Should I pay off my 1998-2005 era student loan?
Cortiz
Posts: 13 Forumite
Slightly unusual situation here.... I live abroad in the US, permanently most likely. I studied as a mature student and am now 51 years old. Due to postgrad study and various life circumstances, my income has been consistently below the threshold, so I have made zero repayments and owe around £17,000. I still have UK bank accounts, including savings making 1.5% interest.
Here are the reasons I'm thinking of repaying the loan in full, in one lump sum:
1. With the SLC interest rate increase to 1.75%, my student loan is no longer useful as a loan for investment purposes. Since my savings account only makes 1.5%, I'm effectively "losing" .25%. In fact, I actually have the full loan amount in a savings account making only 0.50% (because my main savings account has the maximum insured £85k from my UK house sale). So in a sense, that £17k in the other account is "losing" 1.25%. Living abroad, I am not eligible to open any new UK savings accounts that might have better rates..
2. Because of the low GBP/USD exchange rate, it doesn't seem to make sense to exchange the money to my local currency - especially since savings rates are about the same here.
3. Though still uncertain, it's very possible that I'll start making over the income threshold beginning this year or next - possibly a great deal more - at which point I'll have to start repayments anyway (possibly quite high ones).
4. Given the rules of the 1998-2005 system, my loan will not be written off for another 14 years, if I understand correctly. Since I don't expect to have such a low income for all that time, that is probably not much of a possibility.
So am I missing anything? Any compelling reason not to pay it off and just be done with it? Thanks in advance for any comments and perspectives...
Here are the reasons I'm thinking of repaying the loan in full, in one lump sum:
1. With the SLC interest rate increase to 1.75%, my student loan is no longer useful as a loan for investment purposes. Since my savings account only makes 1.5%, I'm effectively "losing" .25%. In fact, I actually have the full loan amount in a savings account making only 0.50% (because my main savings account has the maximum insured £85k from my UK house sale). So in a sense, that £17k in the other account is "losing" 1.25%. Living abroad, I am not eligible to open any new UK savings accounts that might have better rates..
2. Because of the low GBP/USD exchange rate, it doesn't seem to make sense to exchange the money to my local currency - especially since savings rates are about the same here.
3. Though still uncertain, it's very possible that I'll start making over the income threshold beginning this year or next - possibly a great deal more - at which point I'll have to start repayments anyway (possibly quite high ones).
4. Given the rules of the 1998-2005 system, my loan will not be written off for another 14 years, if I understand correctly. Since I don't expect to have such a low income for all that time, that is probably not much of a possibility.
So am I missing anything? Any compelling reason not to pay it off and just be done with it? Thanks in advance for any comments and perspectives...
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Comments
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Wow, almost 400 views and no opinions?0
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It makes financial and psychological sense to pay-off your student loan and be done with it, especially when you are talking about cash.
One financial reason not to pay it back is because you can make more money by investing the £17k in equities in the long run rather than paying the student loan.
Also, if you came into difficulty with not being able to work (redundancy, illness etc) then your student loan contributions would cease until you did work again. You may need that cash for this kind of emergency.You should pay attention to the needs of the moment - otherwise there is no future. But to ignore the future is foolish - living solely for the moment leaves nothing for when the next moment arrives.0 -
It makes financial and psychological sense to pay-off your student loan and be done with it, especially when you are talking about cash.
One financial reason not to pay it back is because you can make more money by investing the £17k in equities in the long run rather than paying the student loan.
Also, if you came into difficulty with not being able to work (redundancy, illness etc) then your student loan contributions would cease until you did work again. You may need that cash for this kind of emergency.
Good points. Since I live abroad I'm not able to open an equities account in the UK, and the exchange rate is currently so poor it doesn't make sense to change to USD. At this point I'm getting 1.40% but the interest is 1.75%, so a small loss. But the cash consideration may be an issue at some point, given how spotty work life is.
At this point I'm thinking that even if I do well one year, I may not the next so perhaps it makes sense to wait for now. It is fairly likely that for at least some of the next 14 years I'll be under the income threshold.0
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