Student loans help

woz9

Hi,

I'm new on this forum, so bare with me,

I have just recieved my first student loan statement, and have noticed I have payed around £500 interest since I finished at Uni. I wasn't aware that interest applied on a student loan.

Anyway I currently owe around £10,700, I earn £16,500, so am paying off £11 per month, which is just slowing down the increase of the balance. I am worried as to how I go about paying the lopan off, how much should I pay off?

How have others payed their student loans?

Any help would be appriciated

Thanks

frivolous_fay

Hi woz,

You should probably look at the loan paperwork you signed - my student loan has an interest rate linked to present inflation rates.

You might consider paying off a lump sum in addition to your regular payments (if you had one obviously!) - it seems a less complicated option than interfering with the repayment amounts, although if you could afford to increase these, it would help.

The main thing is - find out the interest rate, and remember that you don't have to pay it off in a fixed length of time, so don't worry too much about clearing it until you can afford to do so.

MrSafeGaz

Hi,

Theorectically it is more profitable for you not to pay off more than the minimum towards your student loan, assuming that the money you would pay it off with is put into a savings account paying more than 4.8%AER net. This interest rate will change in august or september (can't remember which).

I paid off the minimum but this year I will be going into the higher tax band so I will be paying off my student loan in full within the next couple of months. In theory if the interest rates go down on the student loan I will 'lose out' doing this but I would much prefer to know that I am completely debt free and also have a couple of hundred extra disposable cash each month!

danrees

woz9 wrote: »

Hi,

I'm new on this forum, so bare with me,

I have just recieved my first student loan statement, and have noticed I have payed around £500 interest since I finished at Uni. I wasn't aware that interest applied on a student loan.

Anyway I currently owe around £10,700, I earn £16,500, so am paying off £11 per month, which is just slowing down the increase of the balance. I am worried as to how I go about paying the lopan off, how much should I pay off?

How have others payed their student loans?

Any help would be appriciated

Thanks

Well, you have several choices:

1. Earn more and pay it off quicker as 9% of earnings over £15k (assume this is difficult!)
2. Use other means to reduce the balance.
3. Don't worry about it, treat it like an extra tax, and wait until it is written off at 65.

You will never get borrowing as low as RPI, so paying off a student loan is typically an unwise thing to do. Most cash ISAs pay more interest than is charged on a student loan, so it is actually more profitable to put any spare cash in a cash ISA than use it overpay on your student loan.