Repaying student loans early? Or just clear interest with salary deductions?

MH669

So, I currently have about 18k in student loan debt on plan 2, and earning a comfortable(ish) salary of £44k a year.

after checking my student loan account i noticed that even on my salary i am barely covering the annual interest on my loan, and never really paying back the balance.

I'm in a position where i can save about £300 a month at the moment, and can't decide whether its better to continue saving, or if i should start tackling my student loan. I already have an emergency fund so anything i save would be in addition to that.

I think (may be wrong) that as it is, i will be paying it back until i am about 55, and then the remainder gets written off. but it means salary deductions until then.

Any advice / guidance would be welcome..

Nasqueron

You should check your dates and interest as plan 2 has different plans depending on year of graduation/when you should be paying back

I am on 4.3% but graduated in 2004 so mine continues to 65, I will pay a bit less than £70 a month when the new thresholds start, it will be about balanced with the interest, will be paying off if interest rates drop a bit which they should do based on the March RPI which is likely to be around 3.4%

If you get to 55 and it gets wiped (assuming correct) then the money you saved by not paying extra could have grown substantially in a fund e.g. say you were paying £100 a month and could pay £100 extra and that reduced the debt so it'd clear before 55, think of what you could earn with that £100 paid monthly into a S&S ISA and left alone for 20+ years

Assuming post 2012 on 7.3% interest, MSE have a guide on whether it's worth it

https://www.moneysavingexpert.com/students/repay-post-2012-student-loan/

silvercar

Time for a spreadsheet to calculate which is worth more. I can see the nice feeling of not having a monthly salary deduction, but if the chances are a lot of the loan will be written off it suggests you are better off not paying it off yourself.

silvercar

I’ll move this to the student board.