Should I pay off my student loan ASAP?

Hi everyone,

I'm on Plan 2 and have around £30k at 7.6% interest.

I've found a great job with a salary of around £200k pre tax.

Weekly repayments are significant and I have a family to look after with a need to look for a larger property.

Can anybody help me determine whether it'd be better for me to save and pay the whole loan off and then focus on saving for my family home, or should I let the student loan sit there in the background while I focus on saving the remaining money post tax for the house?

Thank you in advance.

Reply 1

DataVenia

Volunteer Team, Clearing and Applications Advisor

Original post by Willyfrankie

For a Plan 2 loan, you'll need to pay 9% of everything over £27,295. So, with an income of £200,000, you'll be paying back about £15,500 per year - meaning that the remaining loan will be paid off in about 2 years and 3 months anyway (allowing for 7.6% interest). Your question ("Should I pay off my student loan ASAP?") implies that you're thinking of making voluntary payments above the £15,000 (ish) per year you're obliged to pay anyway. Is that right?

And you're trying to work out whether it's more sensible financially to use any spare income to pay off the student loan (for which you're being charged 7.6% per year) or to save it towards a house (where those savings will likely earn about 2.5% per year). That's simple. Pay-off the loan early - you'll potentially save yourself thousands in interest.

However, this will potentially delay your move to a larger property. So if you're in a hurry to move, you might be better off leaving the student loan alone, and setting aside any spare income towards a new property - knowing that your paying for that quicker move by paying more interest on your student loan. It all comes down to when you need to larger property by.