Overpay mortgage or clear student loan?

silvercar

I hear conflicting advice from my friends who are all 'do what Martin says' and this advice has generally held me well in the past but I'm keen to unlock that extra cash per month and just get the thing paid off.

Martin say's don't pay it off because you may not ever have to. I don't think he has said not to pay off early when it is virtually inevitable that you will do so in time.

Cash-Cows

secondtoughest wrote: »

Thoughts?

Start your own thread rather than highjack someone else's.

Cash-Cows

maryb wrote: »

Thank you, yes and that is why we kept her savings and the student loan. But now she has used all her savings on having a bigger deposit. If she loses her job the fact that she wouldn't be making SLC repayments wouldn't really help much, she would still have to find the money for her mortgage each month rather than paying it out of savings until she gets another job.

She has a 1.9% fix for five years, and if base rates rise, which everyone thinks they will, that could easily end up being a good bit less than the rate on her student loan even though she is on "just" the lower of RPI or base rate plus 1%

She wants to make overpayments but it seems more logical to snowball what could be the higher interest rate debt first. On my calculations she wiould be in that group of graduates who end up paying the most on their student loans. She has a very good salary but it is unlikely to increase dramatically in future. She will earn more than enough to pay it off in full before 30 years are up but not so much that she clears it quickly so there would be a LOT of interest

If she's a higher rate tax payer or will be soon then paying into a pension would perhaps be more efficient. A £100 into a pot would only cost £60. You would expect investments to grow faster than the 1.9% that she is paying out of her taxed income.