The Big Student Loan Smackdown 2023

Bored

Ever since I've got out of debt, I've been feeling a bit lacklustre with my finances. I did try to set up a diary a few years ago in order to keep me motivated to pay off the mortgage but it fell by the wayside and life got in the way.

Increasing interest rates have prompted me to take a long hard look (a glare) at my student loan. I graduated in 2011 with a whopping £32,000  but only started paying it off in 2017 because I remained in higher education for several years after I graduated. My current balance is £20,912.33 and I'm currently on track to pay it off in 9 years, 5 months with my current repayments of £229 that come directly from my wages. For reference, it's plan 1.

I understand the conventional wisdom of why it is not worth paying it off. I've read the articles, watched the videos, and I fully understand that I am likely to get a better financial return by investing in a stocks and shares ISA instead. But I still want to get rid of the student loan. And I want to do in one year. I really like setting myself challenges and turning it into a game, etc, and is this going to be my goal for 2023.

The rules are simple. Pay off the entire student loan before 31 December 2023. This will primarily cash flowed from my wages but I also have a few assets I could potentially liquidate before the end of the year if I need to.

At the moment, I'm keeping my 'Student loan repayment fund' in cash in a high interest savings account until I'm ready to make a big overpayment, and it currently sits at a litle over 4k. 

I use YNAB to maintain a zero based budget and keep a handle on my expenses so that any excess can be thrown at the student loan. I also have a separate emergency fund that I keep in premium bonds that won't be touched (unless something goes wrong).

Opinions, suggestions and comments are appreciated (even if you want to tell me why I am wrong for paying it off!). 

Student Loan Balance: £20,912.33
Student Loan Repayment Fund: £4038.98

WinterWarrior

I don’t think you are wrong. It’s still debt and you’ll feel so much better to be free of it. Good luck. 

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Thanks for the support @WinterWarrior. 

Bored

Not much to report today on the finances front. I'm in the process of arranging critical illness insurance which will cost my budget an additional £20 per month but will pay off my mortgage if I am diagnosed with a condition that stops me from working. Unfortunately, I've learned this lesson from seeing it play out with some of my relatives that do not have this particular cover and never want to be in that situation.

NeverendingDMP

It's a few years since I graduated and I owed much less but I also paid mine off and felt much the better for it. I know there's arguments either way but to be completely clear and have the chance to have that 229 in your pocket every month and choose how to spend it over the next few years has got to feel good. 

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I'm back from my holiday so now I really want to buckle down and start penny pinching as much as possible. I've updated my YNAB budget with my holiday expenses and I ended up spending a little bit more than planned but WAM has sorted that out. It looks like I'll need some of my salary this month to top up my February categories, but I should be able to stache away a little over £700 for the Student Loan Repayment fund and fully fund March.

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Nothing on the premium bonds this month. I keep my emergency fund there (£9000) so a bit miffed as I haven't won since October 2022.

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I've been taking a look at my finances in YNAB today, it's clear that I haven't budgeted enough for groceries. I think the budget definitely needs to be increased a little bit, but I also have to find a way to spend less in this category overall. 

My entertainment spending is already double the budgeted amount for this month. I've pulled the overage from other categories like clothes and petrol, but ideally I want to let those balances build up so that the money is there when I go need to spend on those things. This month has been exceptional though in that I have been socialising a lot more than usual and I've purchased a few computer games, which is unusual for me.

There's still a lot of the month left to go so I'm going to have to be careful not to let the grocery and entertainment budgets go over any more than they are already. Other categories are looking good so that's something at least.

Found out last weekend that my car battery is dead so when I get around getting that fixed, there'll be a spend there but I have £75 sitting in my car category, so hopefully that will be enough to cover it. Hopefully it just needs a jump start and it'll be fine. 

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I've gone ahead and done a fresh start on my YNAB budget as the category organisation I was using was great for reports, but less useful for actually budgeting, which is the main purpose! I've simplified and reduced my categories and everything is now covered under three master categories: bills, spending and sinking funds. I think this will make it much easier to cut back on my day to day spending while making sure I'm putting enough money aside for future expenses.

Payday was on Saturday but it only hit my account this morning. Once all my bills, spending and saving is covered, I'm left with £500 to go towards the student loan, which makes my current total £5000. At the moment, I'm just setting this aside in a savings account rather than using it to actually overpay my loan.

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It's the first day of the new financial year and my new YNAB budget is set up and ready to go. I've just been doing a bit of financial spring cleaning and realised that I should increase my pension contributions as my earnings have just recently ticked over to the higher rate tax payer mark. I'm thinking I'll increase it from 6% to 9%. My employer matches up 6% so that should mean a total of 15% saved for my pension, which is the recommended amount by Dave Ramsey and other conventional wisdom (half the age you started saving into a pension). Must remember to do that on Monday when I'm back at work.