Repaying student loan as City solicitor

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Matty60
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Should future trainee solicitors/bankers/consultants etc consider paying their student loans in full if they are able to do so? If I was to join a firm with an NQ salary of £120,000, my repayments would be significantly higher overtime compared to average earners. According to the MSE calculator (https://www.moneysavingexpert.com/st...ce-calculator/), I would pay £71,000 after taking out £27,750 (tuition fees) and £13,500 (maintenance loans). I'd pay an extra £30,000 if my earnings were to reach £154,000 within 24 years of leaving uni.

Have I missed something?
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24dean73
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(Original post by Matty60)
Should future trainee solicitors/bankers/consultants etc consider paying their student loans in full if they are able to do so? If I was to join a firm with an NQ salary of £120,000, my repayments would be significantly higher overtime compared to average earners. According to the MSE calculator (https://www.moneysavingexpert.com/st...ce-calculator/), I would pay £71,000 after taking out £27,750 (tuition fees) and £13,500 (maintenance loans). I'd pay an extra £30,000 if my earnings were to reach £154,000 within 24 years of leaving uni.

Have I missed something?
A number of things but mainly the interest and the inflation. The longer it takes to pay something off, the more it will cost.
If you click on the question mark next to 'repayment in today's money' it'll explain it more.
But I don't reproduce the same results you do for £120k NQ salary as you would have paid your loans off in 6yrs so not sure where your 24yrs comes from.
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999tigger
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(Original post by Matty60)
Should future trainee solicitors/bankers/consultants etc consider paying their student loans in full if they are able to do so? If I was to join a firm with an NQ salary of £120,000, my repayments would be significantly higher overtime compared to average earners. According to the MSE calculator (https://www.moneysavingexpert.com/st...ce-calculator/), I would pay £71,000 after taking out £27,750 (tuition fees) and £13,500 (maintenance loans). I'd pay an extra £30,000 if my earnings were to reach £154,000 within 24 years of leaving uni.

Have I missed something?
Nope for the very few that will be high earners early on, then do the Math and choose which path to take. Most people never earn enough to pay it off.
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jacketpotato
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I would say "no". There is a good MSE article on it here: https://www.moneysavingexpert.com/st...-student-loan/

I don't think you should even consider doing this until you've bought a house, maxed out your annual stocks & shares ISA contributions and invested heavily in a pension.

For the following reasons:

- There's no guarantee that you will want to stay in a job with that sort of salary. Most people who join that sort of firm as a trainee or NQ leave before they get to 3 PQE.

- Early in your career, your biggest financial challenge will be buying a property. Because your salary is so high, the biggest obstacle to buying the property you want will be the size of your deposit rather than the size of your salary. You don't want to have overpaid your student loan with money you'd like to have for a house deposit.

- There is an opportunity cost to paying the money on a student loan. Most important, you want to be making the most of pension contributions. On a salary of £120k your marginal tax rate on additional income is 45.2% (40% income tax + 5.2% national insurance). If you put the money into a pension by salary sacrifice that investment is tax free - so effectively an instant 45.2% investment return compared to overpayments on the student loan (which would have to be paid out of your post-tax income).

- You also want to be maxing out your stocks & shares ISA. You can currently invest up to £20k into each year into this. Once money is in a S&S ISA, the investment returns on that are tax free forever.

- Over the long term, stocks & shares investments are expected to return on average 6-7% per year. That's a bit more than the 5.4% you'd pay on a student loan. Though, if for some reason you preferred to let your money sit in a bank account getting almost zero interest for a long period of time, at that point you'd be better off using that money to overpay the student loan.
Last edited by jacketpotato; 3 weeks ago
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