Pay Off Student Loan?

RobMunfy

RobMunfy

RobMunfy

Associate
Joined
18 Mar 2007
Posts
291
Hey,

I'm not sure whether I'm drawing the right conclusions from this, so if someone could help me clarify that would be great.

After reading this I believe it's saying that I shouldn't pay off my loan.

However, here's my situation:

- I have £9k worth of student debt which I am due to start paying off this month (through pay packet)
- I have ~£9k in an ISA earning interest at 2.1%
- I have no other debts, or anything that I particularly need (the 9k is savings)
- My first installment in the loan was taken out in September 07, which I guess means it is getting interest at 4.8% (from the table in the link above)

So surely this means that it would be best for my to pay off the loan in one lump sum, rather than having 9% of my wage taken every month?
 
So he is saying you earn more from svings than what the loan costs in interest, seems to me your still paying the intrest for the loan anyway :confused:

Personally I don't like having debt I would pay it off but thats just me doesn't work for everyone I just like to know I could pick up and live in a field and not have anyone hounding me for any money.
 
dannycivic02 said:
So he is saying you earn more from svings than what the loan costs in interest, seems to me your still paying the intrest for the loan anyway :confused:

Personally I don't like having debt I would pay it off but thats just me doesn't work for everyone I just like to know I could pick up and live in a field and not have anyone hounding me for any money.
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I try to never stay in debt for more than a month. Works for me
 
The student loan isn't a conventional "loan" though. You don't get harassed for it, it gets wiped out after a set time, and you don't have to pay any of it back until you reach a certain pay threshold.

I'm finishing Uni next year and I plan to leave my loan well alone and let it pay itself back.
 
I have had my student loan since i graduated in 2004. This year im aiming to pay it off finally. I prefer to just get rid of any debt.
 
I'd forget about it and concentrate on your savings. You could live in a field I guess, if you gave up your job the SLC would not chase you for it.
 
No no no!

1) This years SLC rate is 1.5% and this years best ISAs are paying 3%. So if you paid off your £9,000 loan it would cost you £135 per year (9000*0.015) all else being equal.

2) It's a nice cushion if you ever lose your job

3) If you ever want to buy a car or something and need to use finance the absolute best you'll do is probably about 8-10%. If you kept your savings (whether they belong to the SLC or not!) you can use it as a much cheaper way of borrowing.

Paying off student loans is lunacy; as long as you're sensible and don't have money sitting in 0.2% savings accounts it never makes sense to do it. Make sure you're on the best possible ISA deal and switch every year and you can't go wrong.
 
sigma said:
I'd forget about it and concentrate on your savings.
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This. As others have said, it's not a loan you will ever get chased for, it'll only ever come out as a small percentage of your pay. You'll effectively be losing £9k and getting it back in small monthly installments.
 
Ste said:
1) This years SLC rate is 1.5% and this years best ISAs are paying 3%. So if you paid off your £9,000 loan it would cost you £135 per year (9000*0.015) all else being equal.
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But that is for people taking out loans this year? Mine is at 4.8% - or am I very wrong? :confused:
 
I just wrote that without reading the site, did you not read it either? It's totally irrational to pay it off.. :)
 
which system are you on?

It's best not to pay it off as you can use than 9k as a deposit.

Unless you are in a situation where you can get your hands on a deposit and banks will give you a mortgage, but the bills push you to close to be comfortable. At which point that £100-£200 a month suddenly looks like it needs to be cleared before you can proceed. But that doesn't affect many people.
 
Unless you are in a situation where you can get your hands on a deposit and banks will give you a mortgage, but the bills push you to close to be comfortable. At which point that £100-£200 a month suddenly looks like it needs to be cleared before you can proceed. But that doesn't affect many people.
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Even in this scenario it pays to suppliment your income by drip feeding the equivalent of what the SLC are taking off you from your savings :)
 
By the time im finished Uni my student loan will have made me around £2000 in interest and I should have over £24k in my ISA. There is no way im paying it off for now as it is the cheapest loan I will ever get.

I have worked to pay my way through uni so every penny of my loan has gone straight into my savings accounts.

Should be a nice start on a deposit for a house/flat when I come out of uni.
 
AcidHell2 said:
which system are you on?
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What do you mean system? It's a loan from the English SLC.

No, it's 1.5% according to that site. Unless it's out of date or something; if it was 4.8% paying it off would be a reasonable option.
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This is the bit I don't really understand. My loan was paid in installments each year and it was first taken out in September 07...

The table on that site says interest is 4.8% on loans taken out between 1 Sept 07 to 31 Aug 08...?
 
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