Student loan - overpaying vs not?

alweyn

Hi there

Apologies if this is on the wrong board but I have been browsing online for some info on whether or not it’s worth overpaying on my student loan repayments. Does anyone have any insight into this? I know the debt gets wiped off after 30 years however I’m conscious I might end up repaying a whole lot more than I borrowed.

I’ve read the MSE article on busting the myths of repayments and the advice to not overpay, however after some calculations I think it may benefit me.

I’m in my late twenties and earning £80,000 a year. My student loan debt stands at £44,500 and if I average my loan repayments over 12 months, I’m paying back around £395pm on my student loan.

I expect my salary to increase YoY (and with it my student loan repayments), and I have a while until the debt gets wiped so I’m toying over whether or not to increase my repayments by £100pm. An online calculator suggests doing so and potentially benefiting from a long-term 6% saving.

Has anyone had any experience with overpayments or can offer any advice? 

Thank you!

Shiba

Hi alweyn

Student loans are a tricky one for me because they're not regulated by the FCA / Consumer Credit Act etc. HM Govt. funds them through the Student Loans Company (SLC) and collects repayments through HMRC.

You're in your late 20s, so you likely have an income contingent student loan (which became the standard around 1998-2000). And you most likely have one administered by SLC.

Your income is increasing YoY, so you'll have to factor that into what you'll pay each year, and find out what interest rate you're on. Different terms apply based on a range of factors. Information should be available through the SLC website.

Given your income, and depending on other personal circumstances, you may have disposable cash. The general rule of thumb is pay loans early to avoid interest cost - so long as the interest cost is higher than what you would earn on deposits less inflation. So I don't see why that wouldn't apply here too.

Hope this helps.