Should I pay off my student loan in full?

[Coolbreezee]

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.

Hi email martin Lewis at money saving expert. He can advise

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.

What is your housing situation? Do you need a lump sum at some point for a house deposit?

I think martin lewis would say not to - something about the loan repayments not being real debt or something

Are you a homeowner? I'd use the money for my home or keep it in savings tbh x

It’s such a hard call because it depends on future earnings. When will it be written off? If you paid it you’d have about 20K in the bank - how many months’ of emergency savings does that represent?

I’m also on mat leave and actually paid mine off today (yikes!) as I learnt it won’t be written off till I’m 65 so I’ll have to pay it off eventually and as you know, interest rates are high right now

Yours will probably be a newer loan though so written off sooner.

Go to money saving expert and read what Martin Lewis has to say on this. You may not be be better off paying the loan off, depending on your circumstances. Set up a spreadsheet and do the maths on how much you will end up paying back overall.

Mine is written off after 30 years, and as I’ve worked part time for years, I haven’t been paying it consistently. I don’t count it as debt really.

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?

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

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.

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.

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.

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.

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

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

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

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.

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

(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

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

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

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

How old are you op?