Pay Student Loans or Save?

quee2822

Trying to figure out what to do with my relatively meagre savings, I discovered due to scholarships I may end up repaying my student loan in full in 28 years. Which, after a few article readings, means I should be trying to pay more now instead of saving to reduce the interest I pay?

I would appreciate any advice on whether YES I should be paying as much as I can off my student loan now or if I should be saving towards other medium/long term goals?

My debt right now is just below 25k with a salary of 30k. If I let it repay over 28 years, I will pay 18.6k interest, see below.

Year # Year Salary Debt Int. Rate % Paid This Year Interest This Year Total Paid Total Interest
1 2019 £30,000 £24,856 3.30 £450 £820 £450 £820 EDIT
2 2020 £30,750 £25,226 3.30 £518 £832 £968 £1,653 EDIT
3 2021 £31,519 £25,541 3.30 £587 £843 £1,554 £2,496 EDIT
4 2022 £32,307 £25,797 3.30 £658 £851 £2,212 £3,347 EDIT
5 2023 £33,114 £25,991 3.30 £730 £858 £2,942 £4,205 EDIT
6 2024 £33,942 £26,119 3.30 £805 £862 £3,747 £5,067 EDIT
7 2025 £34,791 £26,176 3.30 £881 £864 £4,628 £5,930 EDIT
8 2026 £35,661 £26,158 3.30 £959 £863 £5,588 £6,794 EDIT
9 2027 £36,552 £26,062 3.30 £1,040 £860 £6,627 £7,654 EDIT
10 2028 £37,466 £25,882 3.30 £1,122 £854 £7,749 £8,508 EDIT
11 2029 £38,403 £25,615 3.30 £1,206 £845 £8,955 £9,353 EDIT
12 2030 £39,363 £25,254 3.30 £1,293 £833 £10,248 £10,186 EDIT
13 2031 £40,347 £24,794 3.30 £1,381 £818 £11,629 £11,005 EDIT
14 2032 £41,355 £24,231 3.30 £1,472 £800 £13,101 £11,804 EDIT
15 2033 £42,389 £23,559 3.30 £1,565 £777 £14,666 £12,582 EDIT
16 2034 £43,449 £22,771 3.30 £1,660 £751 £16,327 £13,333 EDIT
17 2035 £44,535 £21,862 3.30 £1,758 £721 £18,085 £14,055 EDIT
18 2036 £45,649 £20,826 3.30 £1,858 £687 £19,943 £14,742 EDIT
19 2037 £46,790 £19,655 3.30 £1,961 £649 £21,904 £15,390 EDIT
20 2038 £47,960 £18,342 3.30 £2,066 £605 £23,971 £15,996 EDIT
21 2039 £49,158 £16,881 3.30 £2,174 £557 £26,145 £16,553 EDIT
22 2040 £50,387 £15,264 3.30 £2,285 £504 £28,430 £17,056 EDIT
23 2041 £51,647 £13,483 3.30 £2,398 £445 £30,828 £17,501 EDIT
24 2042 £52,938 £11,529 3.30 £2,514 £380 £33,342 £17,882 EDIT
25 2043 £54,262 £9,395 3.30 £2,634 £310 £35,976 £18,192 EDIT
26 2044 £55,618 £7,072 3.30 £2,756 £233 £38,732 £18,425 EDIT
27 2045 £57,009 £4,550 3.30 £2,881 £150 £41,612 £18,575 EDIT
28 2046 £58,434 £1,819 3.30 £1,879 £60 £43,491 £18,635

Sorry for the copy paste - new users aren't allowed to post links.

What do I do??

I am the only person in my family with student loans and no-one else has any loans mortgages or otherwise so I am honestly lost.

Thanks in advance!

ViolaLass

https://www.moneysavingexpert.com/students/student-loans-repay/

[Deleted User]

quee2822 wrote: »

My debt right now is just below 25k with a salary of 30k. If I let it repay over 28 years, I will pay 18.6k tax, see below.

Do you mean interest? I'd hope you'd pay a lot more than 8k in tax over 28 years.

Or are you Jimmy Carr?

