Unsure if I should overpay

Princessa_2

Hi,

I’m in England and I was in University between 2002-2005. I still have £11500 left on my loan; I’m on plan 1. I went back to uni to do a PGCE in 2008 and I actually can’t remember what loan I got at the time. I think the course was paid for as there was a teacher shortage, and I know I also got a grant, but I think I may still have had some loan there and so I think it confuses my query. When I log in, it just says I have £11500 on plan 1 at 4.3%. 

I’m now in a position where I can overpay, but I don’t know if that’s the best thing to do? Am I better off putting the intended money into a savings account, or do I reduce the amount I end up paying by making overpayments? I now have twins at uni, and I’d like to eventually make payments against their loans as they look like you have to pay loads back on these newer plans.

Thanks!

Mark_d

Whether or not you should overpay depends on how much borrowing you have in total (not just student loan) and what return you could make investing the money elsewhere.

Suppose your only other borrowing is a mortgage - then I think you could easily make a return in excess of 4.3% by investing in pension, or maybe paying towards a S&S Lifetime ISA for your kids.

silvercar

PGCE in 2008 would also be under plan 1. So I would think all your loans are combined into one.

The question is what else you can do with the money? If needed for a house deposit or pension, that may be better than reducing the loan. At 4.3% I’d keep it running, that is quite cheap borrowing. Unless it reduces your mortgage borrowing capability.

Newbie_John

You need to consider your salary now, what will your salary be in 10 years and how likely is that you will ever pay it off - if low chances then better to wait for it to expire, if high and soon then worth considering paying it off.

There was a nice chart somewhere showing direction of debts repayment, but it was something like:
1) Any short term debts, Klarna, loans etc. with high rates
2) Are you maxing out on your pension contribution? No tax, employer extra?
3) House deposit, mortgage rate?
4) Emergency buffer of 3-6 months salary.

And I think if you still have money left then yes, pay it off.

Princessa_2

Thanks for the responses. I have no other debt, other than the mortgage. On around £50k per year, so I’m not sure how long it will take me to pay the loan off, or how to pay more into my teaching pension. We’ve also been overpaying our mortgage recently. I have probably 4 months’ wages saved up. Does my loan plan 1 expire after 25 years and is that from 2008 when I did the teaching ogce?

Ed-1

Princessa_2 said:

Thanks for the responses. I have no other debt, other than the mortgage. On around £50k per year, so I’m not sure how long it will take me to pay the loan off, or how to pay more into my teaching pension. We’ve also been overpaying our mortgage recently. I have probably 4 months’ wages saved up. Does my loan plan 1 expire after 25 years and is that from 2008 when I did the teaching ogce?

The PGCE loan balance expires 25 years after the April you left that course.

The rest expires at age 65.

Each academic year's loan balance is kept separate on SLC's systems but shown as an aggregated balance per plan type.

Princessa_2

Thank you! If it takes til I’m 65 to expire, then I definitely will be paying it off.

silvercar

Ed-1 said:

Princessa_2 said:

Thanks for the responses. I have no other debt, other than the mortgage. On around £50k per year, so I’m not sure how long it will take me to pay the loan off, or how to pay more into my teaching pension. We’ve also been overpaying our mortgage recently. I have probably 4 months’ wages saved up. Does my loan plan 1 expire after 25 years and is that from 2008 when I did the teaching ogce?

The PGCE loan balance expires 25 years after the April you left that course.

The rest expires at age 65.

Each academic year's loan balance is kept separate on SLC's systems but shown as an aggregated balance per plan type.

Question @Ed-1 , if the loans are separated on SLCs system and have different write off dates, which loan do repayments go towards? 

Ed-1

silvercar said:

Ed-1 said:

Princessa_2 said:

Thanks for the responses. I have no other debt, other than the mortgage. On around £50k per year, so I’m not sure how long it will take me to pay the loan off, or how to pay more into my teaching pension. We’ve also been overpaying our mortgage recently. I have probably 4 months’ wages saved up. Does my loan plan 1 expire after 25 years and is that from 2008 when I did the teaching ogce?

The PGCE loan balance expires 25 years after the April you left that course.

The rest expires at age 65.

Each academic year's loan balance is kept separate on SLC's systems but shown as an aggregated balance per plan type.

Question @Ed-1 , if the loans are separated on SLCs system and have different write off dates, which loan do repayments go towards? 

The repayments of loans in repayment in the same plan type are split in proportion to the outstanding balances.

So if the loan balances are:
08/09: £5,000
02/03: £2,000
03/04: £2,000
04/05: £1,000

Then a repayment of £100 would be split
£50:£20:£20:£10.