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Original poster

Paying off student loan

12 replies

Tomatojuiceandvodka · 18/12/2023 16:38

Is it worth paying off my student loan?

Everyone always says no, don’t they?

I’ve come into some money via an inheritance. It’s a lot but it isn’t life changing in that I’ll still have to work. Five digits.

I earn about 55k, am in my mid thirties and have 10k left to pay off my student loan. Currently paying 250-300 a month back.

I have earmarked some of the inheritance to pay down my mortgage to shorten the term but I’d like some of the inheritance to giver a material difference in available money now.

I pay a car loan of 330/month with 20k outstanding so I was thinking of paying that off and paying off my student loan. This would see me have 500-600 pounds per month extra in my pocket for things like savings and having a holiday each year.

but I’m torn because everyone always says never pay off your student loan. Because of the plan my loan is on, it won’t be written off until 65 and I so I will definitely pay it off over time if I don’t do a lump sum payment.

OP posts:
Clariana · 18/12/2023 16:42

Not really enough information to comment, but it sounds as though you are on track to pay off your loan in full before it expires. If that is the case then I would say pay it now to avoid the extra interest, but only if you are going to pay it off in full in the next few years.

I say this because the reason usually given for not paying it off is that often you will not need to repay it in full, so to do so voluntarily is just giving money away. But it depends on your circumstances.

Daisies12 · 18/12/2023 16:46

I agree with PP, given you have so little left and you will pay it off anyway, I'd clear it now. The advice to not pay it off is usually for those with much higher student loan debt, or who are closer to the point of it being written off.

GeneCity · 18/12/2023 22:38

What are the interest rates on your car, mortgage, and student loan?

qpdlurgak · 19/12/2023 08:04

Are you plan 1? If so and it's likely you'll continue to earn that amount then yes it could well be worth it, but only if you're set up in every other way eg home, pension etc. I'm mid 30s plan 1, on track to pay off in 2026, if I had a lump sum now I would consider it, although my mortgage is to be reviewed in 2025 and is higher interest so more likely to prioritise that tbh.

Blessedbethefruitz · 19/12/2023 08:10

I did this last year when I had 9k left because it would have been paid off within 10 years. I had the money spare from a small business I did evenings and weekends. Dp is in finance and said it makes sense. Never regretted it :)

Original poster
Tomatojuiceandvodka · 19/12/2023 08:49

Student loan is 6%. Car loan is 4%.

mortgage is split over two loans. One at 2.2 and the second half about to go up to 5 in April. About 100k on each half of the loan

OP posts:
Overthebow · 19/12/2023 11:40

Yes I’d pay it off. I think people were saying not to when interest rates on student loans were really low, but at 6% interest it would be worth paying it off and having the money to put in to savings instead.

GeneCity · 19/12/2023 12:35

Yes, I'd definitely pay off your student loan in that case.

GeneCity · 19/12/2023 12:36

And the rest off the part of your mortgage with the highest interest rate.

user1497207191 · 19/12/2023 12:53

The general rule is that if you're likely to pay it off anyway due to your earnings levels and years left, it's better to pay it off as soon as you can to stop the interest accruing.

That assumes the interest rate accruing on the student loan is higher than the interest rate you could earn on the same money in a savings account, or higher than the interest rate you're paying on loans, CC debt or mortgage etc.

So first step is to find out what interest rate is being charged on the student loan.

qpdlurgak · 19/12/2023 12:58

The general rule is that if you're likely to pay it off anyway due to your earnings levels and years left, it's better to pay it off as soon as you can to stop the interest accruing.

That's not strictly true, the difference between student debt and other kinds of debt is that it's not traditional debt as we know it, if the OP was to lose her job tomorrow she would have no expectation to pay student loans and would potentially now be £10k down, student loans don't need to be prioritised above all else and I would likely ensure I had a good rainy day fund set aside before prioritising student loan, it really should be the last thing you do when everything else is settled.

Hearmenow23 · 19/12/2023 13:02

Yes pay it off. The interest is now so high its disgusting. Think of all that extra cash every month!

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