Student Loan - Should I repay in full?
Discussion
Should I repay my student loan in full?
I'm on Plan 1
Currently owe £7,800
Interest rate showing as 6.25% (set at rpi +1%)
Above figures off my SL account on gov.uk.
Plan 1 = £1,834 threshold
Anything over that I pay 9%
I'm a basic rate tax payer - towards the top, but not the top of the threshold.
Pay rises are once every two years, always above RPI.(set to be around +3% for the next two years)
Overtime is generally available if I want it
Potential for future promotion if I pushed for it
Currently put 10% in pension which is matched by the company.
Student loan deductions are starting to sting. This month for example with some overtime and shift work - £200+deduction. Hurts to look at when trying to add as much as I can into my S&S ISA.
I've got enough in savings and/or assets (2nd car, a motorbike or two) to not worry tooooo much about the 7.8k, although I could think of more fun ways to spend it.
But would be paying off the balance be an emotion led decision rather than a sensible financial one?
Would I be making a poor decision based on me wanting to feel less annoyed looking at my payslip?
Maybe someone cleverer than me can help?
Edit to add in some more info about plan 1 threshold and %s
I'm on Plan 1
Currently owe £7,800
Interest rate showing as 6.25% (set at rpi +1%)
Above figures off my SL account on gov.uk.
Plan 1 = £1,834 threshold
Anything over that I pay 9%
I'm a basic rate tax payer - towards the top, but not the top of the threshold.
Pay rises are once every two years, always above RPI.(set to be around +3% for the next two years)
Overtime is generally available if I want it
Potential for future promotion if I pushed for it
Currently put 10% in pension which is matched by the company.
Student loan deductions are starting to sting. This month for example with some overtime and shift work - £200+deduction. Hurts to look at when trying to add as much as I can into my S&S ISA.
I've got enough in savings and/or assets (2nd car, a motorbike or two) to not worry tooooo much about the 7.8k, although I could think of more fun ways to spend it.
But would be paying off the balance be an emotion led decision rather than a sensible financial one?
Would I be making a poor decision based on me wanting to feel less annoyed looking at my payslip?
Maybe someone cleverer than me can help?
Edit to add in some more info about plan 1 threshold and %s
Edited by anonymous-user on Thursday 21st December 23:09
Edited by anonymous-user on Thursday 21st December 23:11
I would. Not only is it attracting interest, the payments you do make only reduce the balance once a year (despite being taken monthly), so you're paying interest on a loan, whilst at the same time your payments are generating interest for someone else.
Unless you can generate a better return elsewhere if course.
Calculations aside, I cleared mine. It did feel like a weight lifted.
Unless you can generate a better return elsewhere if course.
Calculations aside, I cleared mine. It did feel like a weight lifted.
Short answer: pay it off.
Long answer: how long will it take you to pay it off naturally? Interest adds on every day. It's compounding. The longer you take to pay it off, the more you will pay. The smart decision is to pay it off now in the knowledge that you've saved money in the long run. I paid mine off this year when I found out about the ridiculous interest rate by pure chance. It was a no brainer. And even then, I paid slightly more than the figure stated due to the following week's interest being added on.
Long answer: how long will it take you to pay it off naturally? Interest adds on every day. It's compounding. The longer you take to pay it off, the more you will pay. The smart decision is to pay it off now in the knowledge that you've saved money in the long run. I paid mine off this year when I found out about the ridiculous interest rate by pure chance. It was a no brainer. And even then, I paid slightly more than the figure stated due to the following week's interest being added on.
https://www.moneysavingexpert.com/students/student...
Edited by Tye Green on Thursday 21st December 23:41
Previous said:
I would. Not only is it attracting interest, the payments you do make only reduce the balance once a year (despite being taken monthly), so you're paying interest on a loan, whilst at the same time your payments are generating interest for someone else.
This isn't the case - HMRC used to only issue a final report annually so it looked that way, but I'm sure it wasn't calculated that way.It's now reported within days.
EVOTECH3BELL said:
Should I repay my student loan in full?
There's lot of scenarios anywhere from "yes" to "no, never".Some questions:
Will you repay the student loan before it's written off?
Is there anything a lump sum would help with (e.g. house deposit)?
Do you have any debts whose interest rates are above the student loan rate?
Do you have any savings whose interest rates are above the student loan rate?
EVOTECH3BELL said:
nuyorican said:
Don’t they get written off after so many years? Not saying you should take advantage of that or not. It’s just something I think I read somewhere.
Think I've got about 15 years left until that point EVOTECH3BELL said:
I'm a basic rate tax payer - towards the top, but not the top of the threshold.
Assuming £40k salary, it'd be paid off in about 5 years - so no risk there.EVOTECH3BELL said:
I've got enough in savings and/or assets (2nd car, a motorbike or two) to not worry tooooo much about the 7.8k, although I could think of more fun ways to spend it.
But would be paying off the balance be an emotion led decision rather than a sensible financial one?
Would I be making a poor decision based on me wanting to feel less annoyed looking at my payslip?
Maybe someone cleverer than me can help?
As it's a relatively low amount for a student loan ie you will pay it off naturally then I'd say pay it off.But would be paying off the balance be an emotion led decision rather than a sensible financial one?
Would I be making a poor decision based on me wanting to feel less annoyed looking at my payslip?
Maybe someone cleverer than me can help?
Edited by EVOTECH3BELL on Thursday 21st December 23:09
Edited by EVOTECH3BELL on Thursday 21st December 23:11
Because if you paid it off now and then saved the student loan repayments you would otherwise pay you'll save over the £7.8K in the same time as it would take to clear it repaying monthly as you are now (if that makes sense!?) basically if you are disciplined you will end up saving/paying yourself the interest you'd otherwise pay the lender.
