What should I do with saved up student loan.?

Oscar_Bottomley

So I'm leaving university this year, and unlike my friends, I stayed at home and am good with money.

In 2nd year of uni I took out a student loan as I realised that even if I wasn't going to use it just now, the interest rates are extremely low and it would be stupid not to have taken the opportunity. So at the end of 2nd year (2015) I stuck my £5750 student loan + £1000 of my own savings into a 2 year fixed rate ISA with Halifax, earning 1.5% AER. This account is now coming to a close and subsequently so is my university course.

I have 3rd years (2016) £5750 student loan + this years (2017) £5750 student loan sitting in a Santander savings account earning hee-haw (I've been too lazy to look into the best regular savers account and so have been earning nothing on them).

So, I now have around £18,000 of student loans saved up and I was thinking about putting some of it into a Help to Buy ISA and the remainder in a regular savers. Would anyone suggest otherwise?

Should I wait for these Lifetime ISAs to come about in June?
or
Should I do a split Help to Buy ISA with a Cash ISA instead of a Help to Buy ISA and a regular savers ISA?

All help and advice would be much appreciated.

Oscar .

Ed-1

Oscar_Bottomley wrote: »

So I'm leaving university this year, and unlike my friends, I stayed at home and am good with money.

In 2nd year of uni I took out a student loan as I realised that even if I wasn't going to use it just now, the interest rates are extremely low and it would be stupid not to have taken the opportunity. So at the end of 2nd year (2015) I stuck my £5750 student loan + £1000 of my own savings into a 2 year fixed rate ISA with Halifax, earning 1.5% AER. This account is now coming to a close and subsequently so is my university course.

I have 3rd years (2016) £5750 student loan + this years (2017) £5750 student loan sitting in a Santander savings account earning hee-haw (I've been too lazy to look into the best regular savers account and so have been earning nothing on them).

So, I now have around £18,000 of student loans saved up and I was thinking about putting some of it into a Help to Buy ISA and the remainder in a regular savers. Would anyone suggest otherwise?

Should I wait for these Lifetime ISAs to come about in June?
or
Should I do a split Help to Buy ISA with a Cash ISA instead of a Help to Buy ISA and a regular savers ISA?

All help and advice would be much appreciated.

Oscar .

If you started after 1st September 2012, the interest rates on post-2012 student loans are certainly not very low - they're up to RPI+3% (so up to 6.1% from this September). But post-2012 loans do have low repayments (9% of earnings above £21,000) and a 30 year write off of outstanding debt.

It's only pre-2012 student loans have low rates (1.25% currently). But these also have higher repayments (9% of earnings above £17,775).

If you will be looking at buying a first-time house to live in then the Lifetime ISA 25% bonus can't really be beaten.

To get the best rates on cash you could use a Help to Buy ISA until you can feed the money into a Lifetime ISA (you can put £4,000 a year in a LISA, £200 a month into a Help to Buy ISA). Current accounts such as Nationwide FlexDirect pay 5% on up to £2,500 but you need to transfer in £1,000 each month to get it (which can just be in and out of another account held by you with a different provider). If you have a FlexDirect account you can also feed £500 a month into a Flexclusive regular saver which also pays 5%. Both last 12 months, but you can open a new Flexclusive regular saver straight away after it matures. You have to wait another 12 months to get another 5% on the FlexDirect for a year.

DragonQ

Yeah, pre-2012 I'd have said definitely put it in a Lifetime ISA for a first house.

Post-2012 that's still going to be your best choice but annoyingly the interest rate on your loan is higher than you can get in (most) savings accounts right now so once you have that house it might be worth trying to pay it off. Having said that, you could just treat the 9% charge as a tax and never bother paying it off - you might end up paying less overall since the loan will get written off eventually anyway. I'm on a pre-2012 loan (£3k a year instead of £9k and low interest rates) and still nearly half of my repayments go towards interest. I'd have to earn a lot more than I do now to ever pay it off in the 25 year time period, but then there's no advantage to me doing so anyway.

Oscar_Bottomley

Cheers for advice guys,

Forgot to mention that I'm a Scottish student and so I'm pretty sure our loan system differs slightly?

Either way I'll look into the suggestions you have given.

Ed-1, So with the Flexidirect I could get £125 (5% of £2500) so long as I put away £12,000 in that year, and at the same time get 5% on whatever left overs I could put in a Flexclusive?

I'm also a little confused on the whole CASH ISA & Help To Buy ISA stance.

Am I correct in saying you cannot open a new cash ISA once you have opened a Help to Buy, but you can have an old cash ISA as well as a Help to Buy?

Am I also right in saying that renewing an old ISA (for example my Fixed Saver Cash ISA that's about to mature) effectively continues the ISA and so doesn't count as opening a completely new ISA?

If so, would it be wiser for me to renew this Fixed saver cash ISA that I opened with Halifax 2 years ago and then proceed with opening a Help to Buy? Or are cash ISAs not so worthwhile these days anyway?

Cheers,

Oscar.

Ed-1

Oscar_Bottomley wrote: »

Cheers for advice guys,

Forgot to mention that I'm a Scottish student and so I'm pretty sure our loan system differs slightly?

Either way I'll look into the suggestions you have given.

Ed-1, So with the Flexidirect I could get £125 (5% of £2500) so long as I put away £12,000 in that year, and at the same time get 5% on whatever left overs I could put in a Flexclusive?

I'm also a little confused on the whole CASH ISA & Help To Buy ISA stance.

Am I correct in saying you cannot open a new cash ISA once you have opened a Help to Buy, but you can have an old cash ISA as well as a Help to Buy?

Am I also right in saying that renewing an old ISA (for example my Fixed Saver Cash ISA that's about to mature) effectively continues the ISA and so doesn't count as opening a completely new ISA?

If so, would it be wiser for me to renew this Fixed saver cash ISA that I opened with Halifax 2 years ago and then proceed with opening a Help to Buy? Or are cash ISAs not so worthwhile these days anyway?

Cheers,

Oscar.

A Help to Buy ISA is a special type of cash ISA. The ISA rules are that you can pay into each of one cash ISA, one stocks and shares ISA, one innovative finance ISA, one lifetime ISA in a single tax year subject to the £20,000 annual ISA limit and individual account limits.

Forget cash ISAs other than Help to Buy ISAs as interest rates are dismal and you can earn £1,000 or more tax-free interest outside of ISAs now anyway if you are a basic-rate/non-taxpayer. Definitely consider lifetime ISAs as you get a 25% bonus on top of any interest if you use the money saved to buy a first home or at age 60 (and potentially for other things as well in future if the Government adds them in).

You can pay into a Help to Buy ISA (as it's a cash ISA) as well as a lifetime ISA in the same year but can only use one for buying a first home. But Help to Buy ISAs might be useful for decent interest at £200 a month pay in even if you don't buy a first home with it.

With the FlexDirect current account you'll get 5% on up to £2,500 (so you don't want to keep any more than that in the account) as long as £1,000 goes in each month from an account held outside Nationwide (the £1,000 can come straight back out again). So yes £125 over the year and around £10.38 each month. £500 a month can go into a Flexclusive regular saver account which also lasts 12 months and pays 5% and a new one can be opened after 12 months to start again. The FlexDirect current account rate drops from 5% to 1% after 12 months but can be reinstated at 5% again after a further 12 months at 1%.

As a Scottish student you are on the English pre-2012 system with the only difference being a 35 year write-off rather than a 25 year one.