£65,000 worth of student debt: Pay it off early as a high earner?

MoneySaver409

I currently have £65,000 worth of student debt. I am due to start employment in London in September. My salary will be as follows:

Yr 1: £40,000
Yr 2: £45,000
Yr 3: £80,000
Yr 4: £90,000
Yr 5: £100k++

In years 1+2 I can save £1,000 per month - saving up for a deposit for a house which would ideally be purchased in year 3 or 4.

I know I will pay off my student debt (without contributions) within around 15 years (or less) - paying £20,000+ in interest.

If I pay around £600 per month in contributions, the interest I'd pay would only be £6,000 - paying it all off within 6 years. Would this be advisable, as it would reduce my deposit for a house considerably.

Alternatively, save for a deposit within my first two years, then make large voluntary payments in years 3+?

In any case, I am assuming making voluntary payments will definitely be applicable to me as the interest alone will cost over £20,000.

agrinnall

I'd suggest that you start off by reviewing the many, many other threads asking the same thing to see if your questions have already been answered.

silvercar

Welcome to the forum Moneysaver409.

MSE have recently updated their article on this topic. Student Loans Mythbusting

It would be useful for you to put some numbers in the student loan calculator. This will calculate for your circumstances whether it is better to repay early or not.

The guide on paying fees upfront may also be a useful read.

IAmWales

Your salary *may* increase in future years, equally it may decrease. No one knows what the future holds, so spend the first few years getting a decent amount of savings in case of job loss, illness etc.

agarnett

MoneySaver409 wrote: »

I currently have £65,000 worth of student debt. I am due to start employment in London in September. My salary will be as follows:

Yr 1: £40,000
Yr 2: £45,000
Yr 3: £80,000
Yr 4: £90,000
Yr 5: £100k++

How can you be so sure? What kind of job comes with such firm salary prospects in 2017?

If you are correct however, then good luck, and especially so if it doesn't pan out that way. If I were you and feeling sensibly optimistic, since the money looks like it might come easier your way than to most STEM graduates from good universities, then I'd consider whether it might be worth killing the debt and becoming a free agent again, which is what all graduates your age should have been able to expect from your country. Unusually I think, you have the means to knuckle down and shake off the shackles quite fast. Like the unreal nature of the debt itself which is urged on you as just part of the game bý many, you must surely in some ways view salary prospects like yours as like commanding "monopoly money" from Park Lane and Mayfair, compared to your days as an undergraduate in the brown streets just past Go?

However, when I left university donkeys years ago, there were some high paid jobs which came at an immediate price - extremely long hours and a need to spend at a much greater rate than first jobbers in other jobs, just to keep up with the habits of your peers. Is that a danger for you too? If so, how much truly might you be able to save each month, and fast before you hit the wall or burn out or suddenly get made redundant like those who carried out their lives in bankers boxes from Lemans in Canary Wharf in 2008? Yes I know its JPMorgan in that building now, and its buzzing ... but my guess is you are entering that sort of world and it changes you and it is a snakes and ladders existence where very little is predictable in the longer term unless you are some fantastic chameleon character!

Who knows what sort of Erudioed situation you might find yourself in in 5 years time when your debt has grown at 6%pa plus and rules have been rewritten again?

Last question, if I may - what would you say the average starting salary for a good Bachelors degree in a STEM subject from a good university should be in 2017? How many standard deviations above the mean do you think your prospects reside in comparison?

lika_86

Sounds like a city law firm to me. If so, don't necessarily assume you will be kept on post-training contract or that you will want to stay there, many people aren't and don't.

phillw

MoneySaver409 wrote: »

If I pay around £600 per month in contributions, the interest I'd pay would only be £6,000 - paying it all off within 6 years. Would this be advisable, as it would reduce my deposit for a house considerably.

It depends on how much house prices, mortgage interest rates & rent increase/decrease over the next 20 years.

I don't think anyone can accurately predict how things will go post brexit.

You can only make assumptions that you're happy with and do the maths. Don't include capital repayment part of a mortgage in the calculations though as you get that back if you sell the property (+/- any profit or losses).