It gets a bit more complicated for a student leaving with 40-50K of debt.
Was talking about student loans with my daughter the other day, she has 65k debt after a medical degree, and will be starting to pay in April. Overall it seemed better to think about putting capital into a property over the next couple of years and maybe hit the capital later when better established.
Difficult topic to get your head around though
Difficult topic to get your head around though
sawman said:
Was talking about student loans with my daughter the other day, she has 65k debt after a medical degree, and will be starting to pay in April. Overall it seemed better to think about putting capital into a property over the next couple of years and maybe hit the capital later when better established.
Difficult topic to get your head around though
:shock:Difficult topic to get your head around though
I know I shouldn't be shocked after 5 years study with interest rolling up, but........
Nearly 20 years back remember the sinking feeling seeing my student loan hit £30k due to interest... seems insignificant now compared to the numbers today and in the future.
Hoping to clear it in the next year......each time I've come close to clearing the balance in one hit have stopped for some reason or the other.... so will just let it run down with monthly payments.
Hoping to clear it in the next year......each time I've come close to clearing the balance in one hit have stopped for some reason or the other.... so will just let it run down with monthly payments.
I just cleared mine this week. It was due to clear naturally in about 5 months time from salary payments but I’d had enough. I called for a settlement figure (only valid till the close of business) and the interest being added daily decided it for me.
The feeling once I put the phone down and cancelled the DD with the bank was immeasurable. I’ve been paying it for 16 years and just received my first salary payment since graduating that the SLC will get nothing from.
It’s effectively the biggest wage rise I’m going to get and the loans itself was the best money I’ve ever invested.
The feeling once I put the phone down and cancelled the DD with the bank was immeasurable. I’ve been paying it for 16 years and just received my first salary payment since graduating that the SLC will get nothing from.
It’s effectively the biggest wage rise I’m going to get and the loans itself was the best money I’ve ever invested.
If you realistically expect to pay if off naturally before the write off point, and you're framing the decision purely in terms of reducing the amount of interest you pay, then getting rid of it now would be optimal.
But you need to weigh that against the benefit of having the money accessible for other purposes. If you paid it off now then lost your job next week, how precarious a position would you be in?
But you need to weigh that against the benefit of having the money accessible for other purposes. If you paid it off now then lost your job next week, how precarious a position would you be in?
NowWatchThisDrive said:
If you realistically expect to pay if off naturally before the write off point, and you're framing the decision purely in terms of reducing the amount of interest you pay, then getting rid of it now would be optimal.
But you need to weigh that against the benefit of having the money accessible for other purposes. If you paid it off now then lost your job next week, how precarious a position would you be in?
Fortunately not a precarious position at all with savings and assets I could sell, probably got 2.5 years of bills only emergency fund not taking into account partners wage.But you need to weigh that against the benefit of having the money accessible for other purposes. If you paid it off now then lost your job next week, how precarious a position would you be in?
Think I'm at that point where if I can afford to and not sacrifice an opportunity by missing the 7.8k then it's a good time to do so.
2024 clean slate and as someone said above, it's the biggest payrise il give myself, along as I'm disciplined with investing that extra and not spending it unnecessarily.
macron said:
sawman said:
Was talking about student loans with my daughter the other day, she has 65k debt after a medical degree, and will be starting to pay in April. Overall it seemed better to think about putting capital into a property over the next couple of years and maybe hit the capital later when better established.
Difficult topic to get your head around though
:shock:Difficult topic to get your head around though
I know I shouldn't be shocked after 5 years study with interest rolling up, but........
Still, she is making £14 an hour for saving peoples lives now, so not a complete waste
sawman said:
Was talking about student loans with my daughter the other day, she has 65k debt after a medical degree, and will be starting to pay in April. Overall it seemed better to think about putting capital into a property over the next couple of years and maybe hit the capital later when better established.
Difficult topic to get your head around though
My daughter can top trump that - £80k+ owed. There's no way that will get paid off. Well not whilst I'm alive as I stumped up enough with the accommodation expenses. Difficult topic to get your head around though
If only we lived in Scotland, or in fact any EU country and she chose to study in Scotland
Althought I think Scotland have caught a cold offering free education, chickens are coming home to roost.If you anticipate to pay it off before it’s written off, then it becomes a very expensive loan and it’s in your interest to pay it off as quickly as you can.
There is an argument for putting your money into a high interest savings account to mitigate the interest you’re paying on the loan, but personally I like the clear headspace of not having any debt lingering over me, as well as having an extra £500 a month in my pocket.
There is an argument for putting your money into a high interest savings account to mitigate the interest you’re paying on the loan, but personally I like the clear headspace of not having any debt lingering over me, as well as having an extra £500 a month in my pocket.
3xAAA said:
If you anticipate to pay it off before it’s written off, then it becomes a very expensive loan and it’s in your interest to pay it off as quickly as you can.
There is an argument for putting your money into a high interest savings account to mitigate the interest you’re paying on the loan, but personally I like the clear headspace of not having any debt lingering over me, as well as having an extra £500 a month in my pocket.
I think this is the clearest summary of where my head is at.There is an argument for putting your money into a high interest savings account to mitigate the interest you’re paying on the loan, but personally I like the clear headspace of not having any debt lingering over me, as well as having an extra £500 a month in my pocket.
Tried to ring yesterday for a settlement but being a government number...they'd closed for Xmas.
Il try again next week
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