We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Plan 1 student loan - should I overpay?
hollycave
Posts: 10 Forumite
Hi,
I would appreciate help with my plan 1 student loan please, taken out in 2003.
Current balance = £16760
Annual repayment from salary = £1194
But taking away the interest accrued each year I'm actually only paying off £346/year.
Based on salary and payments saying the same, it would take me 48 years to pay off my loan, but it will be written off in 25 years.
However if I continue the same then between now and the time it's written off I will have paid in £26103 i.e. £10000 more than what the loan is currently.
I'm confused about whether I should increase my payments/take money out of my ISA to pay it off sooner/now, or whether I'm better ignoring it and putting spare income into my pension? My pension is depressingly small for my age.
My understanding is that as the loan follows base rate it doesn't really get bigger over time so I'm better putting my money somewhere it can grow, however my husband is very debt adverse and wants me to pay it off now. Tuition was free when he was a student so he never ran up a big debt like I did!
We're unlikely to want to borrow any large sums of money in the future, having paid off our mortgage.
Thank you!
I would appreciate help with my plan 1 student loan please, taken out in 2003.
Current balance = £16760
Annual repayment from salary = £1194
But taking away the interest accrued each year I'm actually only paying off £346/year.
Based on salary and payments saying the same, it would take me 48 years to pay off my loan, but it will be written off in 25 years.
However if I continue the same then between now and the time it's written off I will have paid in £26103 i.e. £10000 more than what the loan is currently.
I'm confused about whether I should increase my payments/take money out of my ISA to pay it off sooner/now, or whether I'm better ignoring it and putting spare income into my pension? My pension is depressingly small for my age.
My understanding is that as the loan follows base rate it doesn't really get bigger over time so I'm better putting my money somewhere it can grow, however my husband is very debt adverse and wants me to pay it off now. Tuition was free when he was a student so he never ran up a big debt like I did!
We're unlikely to want to borrow any large sums of money in the future, having paid off our mortgage.
Thank you!
0
Comments
-
A plan 1 student loan taken out in 2003 will be written off when you turn 65.Given the tax benefits of paying into a pension, I would be inclined to fund your pension rather than clear your loan.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0
-
Thanks, should have said I’m 40 now so another 25 until it’s written off.0
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.6K Banking & Borrowing
- 253.8K Reduce Debt & Boost Income
- 454.5K Spending & Discounts
- 245.7K Work, Benefits & Business
- 601.6K Mortgages, Homes & Bills
- 177.7K Life & Family
- 259.6K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards