Student Loan Repayment Offset Savings Account

CMJS

Hi,

I am currently repaying my student loan at the standard rate which means well over £100 per month is disappearing from my pay packet. To make things balance up I could do with reducing that outgoing. I have a lump sum that is approximately half of the current student loan amount, however to repay it against the loan would not reduce my payments in the short term.

As a solution I'd like to put it into a savings account and take a set monthly amount (approx half of my monthly repayment) such that this pot runs out at approximately the same time that the studen loan comes to an end.

Does anyone know of a savings account specifically designed to do this with decent interest rate? (i.e. they give a good interest rate but allow you to withdraw a set amount each month.) I can do it with multiple normal savings accounts but it gets rather messy to get a decent interest rate.

Thanks in advance.

foofi22

You could get on of the Lloyds/TSB current accounts that pay 3% and set up a direct debit in addition to your salary payments.

However...this is not a particularly sensible option. In fact I'm of the opinion that paying your loan off early is in most cases ill-advised, unless you are super-rich.

VT82

It sounds like you are not setting this savings account up to pay off your loan early (probably sensible), but rather to top up your income so that it only feels like your loan repayments are half what they actually are. Is that right?

In which case, what exactly are you going to do with the extra pseudo-income if not try and save it?

Anyway, the answer is probably to stick it in a Santander 123 account. It's all then instant access, so you can help yourself, but it might be wise to set up a standing order to the current account you actually use, and then cut up the debit card and 'lose' the log in details, so that taking more of your savings than you originally intended to becomes difficult, but not impossible.

Lloyds Vantage accounts might be better, depending on the amount you're talking, as they don't have a £2 a month fee affecting the AER of your savings.

But personally I think the best thing to do is try and preserve your lump sum (still getting some good interest on it though - Santander 123? ISAs?), and live with what your income is after the loan repayments. And then have the willpower to only touch your savings when you actually need some cash from there.

CMJS

Thanks for the advice. I hadn't thought that there are current accounts out there with good interest rates so I'll investigate further.

My situation is that I'm going to be made redundant due to job relocation (will probably turn out to be a blessing in disguise). I'm looking at the possibility of using a portion of the redundancy payout to provide additional income to cover a potential increase in commuting costs - this enables me to be a more flexible in my job search.

Making sure the day-to-day adds up is currently more important than increasing savings.