Student Loan Payback

eenu

Ok i'm getting myself in a real muddle over this one. I've just finished my 4yr undergrad masters and am starting my PhD now. I will be on 22k this year and hopeefully for the next 3 years but certainly years 2 and 3 will be a min of 12k.

Now the confusing bit. Is it better for me to make regular monthly payments to this now given that its around 18k and with around £50 of interest per month. Or should i make regular monthly payments into my highinterest ING account then pay a lump sum from that into the loan in say 3-5yrs....which repayment method would have the greatest impact given the interest rate on the loans goes upto 3.2% in sept.

Jacster_2

Haven't done the detailed sums, but as ING are now 4.75%, after tax on your savings you're not that much better off, and if it were me, I'd prefer knocking something off the debt.

HTH

eenu

yeah was just thinking the same. The only reason i questioned it was it was a hint from MS Money that i could potentially make bigger impacts on a low interest loan by investing the money etc etc

I think your right though send the money straight to the loan

dinkylou

Yes, if were you i d just start paying it back asap.

Just worked out that under the change in payback terms, I ll be 40 before my 9 k is clear. (and theres no guarantee that the interest rate will stay that low)

Scary thought.

pavlovs_dog

will the rate be changing for eveyone, or will it only apply to the current years students apply for their loan ready for september entry?

eenu

it applys to everyone

HGLTsuperstar

But you don't actually knock off anything off the debt until April each year. SLC hang onto your payments then pass it onto HMC&E at the end of each tax year who then recalculte the debt. Point one, keep a very close eye on how much you pay back as payments do go "walkies", and secondly if you put it in ING or other, build up the interest then make a lump sum payment each April

johnllew

Put the money in a Mini Cash ISA with easy access and avoid tax.

surfcat

If you're getting a grant from one of the research councils then it's tax free and so makes sense to save it rather than pay off your student loan. As long as you keep an eye on the SLC rate (now 2.6%, 3.2% for the year from September), you should be fine.

surfcat

HGLTsuperstar wrote:

But you don't actually knock off anything off the debt until April each year. SLC hang onto your payments then pass it onto HMC&E at the end of each tax year who then recalculte the debt.

Technically, the payments don't go through until the April but are back dated to the time they are made, ie you do not continue to accrue interest on the portion of debt you have already paid off.

eenu

ok i am confused....yes my money is tax free right now but the thing is even in ISA's i am not going to make significant gains to outweigh the £50 of interest per month my loan is gaining! Imagine what that will be like in 3-4 yrs after my PhD!

If i pay £250 min per month i can have my debt down to £10k in 3 years....i'll be 26-27 by that point and the reasoning behind paying it off now is that when i do leave uni as a Dr i'll be on 30-50K....i'll be on a high tax bracket having to make a £300 odd contribution to the loan.....add on top of this that i will want a mortgage a car and i maybe looking at having a family (who knows) surely i would be better trying to rid the student loan debt now!?

The only reason i would start repaying it is if there was something significant i could do with £250 that would give me a good (Very good) return to nail the loan for good.

Surely 10k at 26 is better than 20k+