[Closed] Inflation's over 5%, worth paying off the student loan early now?

So, let me get this straight. You have the money in the bank to pay it off, yet have nothing better to spend it on.

Or am I confused?

EDIT: or did you mean you'll take out a high street loan to pay it off?

So, let me get this straight. You have the money in the bank to pay it off, yet have nothing better to spend it on.

Pretty much, got a bit saved up, thinking of selling the MG, some inheritance, and missus is paying off her credit card so not much chance of any epic hollidays this year or next. So have about half the cash in ISA's and could probably muster up the other half before April.

Pre or post 1998?

Being debt free is always a nice place to be.

On the one hand I'll be £200+/month better off without it. On the other hand I'll be another 3 years saving up the same ammount again for a house deposit, which might not be a bad thing in the current market

That's a decent long weekend away biking EVERY month.

Do it!

What interest are you paying, what interest are you earning?

Post 1998 (2004-2008)

That's a decent long weekend away biking EVERY month.

Do it!

Conversely, it's an epic £18k, 6 month bender somewhere hot with a chairlift.............

In my view student loans just aren't worth paying off early. The interest rate is not huge and I'd prefer to have the saved up cash even if just as an emergency fund.

Times are uncertain

If you find yourself out of work, the loan payments will stop and you'll have savings
It's not really like a loan

I'd keep the loan going

Current interest rate on post 1998 loans is 1.5%. It's set at Bank of England base rate + 1% when that figure is lower than inflation

In times of inflation the value of the outstanding loan depreciates. So if you leave it long enough it's actual worth will be less. Let it run.

What interest are you paying, what interest are you earning?

At the moment it's 1.5% interest on the SL.

And no one seems to know how the interest rate is calculated.

SL website says "it's complicated" (and doesn't tell you)
Guardian says RPI or BoE base rate +1, whichever is lower.
And somewhere on the SLC website I'm sure it mentioned RPI or 1% over the highest high street bank loan?

And what are you earning?

It explains all about the interest rate [url= http://www.moneysavingexpert.com/students/student-loans-repay ]here[/url]

And what are you earning?

It explains all about the interest rate here

ahhh, so it'll (probably) be 1.5% again next year

Now I've got a big pile of cash in my pocket that I'd written off in my head, time for some [s]coke and hookers[/s] bikes and hollidays, the rest I'll waste, thanks STW!

Jeez - what interest are you earning?

It's a personal thing. usually it's better to get rid of debt if you can afford it as it reduces your liabilities. Interest rates will go up at some point so getting rid of loans now is a good idea (the high rpi doesn't erode the value of the loan unless wage inflation goes up too)

You might want to think about your earning power. Is your wage likely to go up soon in your career path? if yes I'd wait and pay off when you have more cash.

If not then I think it depends on how close you are to buying a house. If close I'd keep the loan so you have a deposit. If not get rid of it - it will be factored into your mortgage affordability anyway at a bigger multiple than its value.

HTH 😉

Oh and get a good hooker 😉

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HTH

That's a bit like begining with "I'm not racist but............", you know when typing it that you've offered no conclusion!

If not get rid of it - it will be factored into your mortgage affordability anyway at a bigger multiple than its value.

Not so for student loans, they'll factor in the repayments but the actual size of the loan doesn't matter.

I had a mate who paid his off early then regretted it when it came to house deposits and weddings. Personally I have let mine run and it'll be over next payday, a mere 10 years after graduation (7 years of that paying at a decent rate not just scraping the surface as I was the first few years) - woohoo!

I would repay the loan as soon as possible. If there was "normal inflation" here it would be better to keep the loan as its real value would be falling...However the sad truth is inflation here is COST inflation NOT wage inflation and the real value of debt is high.

Conversely, it's an epic £18k, 6 month bender somewhere hot with a chairlift

I like your thinking but minus the chairlift otherwise you'll just get fat and slow 😉

The factoring in the repayment was what I meant. But cause its then multiplied up the impact is bigger.

I'd get rid - all or part. I think that helps 🙂

so your paying 1.5% on the loan and a decent savings account can get you over 3% interest on your savings. correct me if im wrong but you are making money on the loan, why would you want to repay it?

But if the repayment is only 200 pounds a month, that's 2400 a year. If the bank is working on something like 3x salary it'll reduce the amount available to borrow by something like 7.2k.

So you could spend the 18k paying off the loan, have no deposit and be able to borrow 7.2k more

Or you keep the loan, have 18k deposit and be able to borrow 7.2k less.

Runaway inflation is great if you have a lot of capital outstanding and the BOE is hesitant to raise interest rates. QE and inflation are the governments way of making everybody in credit feel pain of solving their debt crisis rather than just those (the banks) that caused the pain.

I think ultimately it depends what you are going to do with the money if you dont pay it off.

If you are going to leave it in an account where you can earn more than 1.5% interest then it makes sense at the moment to no pay it off.
If you are going to spend it on a house deposit then maybe it is better to have the cash than to pay off the loan, as it is unlikely to affect the mortgage repayment as much as the better rate for the larger deposit.

HOWEVER if you are going to just spend the money on crap then from a financial point of view id say youre best just paying it off.

All just in my opinion of course!

Ebygom - that's what I mean. Not saying its net benefit but Rather you Only need 11k in this example to be in just as good position as now so might be better to get rid (long term)

I don't think I'm helping, but then this is stw 😉

Banks were just a factor in causing the pain..they leant as much money as possible cos thats how they make profits.
What people haven't fully woken up to is that the crisis was really caused by regulators and governments failing to account for how much debt was really being created!
The UK and US happily stood by for years pumping up our property market bubbles. The crisis we are now seeing develop are national ones not just commercial banks lending running ammok.
The European Bank crisis has taken off due to Greek (and others!)government bond holdings straining banks balance sheets rather than private lending. It is a convenient political side step to simply blame banks. I remember Gordon Brown instantly changing the subject to naughty bankers every time he was asked to comment on the Uk political expenses scandal.

Slight thread hijack.
For those of us who graduated circa 2003 when do we get ours written off? Is it after 25 years or as someone suggested above at age 65?

If the first year of taking a loan was between 1998 - 2005 they get written off at 65

what about them starting in 93, originally written off when 40, now?

50 unless you were over a certain age when you took them out

Slight thread hijack.
For those of us who graduated circa 2003 when do we get ours written off? Is it after 25 years or as someone suggested above at age 65?

I graduated in '04 and it's 65.

The first student loans were 25 years, then it went up as they inflated the size of the loan.

so your paying 1.5% on the loan and a decent savings account can get you over 3% interest on your savings. correct me if im wrong but you are making money on the loan, why would you want to repay it?

I was paniking based on the inforamtion given when I was 'sold' the loan that it would always be only slightly above inflation and cheeper than a high street loan, less interest than a savings account etc. Inflation at 5.2% and savings accounts at ~3% it would be better to pay it off. But if it's staying ~1.5% then it's better the other way, capish?

Just for a bit of balance... (ish) My loan ('94) actually decreased in value one year even without me paying a single month!