Hi all,

I’m 32, female and deciding whether to pay off my UK postgraduate loan now or just let HMRC deductions continue. Working in IT, I don’t own a house but might start looking in a year or two. Don’t have kids but maybe in 4 years.

Numbers:

• Balance: \~£6,300

• Interest: \~6.2%

• Salary: £45k (usually rises at least \~3%/yr)

• Repayment: \~£120/month (or more if I do on call) 

• Savings: £45k

This year so far I repaid £1033 and they added £300 interest on it.

From my own rough maths:

• If I pay it off now → total cost \~£6.3k

• If I do nothing → likely repay at least \~£8.5k over 4–5 years

→ ~£2k saved by clearing it early

Is that a fair assumption, or am I missing anything obvious (e.g. better use of cash, reasons not to overpay PG loans)?

Thanks!

  • It's all down to your personal preferences, safety net (e.g. rich family privilege, inheritance or early inheritance one day, and so on) and risk apatite.

    You may be able to invest, with risk, and get more than 6.2%. You may lose this money or get back less. If you suddenly habe a lifechanging situation or a recession comes, you won't get those early payments back. Will you survive. 

    parent

    Yeah for sure. No rich family, parents don’t even have a good pension themselves and they’re also young and I am not counting on inheritance.

    Yes was thinking of investing the money saved each month somewhere. Already have a few grand in one Vanguard index fund, could possibly diversify. Some money in premium bonds too. Might just yolo it.

    parent root

    Cool. But it's all about your own risk apatite. Nothing stopping you paying it down with part of your monthly excess and investing the rest in a convination of high and low risk places

    parent root

  • Yeah, I’d pay it off. The interest is well above the base rate.

    Pay it off and then put the money you would be putting into repayments into savings.

    parent

  • The loan isn’t huge compared to your savings (where are these savings? What interest rate are you getting?)

    I’d probably pay it off and put the repayment money into savings instead.

    parent

    Just checked and one of my savings account is at 1% interest rate, so pathetic haha

    parent root

    Eeep!! Get on Moneysavingexpert and take a look at their best savings accounts. You could put £20K of that in an easy access isa for tax free interest.

    £6.3K savings earning 1% interest is not great when you have £6.3k debt growing by 6.3% each year.

    parent root

    Thank you for this! moneysavingsexpert has been great, just opened a new savings account.

    parent root

  • If you don't need 6.3k in the next 6-12 months I'd pay it off. The interest is 6.2% and you aren't making that in savings interest. You're not that likely to make it in investments either (although investments should be a 5 year horizon not 12 months anyway)

    Also the freedom of just being rid of the loan is nice. You can always stick that 120 repayment into savings now rather than just spend it if you don't need the cash. Some banks such as nationwide or first direct will give 6% interest on monthly regular savers.

    parent

  • Yes definitely as you have 45k in savings. No brainer, you are paying more back than the interest they are charging per year.

    parent

  • No advice about whether you should, but as someone who just cleared tbe last 1k of mine, two main tips if you do decide to pay it off:

    • Do it on the day you get your payslip so they can calculate the most accurate figure so you don't accidentally overpay. This is what they told me to do after giving me a settlement figure.

    • Be prepared for delays which mean continued payments come out. I paid mine off two months ago and it's still being taken out of my pay so I have to call up and claim the refund each month. Apparently HMRC can take up to a month to tell your employer it's paid off. In my case my employer is also shit at processing anything, luckily I have just left and told my new employer I have no student loan so no further payments as of next month. It's just annoying having to chase a refund.

    parent

    Thanks! Just a question, when you say ‘after giving me a settlement figure’ what do you mean by that? How come you talked to them, rather than just used the online portal to pay the reminder?

    parent root

    If memory serves they recommend you speak to them to pay in full so they can check you're paying the right amount. So if you've just been paid, for example, and your account doesn't reflect whatever was taken from your most recent pay, you could end up overpaying if you don't speak to them beforehand.

    Just copying this straight from their website so that I don't misquote anything:

    Pay your loan off in full You can contact the Student Loans Company to find out:

    • the total amount you owe (this is called the ‘settlement amount’)
    • the date you need to pay by (this is called the ‘settlement date’)

    You’ll need your customer reference number (CRN) and your latest payslip (if you’re employed.)

    Once you know the total you owe, you can pay by debit card over the phone, bank transfer or cheque.

    If you do not pay the settlement amount by the settlement date, you’ll need to contact SLC again. This is because the amount you owe might have changed. You’ll only need to provide any recent payslips or calculations since you last called.

    parent root

  • Every day you don’t pay it off you’re losing money (interest earned vs interest charged)

    parent

  • You should pay it unless you can put the cash somewhere it can make more than 6.2%, which you likely can't. So yes, pay it.

    parent

    You can invest and likely best 6% by a long way

    parent root

    If OP is asking such basic questions they aren't ready for that, and more likely than not can't beat 6% anyway unless they have a highish risk appetite. 

    parent root