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Original poster

Should I pay off my student loan in full?

82 replies

Coolbreezee · 07/11/2024 19:11

Currently on maternity leave.
I have £21k left on my student loan. £40k in the bank.
I plan to return to work in 12 months time.
My salary will be in the ballpark of £35k rising to £50k in the next couple of years.
Interest on my loan is approx 7%.

If I pay off my student loan I will be completely debt free. I will need to use some of my savings to get through maternity leave but will be in a good position to save when I get back to work.

Im just not sure what the best option as there are too many unknowns. I feel like with my salary I will be one of those people who ends up paying the loan off plus a LOT of interest. Any advice would be greatly appreciated.

OP posts:
upat4am · 07/11/2024 20:01

And yes sorry, student loan is not the same as a normal mortgage or loan because it gets written off and your repayments depend on your earnings.

I personally wouldn't pay it off, I would see it as an education tax where you pay more as you earn more, but it should always be affordable repayments.

Depending on your plans for your savings (like my term or short term) get them in a high interest savings account/stocks & shares ISA and start making money from them.

BamboleoQueen · 07/11/2024 20:01

Nahhh i wouldn't. It's not a normal loan in that it doesn't impact your credit rating and you don't have to pay it if you're not earning etc.

I would only say to pay off a student loan if you're on track to pay it off with your earnings long before the write off date.

I've got an £8k loan, 15 years left to roll on it, earn < the threshold but have £50k in savings. No chance I'm paying it!

beachmum1 · 07/11/2024 20:01

My husband paid his off as it was never going to get written off due to earnings. Was better to pay it now than pay in 10 years with more interest!

NoOneKnowsWhoYouAre · 07/11/2024 19:58

mrsnjw · 07/11/2024 19:31

@NoOneKnowsWhoYouAre it's 10% of what you earn over a certain amount not the whole wage. He explained it really well.

I know. It's still a lot.

Original poster
Coolbreezee · 07/11/2024 19:57

I think I would ultimately pay off all the debt plus interest as it's only 20k not 80k. Also I will need to work full time once I finish maternity as i need to support my DD, so I can be confident I will be paying it back from my salary.

@Anotherparkingthread I'm fast approaching 30. 😭

OP posts:
upat4am · 07/11/2024 19:56

Pippa246 · 07/11/2024 19:12

As my old dad used to say ….No point in having savings if you have debt….unless debt is interest free. I’d pay it off.

Respectfully to your dad, this is not good financial advice.

It depends on the interest rates you're paying on your debt vs the interest you could get if you saved or invested the money.

If you can earn more in interest than you're paying by saving/investing, it's better to do that.

It also depends if your quality of life is being impacted by loan repayments, while you have a chunk of money sitting in the bank.

You need to look at the numbers for your own financial situation and ideally talk to a financial adviser, but to give an idea you can get up to 5.17% on an instant access ISA at the moment (with Trading212) and you'll likely get more if you're willing to invest.

I have a stocks & shares ISA with Vanguard which has returned 25% over the last couple of years. DD's, also with Vanguard, has returned 24% in the last 18 months. We both have the Lifestrategy 100 equity fund, which is high risk, but we plan to invest over a long time and ride out any market dips.

ByQuaintAzureWasp · 07/11/2024 19:55

Yes

Anotherparkingthread · 07/11/2024 19:48

How old are you op?

jimmyhill · 07/11/2024 19:47

Pippa246 · 07/11/2024 19:12

As my old dad used to say ….No point in having savings if you have debt….unless debt is interest free. I’d pay it off.

Unless it's a debt that doesn't have to be paid down when you're earning below a certain level and gets written off after a certain number of years.

Student loans are not exactly like a mortgage or a credit card

whatatodoaboutnothing · 07/11/2024 19:46

Ask this on the money saving expert forum
It depends on your loan type

MissyPants · 07/11/2024 19:46

No because it gets written off. Mine will never be paid back in full.

MumOfOneAllAlone · 07/11/2024 19:45

Coolbreezee · 07/11/2024 19:42

(currently living with my dad whilst on mat leave as escaped DV). I will struggle to find a place to rent on a single salary and need to maximise my salary in the short term. I'm very low maintenance and not a big spender. I can live off £500 a month for the next year. It really depends on the housing market, if I'm renting it makes sense to pay it off but if I buy then it may be better to keep the debt (although 20k doesn't really put a debt in the deposit. I could save that in a year when I go back to work)

Honestly op, I'd save it and then try to save another 20k in a year and that's your deposit on a flat somewhere x

Original poster
Coolbreezee · 07/11/2024 19:42

(currently living with my dad whilst on mat leave as escaped DV). I will struggle to find a place to rent on a single salary and need to maximise my salary in the short term. I'm very low maintenance and not a big spender. I can live off £500 a month for the next year. It really depends on the housing market, if I'm renting it makes sense to pay it off but if I buy then it may be better to keep the debt (although 20k doesn't really put a debt in the deposit. I could save that in a year when I go back to work)

OP posts:
Nitgel · 07/11/2024 19:42

definitely do not use your money to pay this loan off. You would only pay off a small amount monthly anyway when you earn.

MidnightPatrol · 07/11/2024 19:40

If you don’t own a house, keep the money for a house deposit. It will be hard to save the same.

Put it in index trackers, in a S&S ISA. £20k this year, £20k in April.

mrsnjw · 07/11/2024 19:31

@NoOneKnowsWhoYouAre it's 10% of what you earn over a certain amount not the whole wage. He explained it really well.

MissHalloween · 07/11/2024 19:31

I’d keep the lump sum for if/when a house deposit is needed.

MumOfOneAllAlone · 07/11/2024 19:29

Coolbreezee · 07/11/2024 19:22

I will need a house deposit at some point but as a single mum living in London that is a long way off.

I would definitely not pay it off then and would instead keep saving hard for a house

mrsnjw · 07/11/2024 19:29

Oh Martin Lewis had this on his programme this week. Try and find it and watch. The underlying message I took away was to leave the debt as it typically gets wiped after 40 years. Defo worth watching.

Bigcat25 · 07/11/2024 19:29

If you are on your own, it depends on home much savings you need to cover the gap with mat leave, or for when childcare starts. You could pay a chunk and put some in high interest savings.

NoOneKnowsWhoYouAre · 07/11/2024 19:25

I'd pay it off. The thought of paying 10% of my earnings over the next few decades would mean I would (and did) pay it off ASAP.

user1494050295 · 07/11/2024 19:22

This reply has been deleted

This has been deleted by MNHQ for breaking our Talk Guidelines.

You can go on his site and put in your circumstances and question into a section on student loans to give you guidance. And yes he does. When giving a talk at work he mentioned a girl emailed him with a similar situation to your s about paying it off or not.

Original poster
Coolbreezee · 07/11/2024 19:22

I will need a house deposit at some point but as a single mum living in London that is a long way off.

OP posts:
Happygogoat · 07/11/2024 19:21

Unless you need the money for a house deposit, pay it off. It’s not like other debt in that it doesn’t affect your credit score so in that sense it can be left, but 7% is a lot. It just continues to eat in to your pay and any bonuses like an additional tax.

it depends on your mindset. If you’re okay to ignore how much interest you are paying, see it as a tax for however long, then keep your bolstered savings. It will come down quicker once you’re on 50k+.

A lot to be said for being “debt free” but equally it will not hold you back like credit card debt would so your savings could be better used covering some of your mat leave and potential emergency fund?

Twogirlsonecup · 07/11/2024 19:20

This reply has been deleted

This has been deleted by MNHQ for breaking our Talk Guidelines.