Should I pay off my student loan?

AlStillo

I now have under £3k left of my student loan (accumulated between 2001 and 2004) and am thinking of using some of my personal savings to pay it off in full.

I'm 35 next year and would like to use the money I currently pay toward my student loan each month (around £140) to pay into my stakeholder pension via salary sacrifice instead. My employer currently pays 10% of my monthly salary into my pension pot but I don't (I realise I'm lucky in having that luxury - however I've been advised that I should also be contributing myself).

Does anyone think this is a particularly good / bad idea?

Tom99

Are you paying the old lower interest rate on the loan?

Even so I think I would agree with you and clear the decks regarding the loan and start the pension payment.

Will your employer increase thier contribution if you start? If so an even greater incentive.

Tammykitty

I have about the same as you left on my student loan, and pay over £100 on my repayments


The loan has an interest rate of 1.25% until September 18, and you probably have your savings invested at a higher rate than this - if so I wouldn't pay of the loan.


Is your pension defined benefit as 10% employer contribution and no employee contribution sounds unusual? Are you sure you are not contributing and the employer also contributing 10%?


Persoanlly, I am not paying mine off, due to interest rates and the fact that if some freak accident happened tomorrow and I had no income I would never have to pay my student loan.

enthusiasticsaver

It is unusual to have no employee contribution with a relatively high employer contribution. Are you sure you are not paying via salary sacrifice already? If not, yes you should be contributing regardless of the student loan. Are you a higher or basic rate tax payer?

Have you checked the interest rate you are paying on your loan? Whether or not you should pay it off depends on this and how much you are receiving in interest on your savings.

Car1980

Generally paying anything extra off your student loan is far less desirable than adding to a house deposit or paying some extra off your mortgage.

ricky_v

10% employer contribution to 0% employee contribution is unsusual, but it does exist as my employer offers the same. (It's then 3% matched, so 13% employer to 3% employee, then anything above that attracts 1/20th so £100 employee contribuion attracts a £5 employer contribution which I guess is passing on some of the employer NI saving). This is certainly up there as far as DC pensions go. They were still doing a final salary scheme until only 6 years ago!

AlStillo, I would see if any contributions attracts an employer's contribution, if it does then certainly take it above overpaying the student loan. I would also certainly consider salary sacrefice additional contributions as this attracts a 32% tax/NI relief. Ofcourse the only stipulation if you cannot get at the money for a few years.