Is it worth paying off your student loans early? UK

[ShowMeTheMoney]

Hello all,

I've been living in Japan for around 15 years and in that time I've only paid the required amount towards my UK student loans. This worked out well for me over the years as the interest amount was low enough that I managed to reduce my total loan amount by around 25% while only making the minimum payments. However, I only managed to reduce my loan by around £100 from 22 to 23. After that, the minimum amount I have been paying since April 2023 is much less than the interest that is added on each month and so my loan has increased £700 since April 2023.

It made sense for me to not pay off my loans early when the interest was less than 1% but now that it's sitting at 6.25% the idea of paying it off and forgetting about it seems more appealing.

Due to when I attended university, my loans won't get written off until I'm 65, which will be close to another 30 years for me.

With all this in mind, should I try and pay off my students loans as soon as possible or hold the line and continuing paying the minimum while watching the total amount rise, in the hopes that it will all be reduced to zero when I'm 65? I currently hold enough in my UK savings account that I could pay off a large chunk today, but in all honestly I'd rather put that money towards my investment accounts or towards a Masters degree.

[sutebayashi]

Paying back a loan at 6.25% interest for zero risk seems like an attractive plan to me.

Not so at 1%.

I’m no interest rate trader but I’m thinking interest rates are going to remain somewhat elevated.

[beanhead]

I would pay it off.
In general, it makes sense to pay off all non-mortgage loans as quickly as you can.
There may be exceptions, but this is not one of them.

[Gareth]

No no no don’t pay it off.

Martin Lewis explains why much better than I could

https://www.moneysavingexpert.com/stude ... ans-repay/

I actually paid some off in 2018 and 2019 and I regret it now.

[ShowMeTheMoney]

I guess for me, my concern would be that I continue to pay off the minimum and watch as the interest make the total amount own climb to the same amount as when I first took it out over 20 year ago. And then they change the amount I need to pay, requiring me to pay substantially more than if I just paid it off now.

[sutebayashi]

Martin Lewis explains why much better than I could

https://www.moneysavingexpert.com/stude ... ans-repay/

TL; but I did skim through it

One assumption in the article is that one is earning wages in the same currency as the loan.

Something else to think about.

[Gareth]

Use the money to pay for your Masters degree, get a higher paying salary and pay more back in your monthly payments if you want to pay it off faster.

If you ever have a change in circumstances, you will definitely regret having paid it off, especially if it were in a year where the interest rate had dropped back down.

[Nancy]

This all looks good on paper, but I would personally pay them off as soon as possible. Who wants to have this worry at the back of your mind that you need to pay off a debt. I know that this is probably old school, but paying off this type of debt is very freeing I think, and could increase your happiness factor by 150%.

[Nancy]

I just made up this 150% happiness statistic. Also though, it might help your credit rating.

[beanhead]

Martin Lewis explains why much better than I could

https://www.moneysavingexpert.com/stude ... ans-repay/

TL; but I did skim through it

One assumption in the article is that one is earning wages in the same currency as the loan.

Yeah. He says They have no 'real cost' of borrowing
This is because they are set by using the rate of inflation. In the UK, not Japan.
All the time inflation is lower here, this is not to the benefit of someone earning in Japan and paying off the loan in the UK.

Waiting until the loan is written off is the other argument. Not one I agree with.