Student loan rate / refinancing
Discussion
Hi all. Need a bit of advice on student loans, please.
Background:
- girlfriend went to uni late and is now a qualified teacher as of next week. Has just secured a job to start the following week! She will earn 22691 gross assuming 1 per cent pay award from September as an nqt, but a bit beforehand too.
- student loan rates increase from 4.6 to 6.1 per cent as of this autumn
- she has around 25k debt
- we live together in a house I own. Value approximately 140k, mortgage remaining approximately 80k.
- I earn reasonable money (circa 50k) and have been overpaying the mortgage to clear early even while she has been reduced to part time hours whilst studying.
I have a personal loan (4%) which finishes in a couple of months and a good credit history. I can get another loan at 3% at a quick glance. Or I could refinance the mortgage (again, 4% or a bit below, need to check).
Both options are significantly cheaper than leaving 25k at 6.1%. I've done some calculations in excel and she will accrue around 130 pounds a month in additional interest but only pay off around 40.
So I'm right in thinking I definitely need to refinance this? I'm quite willing to do it in my name - we have been together a while and I plan on making things more permanent soon (!)
Is the best option to do it as a personal loan for me or remortgage to finance it? Or is it whatever gives the better rate?
Thanks for any and all help!
Background:
- girlfriend went to uni late and is now a qualified teacher as of next week. Has just secured a job to start the following week! She will earn 22691 gross assuming 1 per cent pay award from September as an nqt, but a bit beforehand too.
- student loan rates increase from 4.6 to 6.1 per cent as of this autumn
- she has around 25k debt
- we live together in a house I own. Value approximately 140k, mortgage remaining approximately 80k.
- I earn reasonable money (circa 50k) and have been overpaying the mortgage to clear early even while she has been reduced to part time hours whilst studying.
I have a personal loan (4%) which finishes in a couple of months and a good credit history. I can get another loan at 3% at a quick glance. Or I could refinance the mortgage (again, 4% or a bit below, need to check).
Both options are significantly cheaper than leaving 25k at 6.1%. I've done some calculations in excel and she will accrue around 130 pounds a month in additional interest but only pay off around 40.
So I'm right in thinking I definitely need to refinance this? I'm quite willing to do it in my name - we have been together a while and I plan on making things more permanent soon (!)
Is the best option to do it as a personal loan for me or remortgage to finance it? Or is it whatever gives the better rate?
Thanks for any and all help!
I had a bit of time over lunch and came up with this:
https://ufile.io/l72oq
It's an Excel file which projects the salary of a main scale teacher over 10 years with a starting debt of 25k (although this could be anywhere up to 40k for some teachers, I think, dependent upon course/university etc.).
In Sept 23 the repayments will begin to be more than the monthly interest, providing the interest remains at 6.1%. However, it will never clear the debt after 30 years, even with 20 years at peak salary. It will still have 12k left.
If they stayed at 4.6% then the debt would be cleared in Apr/May 2042, sticking to the regular salary and the rates staying constant.
So basically the shift in rates turns it from a repayable debt into a tax which is eventually cancelled after 30 years.
(cell C4 to change the rate, if interested)
Now I need to sit down and figure out which way costs less over the long term!
https://ufile.io/l72oq
It's an Excel file which projects the salary of a main scale teacher over 10 years with a starting debt of 25k (although this could be anywhere up to 40k for some teachers, I think, dependent upon course/university etc.).
In Sept 23 the repayments will begin to be more than the monthly interest, providing the interest remains at 6.1%. However, it will never clear the debt after 30 years, even with 20 years at peak salary. It will still have 12k left.
If they stayed at 4.6% then the debt would be cleared in Apr/May 2042, sticking to the regular salary and the rates staying constant.
So basically the shift in rates turns it from a repayable debt into a tax which is eventually cancelled after 30 years.
(cell C4 to change the rate, if interested)
Now I need to sit down and figure out which way costs less over the long term!
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