DrEskimo

Keep your savings and concentrate on saving a deposit for a house. You can worry about student loan debt later.

You always need to bare in mind that there is minimal risk attached to student loan debt. It's not like other debt where if you lose your job you still have to find a way to service it with no income. If you lose your job you no longer have to pay the student loan.

As such, using your savings now to either pay down other consumer debt, or saving for things like a house deposit will be, IMHO, a far better use of your money than paying down your student loan.

Granted, I have a Plan 1 loan, so my interest is meager, but I even though I will be paying it off in full within the next 5 odd years I have no plans to pay it down sooner. I just treat it as additional tax. Given that I am in my job as a direct result of having the degree, it's a small additional tax to pay given the amount it has enabled me to earn.

quee2822

Deleted_User wrote: »

Do you mean interest? I'd hope you'd pay a lot more than 8k in tax over 28 years.

Or are you Jimmy Carr?

Hahaha 18* but yes I meant interest, oops

quee2822

ViolaLass wrote: »

New users can't reply to links either, apparently

Thanks, this is the article that made me post this since it's still confusing as I feel my case is kind of borderline.

DrEskimo wrote: »

Keep your savings and concentrate on saving a deposit for a house. You can worry about student loan debt later.

You always need to bare in mind that there is minimal risk attached to student loan debt. It's not like other debt where if you lose your job you still have to find a way to service it with no income. If you lose your job you no longer have to pay the student loan.

As such, using your savings now to either pay down other consumer debt, or saving for things like a house deposit will be, IMHO, a far better use of your money than paying down your student loan.

Granted, I have a Plan 1 loan, so my interest is meager, but I even though I will be paying it off in full within the next 5 odd years I have no plans to pay it down sooner. I just treat it as additional tax. Given that I am in my job as a direct result of having the degree, it's a small additional tax to pay given the amount it has enabled me to earn.

Great, thank you so much for a direct and helpful answer. This was my thought too, especially since the prediction is based on assumptions such as a steady pay increase. It just seemed, given this loan is so low-risk, that paying it now was perhaps not a clever move but I wanted to consult others who perhaps are a bit more informed.

Thank you again!

Ed-1

quee2822 wrote: »

Trying to figure out what to do with my relatively meagre savings, I discovered due to scholarships I may end up repaying my student loan in full in 28 years. Which, after a few article readings, means I should be trying to pay more now instead of saving to reduce the interest I pay?

I would appreciate any advice on whether YES I should be paying as much as I can off my student loan now or if I should be saving towards other medium/long term goals?

My debt right now is just below 25k with a salary of 30k. If I let it repay over 28 years, I will pay 18.6k interest, see below.

Year # Year Salary Debt Int. Rate % Paid This Year Interest This Year Total Paid Total Interest
1 2019 £30,000 £24,856 3.30 £450 £820 £450 £820 EDIT
2 2020 £30,750 £25,226 3.30 £518 £832 £968 £1,653 EDIT
3 2021 £31,519 £25,541 3.30 £587 £843 £1,554 £2,496 EDIT
4 2022 £32,307 £25,797 3.30 £658 £851 £2,212 £3,347 EDIT
5 2023 £33,114 £25,991 3.30 £730 £858 £2,942 £4,205 EDIT
6 2024 £33,942 £26,119 3.30 £805 £862 £3,747 £5,067 EDIT
7 2025 £34,791 £26,176 3.30 £881 £864 £4,628 £5,930 EDIT
8 2026 £35,661 £26,158 3.30 £959 £863 £5,588 £6,794 EDIT
9 2027 £36,552 £26,062 3.30 £1,040 £860 £6,627 £7,654 EDIT
10 2028 £37,466 £25,882 3.30 £1,122 £854 £7,749 £8,508 EDIT
11 2029 £38,403 £25,615 3.30 £1,206 £845 £8,955 £9,353 EDIT
12 2030 £39,363 £25,254 3.30 £1,293 £833 £10,248 £10,186 EDIT
13 2031 £40,347 £24,794 3.30 £1,381 £818 £11,629 £11,005 EDIT
14 2032 £41,355 £24,231 3.30 £1,472 £800 £13,101 £11,804 EDIT
15 2033 £42,389 £23,559 3.30 £1,565 £777 £14,666 £12,582 EDIT
16 2034 £43,449 £22,771 3.30 £1,660 £751 £16,327 £13,333 EDIT
17 2035 £44,535 £21,862 3.30 £1,758 £721 £18,085 £14,055 EDIT
18 2036 £45,649 £20,826 3.30 £1,858 £687 £19,943 £14,742 EDIT
19 2037 £46,790 £19,655 3.30 £1,961 £649 £21,904 £15,390 EDIT
20 2038 £47,960 £18,342 3.30 £2,066 £605 £23,971 £15,996 EDIT
21 2039 £49,158 £16,881 3.30 £2,174 £557 £26,145 £16,553 EDIT
22 2040 £50,387 £15,264 3.30 £2,285 £504 £28,430 £17,056 EDIT
23 2041 £51,647 £13,483 3.30 £2,398 £445 £30,828 £17,501 EDIT
24 2042 £52,938 £11,529 3.30 £2,514 £380 £33,342 £17,882 EDIT
25 2043 £54,262 £9,395 3.30 £2,634 £310 £35,976 £18,192 EDIT
26 2044 £55,618 £7,072 3.30 £2,756 £233 £38,732 £18,425 EDIT
27 2045 £57,009 £4,550 3.30 £2,881 £150 £41,612 £18,575 EDIT
28 2046 £58,434 £1,819 3.30 £1,879 £60 £43,491 £18,635

