Pay off Student loan with ISA?

jimjazzuk

I had the latest statement from the SLC yesterday and i now owe about 18.5 k. The past 6 months the figure has gained 400 odd pounds in interest (or inflation) so over a year that will probably be getting on for £900. Whilst studying i managed to put quite a lot of money in my ISA (currently about £7,500). My ISA used to have an interest rate of about 5.75 % but is now more like 5%. Now...... i have a music degree and i'm not likely to earn much over £15,000 a year for some time. This means that every year from now on that 18k figure is going to increase by hundreds of pounds. So 5 years down the line that figure could be more like 25k. So.............. Do you think it would be a good idea to pay off say 7k of the student loan from my ISA in a lump sum now? That would make paying it off more manageble. At the moment i would have to pay over £70 / month just to pay the interest and keep it at the same figure. Whereas if i were to reduce the amount i owe by paying a large lump sum then i would only have to pay about £30 - 40 per month to make sure the debt doesnt get any larger. Thoughts?

Lokolo

No.

The rate of SL is 4.8%.
Bank account rate is around 5-6%.

Every £100 you have.

Pay back student loan. Save £4.80 a year.
Put in savings account. Save £5-6 a year.

Which one is worthwhile?

BruceyBonus

And remember that next year the rate will only be 3.2% on the loan.
Also remember to make sure your ISA is in the place that pays the most interest!

Lokolo

BruceyBonus wrote: »

And remember that next year the rate will only be 3.2% on the loan.
Also remember to make sure your ISA is in the place that pays the most interest!

Its 3.8%. I read the wrong column oppsy but still thats still lower than most savings accounts.

Masomnia

Definitely save the money.

Like the others have said there's no financial benefit to paying off the loan, but also I think it's a good idea to have the money set aside in case you do fall into difficulties somehow in the future.