Should I pay off my student loan early?

silvercar

Ryan_Holden said:

I know it's a money saving site, but I never thought I'd see the advice of basically don't pay off what you owe, it's someone else's problem. 

I have always paid my debts, I overpaid on my loan to make sure it was repaid early. I guess it's just a different view of the system.

The government funds universities (in the main). Tuition fees puts some of this debt onto individuals, but in the knowledge that not all will pay all and not with any expectation that they will do so. So the debt attached to individuals isn't with any expectation that payments will be made in full.

Paying your loan off early could in itself mean that you decide to pay less into a pension and then rely on pension credits in your old age, so you become a cost to the government just because you cleared your student debt. 

My view is you pay what your required to do, anything over and above that is a choice and making that choice should be done with the full facts available to you.

Ryan_Holden

I understand your point of view, but there's nothing to say you won't need pension credit as well as not having paid off a student loan. So I think my point of view being pay your debts is a better position for society.

jbrassy

Ryan_Holden said:

Howdy, bit of a no brainer isn't it? 

It's always advisable to pay down debt as soon as you can, and in your case if you clear the SL and it happens to be the same amount as the mortgage will be then you're net even and not down another 400 quid a month.

Good on you for having no other debts.

As other people have said, this answer is far too simplistic. The interest rate is 6.5% while the inflation rate is over 8%. Therefore, in real terms, the value of the loan is decreasing. This will always be true of plan 1 loans since the interest rate is the lower of the inflation rate or the Bank of England base rate + 0.5%. It's quite likely that the interest rate on plan 1 loans will come down as inflation comes down while the BofE base rate remains elevated. Therefore, I would not worry about the interest rate.

I was in a similar position to the OP during COVID (albeit I didn't need to remortgage). I had about £2k left of my student loan and it would have taken less than a year to pay it off. I had quite a lot of savings so I just wanted to get rid of it and not have to think about it again.

However, what is also bearing in mind is that, if you lost your job, you wouldn't need to pay anything towards the student loan, but you would still need to pay the mortgage. Therefore, personally I would not use my savings to pay my student loan as I would keep it aside for a rainy day. I would only consider paying it off when you're in the last 12 months of repayments as it'll make less of a dent on your savings. 

sharp910sh

I would suggest you pay it off, the interest rate is high and it affects your mortgage affordability. The only reason you should not pay it off is it you do not think you will pay off your student loan in full in the future. 

I do like like Martin Lewis saying its a graduate tax and its not real money. It is tell the banks it's not real money when you're getting a mortgage see if they believe you. They will happily reduce your mortgage affordibility!