Borrow to Paying low student debt off in full

ljsilson

Hi. Ive read all the advice in srudent lians and if it was a high loan I would definately  not consider repaying early but my son only attended Uni 6 mths and so has a debt of £8500. he has left now and joined raf so low wages... but im worried that a lowish loan is going to escalate with te intereat charges... obviously cant predict future earnings so im unsure whether to leave anx take a chance or loan him the money to clear and he can repay back to me with no interest. just dont want to encourage him to pay it off unnecessarily... any thoughts?

[Deleted User]

It doesn't sound as if paying it off should be a priority for him, given his low income.

[Deleted User]

The student loans people will tell you what his repayment schedule is, the interest rate is quite low usually and it's generally not a good idea to rush to pay it off 

maxsteam

Borrowing at a commercial interest rate to pay off a low interest rate loan is not a good idea. If it's the government's student loan then there should be no pressure to repay the loan while on a low salary and, if the low salary continues for long enough, the loan will be written off. You will not get such a good deal from a commercial lender.

DCFC79

Have you read what Martin says about paying student loans off ?

FaceHead

The interest rate on plan two loans is the RPI whilst your income is below £26,575, which I'll assume your son's is. 

That means there is no real cost of borrowing, whilst the interest is only at the rate of inflation. In this case, taking a commercial loan to pay the student loan off is probably a bad idea. 

Once his income gets past £26,575 the interest rate starts to taper up to RPI + 3%. At this point it might make sense to pay it off.

Summary: Sit tight for a couple of years and see how his salary and interest rate start to shape up.