Paying off some student loan - confused...
Discussion
My daughter has two student loans:
Graduate Plan 2 - About £50k at 9% of salary over £27,295.
Post Graduate - About £15k at 6% of salary over £21,000.
She has £15k cash so is considering paying off the post graduate loan. The thinking is that by paying off the post grad loan will mean no more post grad payments. Whereas paying £15k off the plan 2 loan will make no difference whatsoever to her payments as the monthly payments are based on 9% of salary NOT 9% of outstanding loan amount.
Is this good thinking or confused? TIA
Graduate Plan 2 - About £50k at 9% of salary over £27,295.
Post Graduate - About £15k at 6% of salary over £21,000.
She has £15k cash so is considering paying off the post graduate loan. The thinking is that by paying off the post grad loan will mean no more post grad payments. Whereas paying £15k off the plan 2 loan will make no difference whatsoever to her payments as the monthly payments are based on 9% of salary NOT 9% of outstanding loan amount.
Is this good thinking or confused? TIA
Scarletpimpofnel said:
My daughter has two student loans:
Graduate Plan 2 - About £50k at 9% of salary over £27,295.
Post Graduate - About £15k at 6% of salary over £21,000.
She has £15k cash so is considering paying off the post graduate loan. The thinking is that by paying off the post grad loan will mean no more post grad payments. Whereas paying £15k off the plan 2 loan will make no difference whatsoever to her payments as the monthly payments are based on 9% of salary NOT 9% of outstanding loan amount.
Is this good thinking or confused? TIA
pay down the debt with the higher interest rate first = lower overall cost.Graduate Plan 2 - About £50k at 9% of salary over £27,295.
Post Graduate - About £15k at 6% of salary over £21,000.
She has £15k cash so is considering paying off the post graduate loan. The thinking is that by paying off the post grad loan will mean no more post grad payments. Whereas paying £15k off the plan 2 loan will make no difference whatsoever to her payments as the monthly payments are based on 9% of salary NOT 9% of outstanding loan amount.
Is this good thinking or confused? TIA
ChocolateFrog said:
Is she definitely going to pay the loan off assuming no additional payments?
Only worth paying it down if you're confident it will be paid off before it's written off.
100% this!Only worth paying it down if you're confident it will be paid off before it's written off.
Maybe things have changed, or maybe OP's daughter is /will be in a high paid job, but am sure i have seen in the past money experts saying that there's no point in paying more off as there's every liklihood that it won't get paid in it's entireity...
Scarletpimpofnel said:
My daughter has two student loans:
Graduate Plan 2 - About £50k at 9% of salary over £27,295.
Post Graduate - About £15k at 6% of salary over £21,000.
She has £15k cash so is considering paying off the post graduate loan. The thinking is that by paying off the post grad loan will mean no more post grad payments. Whereas paying £15k off the plan 2 loan will make no difference whatsoever to her payments as the monthly payments are based on 9% of salary NOT 9% of outstanding loan amount.
Is this good thinking or confused? TIA
My daighter was in same loan setup , so about a year or so after her post grad I paid off that loan , on same rational . OK thats easy for her, as I was paying but the same rational was in place . I'm really not sure she would have done herself if I had just given her the money and let her choose . Graduate Plan 2 - About £50k at 9% of salary over £27,295.
Post Graduate - About £15k at 6% of salary over £21,000.
She has £15k cash so is considering paying off the post graduate loan. The thinking is that by paying off the post grad loan will mean no more post grad payments. Whereas paying £15k off the plan 2 loan will make no difference whatsoever to her payments as the monthly payments are based on 9% of salary NOT 9% of outstanding loan amount.
Is this good thinking or confused? TIA
ChocolateFrog said:
Is she definitely going to pay the loan off assuming no additional payments?
Only worth paying it down if you're confident it will be paid off before it's written off.
I've used this approach and the likelihood it will be written off before it's paid off. I expect my daughter will want a family in the future and then either stop work or go part time which will stop any loan repayments. When she last looked over £75k was owed! Only worth paying it down if you're confident it will be paid off before it's written off.
If she bought £15k worth of Premium Bonds...
The current 4.4% Prize Fund could be expected to payout £660 pa. (in theory, probably less as they say you need to hold the full £50k worth to get close to the average)
If she currently earns £32,000 pa, her post grad repayment would be £660 pa... (6% of £11k)
Does she feel lucky?
The current 4.4% Prize Fund could be expected to payout £660 pa. (in theory, probably less as they say you need to hold the full £50k worth to get close to the average)
If she currently earns £32,000 pa, her post grad repayment would be £660 pa... (6% of £11k)
Does she feel lucky?
Using this site - https://www.student-loan-calculator.co.uk/ - it says if she pays off her Post Grad Student Loan in the normal way through salary then she'll pay a total of £21,534 (£17,577 in today's money) by 2037. To pay it off now is £13,500 ish.
This assumes her salary grows year on year, she doesn't have kids etc. In reality she is likely to be paying something into it until 2047.
This assumes her salary grows year on year, she doesn't have kids etc. In reality she is likely to be paying something into it until 2047.
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