Repay Plan 1 loan early?

leeloolee
leeloolee Posts: 16
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edited 16 January 2023 at 9:28AM in Student MoneySaving
Hello, everyone! Another student loan question here.

I have a Plan 1 student loan, of which I have around £1800 left to pay. I'm paying it off at around £300ish a month on a salary of around £60K. I am obviously getting quite close to clearing the balance now and am wondering whether it might be worth paying the remaining balance off in one go in the next 2-3 months rather than waiting 6+ months for it to be cleared through PAYE? The interest rate has gone up quite a bit recently, which seems to make early repayment look more attractive. I have also heard that it can take the SLC some time to stop taking it from your pay once the balance is cleared, so you can end up overpaying?

I currently have £3500ish in my emergency fund, which is the only savings I have right now, as I've just bought a flat. I don't want to touch this to pay off the loan. I often also do a bit of freelance work to fund holidays and so on, and I might be able to do some of this kind of work over the next few weeks and save up the approx £1000ish it would take to fully pay off the loan balance in say, March. Would this be a good use of my hard work and funds?

Comments

  • MalMonroe
    MalMonroe Posts: 5,783
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    Hello and welcome - there's lots of useful information in the following link - https://www.savethestudent.org/student-finance/student-loan-repayments.html

    and there are links within that link to other helpful info.

    If you want to pay it off in one go in the next 2-3 months and you can afford it, then you may as well do that. There's not a lot left to pay and it sounds as if you will be able to do it quite comfortably (well, with a bit of extra hard work). I think it would be a good use of your hard work and funds, it won't take long and then that's a debt off your shoulders (although I know it doesn't affect your credit report. I had a Plan 1 loan in 1998 and became too old to pay it back before I started earning the threshold amount.) You have a brilliant salary.

    Like you, I have also heard that it can take the SLC some time to stop taking it from your pay once the balance is cleared, so maybe you could write to them now, advising of your intentions and telling them that you will (obviously) want to stop payments at the time when the balance is cleared, hopefully end of March. I just say end of March because the new financial year will begin in April and interest levels may rise again.

    This is only my own opinion of course.

    I wish you all the very best, sounds like you have a bright future ahead.  :smile:
    Please note - taken from the Forum Rules and amended for my own personal use (with thanks) : It is up to you to investigate, check, double-check and check yet again before you make any decisions or take any action based on any information you glean from any of my posts. Although I do carry out careful research before posting and never intend to mislead or supply out-of-date or incorrect information, please do not rely 100% on what you are reading. Verify everything in order to protect yourself as you are responsible for any action you consequently take.
  • Thanks for the info!

    I'm actually not that young anymore - nearly 40! It's taken me years to get to this salary and there were many years where I earned too little to pay anything at all, so I am extremely happy to finally have an end in sight. I think doing the freelance work will mean being tired and not having much of a life for the next month or two, but clearing the last of that student loan will be a real weight off my shoulders. 

    That's a good idea about letting them know about my intentions. I am a bit worried that even if I do clear the balance, they will mess up and keep taking deductions anyway, but presumably they'd be obliged to refund me fairly quickly? 
  • silvercar
    silvercar Posts: 46,743
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    When nearing the end of the loan you can request to slc that you make payments via standing order rather than paye deductions, to avoid deductions continuing  beyond the time when you would have totally repaid your loan.
    I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to [email protected] (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • DrEskimo
    DrEskimo Posts: 2,333
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    Yes would advise the above and move to a direct debit rather than PAYE. 

    I have set up a much higher monthly amount than the PAYE amount via direct debit to clear the loan faster. 
  • Thanks for the info. Anyone know how much notice SLC need to stop taking repayments from your salary? I've just learned that my pay for February is likely to be quite a bit higher than usual as I'm finally being paid for some overtime I did ages ago that didn't get recorded properly. It's probably going to be about a grand higher so presumably my loan deduction will be higher than the usual £300 or so. My worry is that I'll switch to direct debit and then a massive chunk of money will also come out of that February paycheque! 
  • DrEskimo
    DrEskimo Posts: 2,333
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    leeloolee said:
    Thanks for the info. Anyone know how much notice SLC need to stop taking repayments from your salary? I've just learned that my pay for February is likely to be quite a bit higher than usual as I'm finally being paid for some overtime I did ages ago that didn't get recorded properly. It's probably going to be about a grand higher so presumably my loan deduction will be higher than the usual £300 or so. My worry is that I'll switch to direct debit and then a massive chunk of money will also come out of that February paycheque! 
    I requested to change to direct debit in June last year and it was put into effect in September, so around 3months. 

    Definitely doesn’t happen straight away!
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