Student Loan advice requested.

Sainter

Hello guys, I have read the article regarding student loans but I am a bit on the fence. The article is quoting interest rates of 1.9 etc but being a student in 2012-2015 I am now paying 3.9%.

Cutting to the chase: should I pay off my loan NOW?! before the interest blows it up?

I did an NHS funded course (nice!) so my only loan was my maintenance grant.

I now owe £7,300 after being out of university for 2 years.

I am currently earning over, £21,000 a year so I am going to be paying it off but due to the nature of how I am paid it only will start taking payments after 21k. I feel comfortable in my current position to set up a direct debit of say £20 a week to start taking it down.

NOW: £ 7300
Next year: £7519
2 years : £7744
3 years : £7976

Ignoring it (e.g. not paying any off, which is not my intention as it comes out regardless after 21k) would mean it has gone up £700 in 2 years.

Paying a £20 a week from my debit card would bring it down to £6260 after 1 year, then £5220 after 2 years.

I understand a GREAT bank could return me 4% a year but I am really not great at keeping money away that I have access too, although its not impossible, just being honest.

What do you think is best?! £20 a week into a side bank account or £20 a week to student loans.

My debt isnt massive... hmmm

Cant wait to hear your advice!

Sainter

anyone?

Mogley

If you were a student in England/Wales then your 2016/2017 (Sept-Aug) interest rate is 1.6%*.You could definitely do better putting money away in savings for now.

However, the interest rate for you from September 2017 will be 3.1%*. It now becomes more difficult to beat this rate in savings so your plan to start paying the student loan off is a good one at that point.

Things to consider:
- Firstly pay off any other debt over and above the student loan, even if it is at 0% interest. The terms of the student loan beat any normal credit/loan agreement.
- If you are saving for a house deposit as a first time buyer, the government bonus on LISAs and HTB ISAs beat the student loan interest so re-direct funds there.
- Keep track of the interest rates in future and work out where best to allocate your money, savings or student loan. Once you have enough in savings you could use this to pay off the full student loan.
- If in the future you are thinking of taking a career break eg. stay at home parent or working part time, then potentially you may not be paying the full loan amount back so overpaying now makes less sense.

I hope this helps:).


*(minimum depending on actual taxable salary)