Should I pay off my Plan 1 student loan

It’s a question that is commonly asked. And we’ve answered it many times before, but mainly about Plan 2 student loans. In this video though, Martin Lewis talks purely about Plan 1 loans - for anyone who studied anywhere in the UK between 1998 and 2012, and Scottish and Northern Irish students from 2012 onwards.

[@SteveHasACamera]

Please Martin, could you do a 2023 updated version of this! My interest is at 6.25% 🤢 I’m thinking it might make sense to try and pay off fully, because of crushing interest rates.

[@lucyrayner5163]

I need advice for this query too

[@SteveHasACamera]

@@Blessed-Beautiful Yeah, I agree, it’s at 6.25%!!!!

[@SteveHasACamera]

​@@Blessed-Beautiful I just did it yesterday... in one go 🤢 I wont be 65 for another 15 years, so that's a lot of compounding. It would end up being somethign like 3 times what I originally owe. And because the bank took a day to process, I had to pay an additional £2.75, how nice of the SLC. I was hoping some MSE'er smarter than myself would have said "Better to leave the debt to grow, because you'd only end up paying £X amount before you're 65, and 'Insert some secret government hack here', and you can get out of it entirely!" Meanwhile Joe Biden is cancelling student debt left and right. But considering the government we have, I can't see that happening. Rishi seems to love the feeling of the fabric of our pockets, and isn't planning on taking his hand out any time soon. 😖

[@SteveHasACamera]

@@Blessed-Beautiful yeah, were totally getting squeezed up against the financial ceiling. I’m currently looking at a few 2 year fixes, or even dare I say a 5 year fix, savings account 🤢

[@aislingmoran7762]

My loan doesn’t start gaining interest until I start earning enough to make my first payment. Should I save as much as I can until then? I’m currently on work placement and considering not taking maintenance for final year as I’ve saved up living at home and will work throughout final year. Thoughts?

[@GozieZilla]

One of the most well structured and well presented videos ive seen in a while

[@sjessrabbit9]

Amazing video very clear thank goodness plan 1 is talked about finally!!Please do more like this Martin! You make sense of the scary money world and have learnt more from your tv show and website than in all my years of education put together!!

[@CadyCTSlover]

@Martin, what about now in 2023 where the interest on my student loan is 6.25%, and the base rate shows no signs of coming back down. Would it be better to pay off the loan early in today's conditions?

[@SteveHasACamera]

I really wish MSE would address this issue, and offer solutions. I've been messaging them over socials, but not heard anything. If it helps you make a decision, I just paid mine off in full. It was incredibly painful to do but at 6.25% it made me feel sick, knowing I was gaining £1,000+/year interest. I'm hardly getting 4-5% interest from the bank. It's damn cheeky that SLC raise the interest without telling you. My bank even lets me know if my interest changes.

[@RemnantofValour]

Now that plan 1 interest is 6% and fixed savings accounts are also 6% interest should I start paying off my loan? (I will pay it off eventually on my current wage and don't splurge)

[@halfmanhalfcat1058]

thanks martin. you one of the good guys!

[@tomroberts3851]

Great video, thanks Martin! I'd be very interested to see how much your perspective has changed now that Plan 1 student loans have jumped to 5%. I never really considered paying mine off but now I'm very keen to sell off some investments to pay it off in full!

[@scimitar123]

I'm in exactly the same boat. If you will end up paying it off then surely sooner the better with present interest rates

[@tomroberts3851]

@@scimitar123 I literally paid it off in full yesterday! I'm excited to see a massive pay rise next month :)

[@scimitar123]

@@tomroberts3851 I think I'll be right behind you on that one. The present circumstances aren't discussed in Martin's video (understandably)

[@JasonSmith-dy4rg]

I’m considering paying mine off in full too now it’s at 5% interest. I don’t like the idea of it compounding against me. I still have another 12 years ahead for mine to wiped off.

[@tomroberts3851]

@@JasonSmith-dy4rg I've paid mine off in full now, did it last week 🎉🎉🎉

[@michealmclaughlin429]

this is an oversimplification of inflation.... food price inflation can be vastly different than other forms of inflation... inflation is also relative to different assets or liabilities .... eggs vs fuel might increase prices at different rates

[@eatmycomments]

Agree, inflation is well above the 5% interest my Plan 1 loan currently sits at, but my savings aren't exceeding that interest currently, neither is my wage inflation. The only thing that is, is our outgoings

[@JivanPal]

Great informative content as always - consider adding a drop shadow to your text, though, since sometimes it is difficult to read against the set background.

[@sarahdickinson573]

Amazing advice as always Martin, thank you!

[@Jenthesaint]

I started overpaying my student loan 3 years ago, cleared the balance in November 2019, felt great! We've been overpaying the mortgage (lower interest rate than my student loan) and also ramped up my pension to 10% - diversify your investments folks and get all debt cleared asap. Now when I return to work after maternity leave I won't be losing any money to my stupid student loan which I'll need for childcare costs etc.

[@Marais-cu3vo]

The argument that the interest rate has no real cost is silly, especially in a world where pay rises do not match inflation.

[@Stalast.]

Incredible video. Martin Lewis you're a legend.

[@c4715]

Very helpful as always, thanks.

[@zeea6507]

Finally my student loan is paid off as of June 2022. (graduated 2011, started paying around 2012) I was on plan 1, I got paid bonus 3 years in a row and this has helped massively clearing my £17+k student loan. Finally no more monthly deductions. I feel for those on plan 2, its harder with more money borrowed due to increased fees and costs.