Sorry for the copy paste - new users aren't allowed to post links.

What do I do??

I am the only person in my family with student loans and no-one else has any loans mortgages or otherwise so I am honestly lost.

Thanks in advance!

You are making assumptions that the repayment threshold is fixed at £25,000 which it's not (it's £25,725 now) and the interest rate is fixed at 3.3% which it's not (it will be between 2.4% and 5.4% from this September).

MallyGirl

Also, if you are female, you might take time out for maternity/kids which could push you over the 30 year cutoff (if that applies to your version of the loan). You might take time out for kids if male too but the maternity bit is fairly gender specific

Socajam

I would repay the student loan now.
It's better to get that monkey off your back as early as possible while you are young.
No one knows what is around the corner and the last thing you need is to have a debt from year's past hindering you later in life - married with children or husband/partner leaving you and struggling to survive.
As someone who is debt free, I can tell the you that it is one of the best feeling one can experience.
You wake up every day without the worry of how you will spread your money to pay "x" or "y".
I went through a dramatic time from 1989 and that was a hardest lesson for me with loads of debt.
Also that debt may return to haunt you job wise (security clearance etc) - and would you really want that.
Companies nowadays are looking at everything and you find your dream job, but guess what, the student loan of years ago was the one that stopped you getting that job. Don't think it cannot happen, because it can.

MallyGirl

student loan repayments should not, on their own, leave you struggling to survive. They are a percentage of your earnings about the threshold (currently £25725 it says above).
Very different to normal debt.

DrEskimo

Socajam wrote: »

I would repay the student loan now.
It's better to get that monkey off your back as early as possible while you are young.
No one knows what is around the corner and the last thing you need is to have a debt from year's past hindering you later in life - married with children or husband/partner leaving you and struggling to survive.
As someone who is debt free, I can tell the you that it is one of the best feeling one can experience.
You wake up every day without the worry of how you will spread your money to pay "x" or "y".
I went through a dramatic time from 1989 and that was a hardest lesson for me with loads of debt.
Also that debt may return to haunt you job wise (security clearance etc) - and would you really want that.
Companies nowadays are looking at everything and you find your dream job, but guess what, the student loan of years ago was the one that stopped you getting that job. Don't think it cannot happen, because it can.

Student loan debt is very very different to other types of consumer debt.

You would not need to pay a single penny if you earn under £25,725. Regardless of the amount owed, you will only ever repay 9% of anything you earn over £25,725. It will be written off after 30yrs, or if you become disabled/unable to work, or if you die. It does not factor in as part of your total debts when looking at things like mortgages (although it's impact on your monthly wage would obviously affect affordability metrics).

Please take the time to research the issue before providing potentially misleading advice..