I took out around £28k in student loans, mostly for tuition. I’m 24, working as an accountant making £55k, and that should go up over time.
I crunched the numbers, and it seemed smart to pay off the loan. I have a mortgage at 4.2%, and my student loan interest was at 7.3% (plan 2).
After inheriting some money, I decided to pay off the student loan completely. Now I’m wondering if that was the best move… maybe I should have invested it instead?
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You took a bold step, and if clearing that debt brings you peace of mind, then it’s totally worth it. Sometimes it’s not all about the numbers.
Honestly, just having that debt off your mind can feel great, so that’s a win right there.
Logically, since your income is already high, you’d likely have paid it back anyway, and at a 7.3% rate, it would’ve been tough to earn a higher, consistent return on that amount elsewhere. Seems like a smart choice for both peace of mind and finances.
@Dallas
Sure, investments might’ve done well, but it’s not a sure thing. Plus, with no loans hanging over you, you’re free to make new choices without worry.
Dare said:
@Dallas
Sure, investments might’ve done well, but it’s not a sure thing. Plus, with no loans hanging over you, you’re free to make new choices without worry.
You could always put more into a pension now and get some tax relief, right? Might be a good balance!
Dare said:
@Dallas
Sure, investments might’ve done well, but it’s not a sure thing. Plus, with no loans hanging over you, you’re free to make new choices without worry.
Investing can pay off long-term, but at 24, freeing up your income and ditching that 7.3% interest probably makes more sense. Less risk too.
Dare said:
@Dallas
Sure, investments might’ve done well, but it’s not a sure thing. Plus, with no loans hanging over you, you’re free to make new choices without worry.
You’d have to bank on a solid bull run for a decade to beat that loan rate. Playing it safe might have been smart.
With interest rates like that, it’s hard to make a profit investing. Clearing the loan first sounds like a safe choice, especially with your mortgage already in place.
Haru said:
With interest rates like that, it’s hard to make a profit investing. Clearing the loan first sounds like a safe choice, especially with your mortgage already in place.
Right … folks forget loans start racking up interest from day one, and 7% isn’t small.
@Skyler
Yep, unless you never pay it off. Then it’s just hanging around as a constant payroll deduction.
Haru said:
With interest rates like that, it’s hard to make a profit investing. Clearing the loan first sounds like a safe choice, especially with your mortgage already in place.
Would’ve maybe done better if it was in stocks, but who knows how the market will be down the road.
Haru said:
With interest rates like that, it’s hard to make a profit investing. Clearing the loan first sounds like a safe choice, especially with your mortgage already in place.
Student loan interest does fluctuate. If you end up with a lower interest rate, paying it all off now might not be as beneficial long-term.
@Dayton
From what I see, £28k is manageable, especially if you’re already on £55k. If you’re driven, you’d pay it off soon enough.
Dallas said:
@Dayton
From what I see, £28k is manageable, especially if you’re already on £55k. If you’re driven, you’d pay it off soon enough.
Math isn’t always the strongest here!
@Dayton
As someone who went the same route, you’re probably in good shape to pay it off given your career track.
It’s tough to find a 7% return every year for nearly 30 years, which is what you’d need if you hadn’t paid it off.
And you can still start putting money aside for other investments now that you aren’t paying back the loan. It’s a win, as long as you keep making smart choices!
@Payton
> It’s tough to find a 7% return every year
People investing in global stocks probably did this over the long haul.
Kelby said:
@Payton
> It’s tough to find a 7% return every year
People investing in global stocks probably did this over the long haul.
S&P 500 averaged around 7.8% over 28 years, but that’s without factoring in taxes you’d pay on any gains.
Archer said:
@Kelby
The cash you use to pay the debt is worth less each year.
OP’s loan would also lose value in real terms over time, so inflation affects both sides equally.