Postgraduate Loan - worth it or not?

bootsandblisters

Hello All,

I'm 45, mid-way through a career change and have just started a Masters, to be studied part-time over 3 years alongside full-time work. Salary currently £32,500.

I took out a Postgraduate loan for the value of the course - £11,506, however I'm now doing the sums and concluding that it is a fiscal mistake to continue the loan. It has a 30 year term and whilst my income will drop when I retire in approx 3000 years, it's extremely likely that I'll repay in full before this, interest and all. I used a calculator, which suggested that by the time it's paid off in around 15 years, I would have paid over £20k. I also have a Plan 2 undergraduate loan which was £6k when taken out but is now nearly £14k because I was a low earner for some time and the interest piled on. They stack, so I'd be paying both.

My circumstances changed positively shortly after I took out the loan, which is why I'm now deliberating. So, my question: is my thinking is correct, that it would be logical to cancel the postgrad loan and fund the Masters myself? The cost each year would be just under £4k, which I could accommodate with some belt-tightening.

Thanks in advance.

silvercar

I’ll move this to the student board. Plenty of discussions on the wisdom of taking a loan, or not, over there.

My take on it is to consider what else you could use the money for eg house deposit, pension contribution and to remember once repaid (or not taken) the money is gone, whatever your future circumstances.

silvercar

@bootsandblisters, the student board can be found here:

https://forums.moneysavingexpert.com/categories/student-money-saving

bootsandblisters

silvercar said:

My take on it is to consider what else you could use the money for eg house deposit, pension contribution and to remember once repaid (or not taken) the money is gone, whatever your future circumstances.

Thanks Silvercar. It'll be paid off before the term ends, so the money is gone either way. It's just that if I pay it myself now whilst I can afford to do so, it costs me £11506 vs paying it off every month over a period of years, where the value will be significantly greater due to the added interest. Short term it's a hit that's not ideal and means I'm contributing less to savings (I'll never afford to get on the housing ladder so that's moot), but longer term it means I've saved potentially £8-9k.

Basically I know what approach seems logical, I just want to check that I'm not missing something obvious before I do it!

silvercar

bootsandblisters said:

silvercar said:

My take on it is to consider what else you could use the money for eg house deposit, pension contribution and to remember once repaid (or not taken) the money is gone, whatever your future circumstances.

Thanks Silvercar. It'll be paid off before the term ends, so the money is gone either way. It's just that if I pay it myself now whilst I can afford to do so, it costs me £11506 vs paying it off every month over a period of years, where the value will be significantly greater due to the added interest. Short term it's a hit that's not ideal and means I'm contributing less to savings (I'll never afford to get on the housing ladder so that's moot), but longer term it means I've saved potentially £8-9k.

Basically I know what approach seems logical, I just want to check that I'm not missing something obvious before I do it!

Compare the interest rate you could get on savings with the interest rate being charged on the loan. Future earnings are always a crystal ball gazing exercise, so you need to take a view. Fr me the tax benefits of pension contributions are a big consideration.