Student Loan repayment of over £1,000 a month. WWYD

[geordiegoose]

Dd has secured herself an exceptionally well paid job. She’s a lawyer in London. Her current student debt is £70k.

This year her salary is £170k. This means she will pay roughly £13k in a student loan repayments. The current interest rate is 7.7% on her debt.

Now it might make sense to repay the student loan now and save interest and future payments. But what if she decides in two years time that she doesn’t want to work in such a high pressured career? What about savings? What about saving a flat deposit?

For those @BudsBeginingSpringinSight @AskingForAFriend12 asking what type of law, this webpage might help:

https://www.chambersstudent.co.uk/law-firms/law-firm-salaries-compared

@Mayflower282 thank you, I assume the big salaries are dependent on the law firm? Or type of law

Question
my daughter has come into some inheritance around £30,000 she will go to uni to study law her career path might be that of a high achiever
should we use that money to pay her course fees and thus not have these high interest student loans (plan 5)

OP, in likelihood on that salary, your DD is going to struggle to have time to spend that salary outside of rent. She can probably save for both at the same time. A less stressful career may well appeal later, but moving in house with the type of skills and CV she will be accruing means she will easily be able to obtain a comfortable wage (not quite US/magic circle levels, but very comfortable nonetheless).

A US firm in the City.

Even if she decides to take a step down - will still be on circa 100 k in an in house role. She should pay it off ASAP.

You’re probably better off starting your own thread.
But I’d say no. Definitely not up front. At the very least put the money in a high interest savings account for the duration of the course and see how the land lies at the end of it.

I would strongly recommend paying it off as soon as possible.

Firstly, as a recent uni graduate she isn't used to spending it yet, and won’t feel deprived or like she is scrimping and saving if she sets herself a lower budget to accommodate big payments.

Secondly, at that interest rate, paying it off quickly (say within 2 years) will benefit her dramatically in terms of interest.

Thirdly, doing that kind of work, she probably won’t have time to spend the money, and so (building on from point 1) if she gets in good habits from the start, she won’t fritter the money away, and will be in a good position to save large amounts for a house deposit etc once she has paid off the loan.

Finally, if she decides she doesn’t want to do this career in 2 years time, how much better will it be to be able to make that decision knowing there is no student loan debt to still pay off should she switch careers. Even if she does decide to throw it in, she may decide to stick it out for another 6-12 months and save all the money she used to pay on the loan as a buffer or Emergency Fund or travel fund.

She has done exceptionally well. At that level I would be encouraging her to put as much away in a pension as possible. She’ll be benefiting from employer match and tax relief of 40%. She might not fancy that in her 20s but her future self will thank her as that money will have time to grow and compound over many years.

The student loan rates are pretty punitive at higher rates so trying to get it down and overpaying a bit would probably be sensible but I’d also want to be saving and investing as well to build up for a deposit.

£170k take home with 5% would be £8100, 10% pension would be £7711 pcm, 15% 7321

Many grads will be on take-home of around £2-2.5k before loans so even with hefty pension and student loan payments she’ll have more than double what many are living on. But, there will also be high expectations of her clothes etc so she should budget for a professional wardrobe.

damn that take home is tragic

She'd be better off putting money towards a deposit on a house and taking the hit on the interest than paying rent for longer.

You'd think! 🤣