This is good news for a lot of old students

[Adam]

Your student loans are shrinking (http://www.moneysavingexpert.com/loans/student-loans-repay)

Not me but I found the how and why kinda interesting and then thought a lot might be effected here as we are generally the right age group (twenty-thirty-somethings).

[QueenAdrock]

Looks like that's for Brits only?

My interest right now is at 6.8%. My brother's (from 2004) was around 3%. It just keeps getting higher here in the States...then again, I haven't looked to reconsolidate yet. Maybe rates have gone down since 2006.

[na§tee]

yeah, brits only.
scottish students don't have to pay tuition fees at all. when i graduated we had to pay something called a graduate endowment fee (around £2,000) which went into the student hardship fund for hardup students... anyway, last year the snp abolished the graduate endowment fee so no more £2k when you graduate.

i got loans to cover my cost of living. the interest is very low, yeah. it's not something i worry about and it doesn't have an impact on my credit rating. we are pretty lucky. we can complain about having to even have them in the first place but the grant days are long gone and will never be coming back. i briefly thought about paying a bit extra per month to pay it off quicker but it's actually not that cost effective - as that article proves.

[QueenAdrock]

I just looked at my loans, I owe about $25,000 right now. With interest and everything, if I decide to pay it off over 20 years, it would end up being $46,000. That's $21,000 more than what I owed! I told my friend I was going to pay off my loans ASAP because I don't want to have to deal with it, and she told me the cost of inflation would actually save me money if I did 20 years, and if I paid it off now I'd be using "more expensive" money to do so, so I should wait and just pay it off gradually. However, this is coming from someone who couldn't afford $2.60 for gas because she budgeted so poorly one month, so I'm not sure how I should take her financial advice (though she is in the financial industry, so sometimes I wonder if she knows what she's talking about).

Any economic geniuses here who can tell me if she's full of it or not?

[Adam]

Any economic geniuses here who can tell me if she's full of it or not?

I'm so anal about these type of things, I'll spend an hour looking around the web how to save £10 if I need to buy or subscribe to something. I'm an accountant in another life - I know it.

But read the article as some of it applies to you. Basically, your friend is right assuming the most common predictions of the economy are correct, although its a kinda over complicated model to work on which means taking an interest in the economy for the rest of your life, but remember no-one important predicted this recession so what do the the experts know?

But paying off the most expensive debt first is key. If that is your only debt an easy way to decide if to pay off or not is to check the savings rate. If the amount you can get in saving interest is higher than what you are paying on your debt then its worth pouring money into savings. But if your debt interest is higher than savings then pay off your debt.

If your debt interest rate is close to inflation then in real terms your debt is neither increasing or decreasing (this is what the article is on about). At times like this, no1 is making any real money and investments get riskier. Safest commodity to pour money in long term is gold but can be poor returns and chance of losing money and this is a long term investment stuff (20+ years). The very safest is government backed banks although these are even smaller returns - a government can still go bust but most of western europe and north america and richer parts of asia (ie where most of us live) are solid enough to not go bust. Basically, without some real fuckups in charge (ie worse than bush, blair) it'd be pretty hard to bust your government when you can actually just print money (exactly what the UK are doing - not sure if the states are?).

So if you've read this far, the most riskier investments are the better returns, the most safest offer very little. But I digress.

If you've a low interest rate on your loan then its very rare worth paying it off now or quicker.

[QueenAdrock]

Damn, good to know. My student loan rate is at 7.25%, which is less than the inflation rate...but either way, it is my only debt that I have so I just want to pay it off as soon as possible. I don't want to have something hanging over my head for 20 damn years, unless I absolutely have to. Just knowing I owe bothers me and can be stressful if I'm ever without a job.

The good news is, I can claim all of my tuition in the next few years in Canada. I didn't make enough money to claim all of my tuition/books/living expenses this year or last year, so they give me a credit that I can use when I DO make enough money. It's pretty sweet. (y)