Like many, I left university with some debt. I’m probably one of the lucky ones though, as it wasn’t a huge amount, compared with the average figures that students are accumulating these days, plus all of my debt was in student loans – no overdrafts, credit cards etc.
I’ve been wondering recently whether I should be paying the loan off, so that it’s not lying around waiting to be repaid at a later date, but common sense would say that as student loans are some of the cheapest form of debt, and because they can easily be deferred until you’re earning over a certain level, then it makes sense to keep deferring repayment.
If you’re in the fortunate position of being able to afford the repayments, yet do not earn enough to have to pay back the loan, then ideally you should find some sort of savings account (Cash ISA?) that pays more interest than the interest rate of the loan (the rate of inflation, 2-3%). That way, you can build up your savings, to eventually pay off the loan, and the amount you pay back will effectively be less, because the interest you’ll have earned should be greater than the interest you pay on the loan. Does that make sense? The savings to be made won’t be huge, so you might consider it better to get rid of the debt so it’s not hanging over you than trying to make a quid.
By the way, it probably worth mentioning that I come under the rules for those starting courses before 1998 – I believe students starting after that date may have different rules for repayment.
- HSBC SmartSave: New Micro-Savings App (December 5, 2016)
- 10 Simple Money Savers You Shouldn’t Ignore (June 18, 2016)
- HSBC Launches “Connected Money” App (May 9, 2018)
- goHenry’s New Features Aim To Make Saving A Habit For Young People (January 14, 2015)
- Plum, AI Facebook Chatbot For Saving & Investment (February 22, 2017)