[@vegetabrah1889]

Congrats! That must be a nice feeling. I'm also considering clearing mine, I have around 25k left and it will give me an additional £350 month as I earn around £66k/yr. Although I think investing in a property for myself first is my priority :S

[@AlejandroMartinez-cl4kk]

@@vegetabrah1889 what did you end up doing?

[@lenethh-j8516]

Thanks matey. Top advice.

[@peterduggan5170]

So brilliant. Thank you!!!

[@g0801215]

I wonder if this advice is still valid since both inflation and the Bank of England rate are rising fast.

[@jamest7539]

Mine has gone from 1. 5% to 4. 5% within six months

[@eatmycomments]

That's exactly why I'm watching this video! I paid my masters load off as quickly as I could as the rate was substantial, but I've never touched the Plan 1 loan, but at 5% interest currently I think I will just pay off the remaining balance. Whilst 5% is lower than inflation, I'm not receiving any pay rises in line with inflation and savings accounts at 5% level are generally capped to £250 monthly pay-in's...

[@harmony1307]

Very useful, thank you. I'm dyslexic and process information Better in audio format. So thanks for the videos. Just need to find out when mine wipes. I'm 13 years out of uni now

[@chunkylefunga]

Like any loan it comes down to are you good with money and can you save responsible. Yes savings interest would generate you more money but a lot of people if they decided to save money in the bank to later pay off their student loan, 9/10 people would frequently dip into that saving account negating interests benefits they were trying to save to pay of their loan. For most people I would say just increase your student loan repayments to what you had intend to save money into your savings account to later pay off the loan.

[@23phaedrus]

What if you need access to your savings? Currently you only get 1.4% which is less than the 1.75%...?

[@Jenthesaint]

True, you don't get a lot of good interest rates on savings accounts that are easy access. Likewise mortgage rates are nowhere near 4 or 5%... most of us plan 1 graduates who own their own homes will have fixed term mortgages where the rate is much lower, mine is only 1.59%. It totally made sense for me to overpay my lian and get it gone before turning 30! Totally felt amazing by the way, 100% recommend it.

[@samhoey8247]

i feel really gutted because i thought studying in NI would save me so much more money than in england. im now realising that because the loans are written off i really dont think theyll ebd up paying back much more than i will :/

[@TheQuiQuestion]

Interesting how since this video was made, student loan interest is now higher than both saving rates and mortgage rates.

[@Siggerou1993]

Hi there! A very important question about paying off student loan early or not. In my case, I only have postgraduate student loan (currently around 11K, interest is 5.4%, paying 6% above threshold) and I want to achieve F.I.R.E withing the next 20 years, by starting to invest 50% of my net salary (my emergency fund is done and atm I can save about 70% of net salary, which is not too high, unfortunately, due to lack of a specialised degree) My question is, will I have to pay back 9% of the earnings I will have from my investments each year? (planning on investing in index funds, REITS and own some real estate in the Netherlands). - If so, I think it makes sense for me to first pay the loan in full (it will take 10-12 months), because otherwise I might end up paying 3-4 times more over the 30 years. - If not, then investing that money ASAP and start this compound interest going (or saving for a down payment so I can buy real estate, which potentially has a great ROI) might be a better option, and I can stick to my minimum payments. Many thanks!

[@diogofernandes4920]

I think the best thing to do is to pay as quickly as you can, in my opinion, I am a student to, if you prolongate the 9 per cent for 20 years you would have paid more than the original debt

[@Gracie193rrf]

Funny how in 3 years the rate of interest is now 5% 😅😅😅😅 think you need to do an update to this video and for those who have only taken out a PG loan

[@Anteater23]

But savings interest is also 5% or more for fixed rate accounts.

[@J-K-AG]

Run for prime minster please

[@AATHFC]

If my mortgage is 1.4% and I'm on a Plan 1 student loan that I still owe 10k would it not be sensible to add this debt to my mortgage enabling me to not pay 9% of my salary above 18k each month?. That money could then be put into a savings account

[@ShadowJJG]

No because mortgages will always have a higher interest rate than inflation. You may be riding an initial low fixed rate now but that won't last forever, whether that means the base rate increasing in future or the fees you pay when you remortgage.

[@flipperfish7]

What a dreadful waste of money i did then

[@bimgim5958]

Unlimited asians bruh

[@DAHQatar]

He says don’t overpay so you keep in paying usury.

[@freddiemoses467]

Agreed. I'm paying mine off as quick as I can with overpayments. Gets that chain from around my neck

[@kazbaz8645]

I would of said no unless you have money to spare. It's written off after 30 years.

[@kristaylor7119]

Not if you have arrears.

[@diogofernandes4920]

but if you keep paying 9 per cent of your money, you after 30 years have paid more than if you save and pay instantly, right?

[@sidkings]

I believe Plan 2 is written off after 30 years. Plan 1, which Martin is talking about, is written off at age 65 (or retirement age)

[@imnottellingyoumyname3050]

Terrible advice. There are so many variables in peoples circumstances which means this cannot be considered good, blanket advice.

[@chrisharrison763]

Sad state of affairs when Martin feels the need to explain the concept of inflation to university graduates.

[@DAHQatar]

Mortgage = mortal engagement = death grip

[@DAHQatar]

The only “hideous” form of lending is lending money that is quantitive easing printing out of thin air.

[@DAHQatar]

Buy gold; never buy diamonds.

[@Professional_Youtube_Commenter]

are people really so thick that you had to explain interest and inflation rate with a the 100 trolley explanation? This is how you would explain inflation to 8 year olds.

[@shaunmotivation7509]

Tit

[@lessandra602]

And what?