing contract work soon therefore yearly salary may almost double before tax, would she be better to pay back monthly as is set by the loans company or over the longer term will she end up paying back more tan she borrowed if on higher salary the question is would she be better paying it off quicker? thanks. forgive me if I am talking rubbish, something tells me Martin lewis discussed this topic on his money show, cannot remember!! thanks in anticipation.
:money:brenda10

Lokolo

Assuming she is post 1998-pre 2012 loan, then the interest rate is currently 1.5%. Any money she gets she can choose to save or put towards student loan (or spend obviously). To beat the student loan, assuming paying 40% tax, she would need to find an ISA over 1.5% or a taxable savings account above 2.5%. You can easily find an ISA above 1.5%.

However saying all this there are more tax issues, your daughter will end up paying 51% tax (40% income, 2% NI and 9% student loan) when she reaches £41,450. Is her contract work going to be self employed?