Student loan almost paid off: What to do with the spare cash?


When I first started work as a journalist at This is Money in 2010, I remember an overwhelming sensation: I have so much to learn about personal finance.

I was in my early 20s, fresh out of a postgraduate course in journalism, ready and eager to get stuck in.

However, it wasn’t easy writing about investments, pensions, savings, mortgages and everything in between, when I didn’t have any of my own or even a drip of financial education down the line.

It had been a battle to start a career in journalism from scratch, especially in the aftermath of the financial crisis. I had little in the way of money after four years of full-time education, and even more importantly, no industry contacts.

Free man: With my student loan almost done and dusted, I can make plans of what to do with my surplus pay

Free man: With my student loan almost done and dusted, I can make plans of what to do with my surplus pay

I sofa surfed with an array of friends I had met at university in London, took unpaid work experience and hoped and prayed for a foot in the door somewhere. 

Although an unruly teenager, I always knew I wanted to be a writer and that passion made sure I knuckled down to obtain the grades and degree needed to help me on my way – no matter what the cost of that higher education might be. 

It was a debt can to be kicked down the road, not to be thought about while going through university applications.  

Luckily, that passion helped me bag some work experience at This is Money and I’ve never looked back.

I can also remember the sinking feeling of having a small student loan repayment docked from my wages for the first time – and how that didn’t cover the interest that month for my £20,000-plus loan. Would I ever repay it full? Did it even matter? 

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Fast forward to some 16 years after I started university at 18, and I’ve had a letter from the Student Loans Company. 

I am almost there. I can see the light at the end of the student loan tunnel, the boulder being dragged along by my neck has been replaced by a pebble, and I need to take action to prevent myself paying back too much.

It felt far more triumphant than I thought it would.  

Now, I am fortunate. I went to university in the last year tuition fees were capped at £1,200 per annum, and because of my household circumstances at the time, I didn’t even have to pay the full amount. 

Yet, there were also living costs to pay and borrow for and I somehow still came out with that amount to pay back.

Additionally, I should point out here that I enjoyed every moment at university – I learnt plenty, made friends for life, and obtained skills that only come by being completely independent of parents and family, thrown in at the deep end. It also helped me bag my dream profession.

I’ve never tried to think about it too much as a debt, more of a tax that is deducted from my pay every month – and I believe it is important for youngsters heading to get a degree today to think along those lines, rather than seeing a huge total sum burn into their retinas, putting them off going.

But I would argue that is easier said than done in beginning. As the years pass and the amount gets chipped away, it does become like another tax though – for me, in the third line below tax and NI. 

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But as my wages have headed higher, so have the repayments – and increasingly, I daydream about what could be done with that extra cash.

Investing, overpaying the mortgage or, in the last 12 months, covering some of the cost of my daughter’s incredibly expensive two days at nursery. Any boost in pay is always useful. 

With the loan burden soon to end, I am left with that beautiful decision of what to do with the not-so-insignificant three figure amount soon to head into my bank account each month, rather than to the SLC.

Easy call: Building an investment pot for my daughter's future has been one of the most astute moves I've made in recent years

Easy call: Building an investment pot for my daughter’s future has been one of the most astute moves I’ve made in recent years

It hasn’t been too difficult making the call. It will all be diverted into a stocks and shares Isa opened to save for my daughter Brooke when she was born.

Back at the start of 2019, I wrote about how I had opened a Vanguard Lifestrategy 100 per cent equity fund in a tax-free wrapper with the view of her avoiding a large student debt burden, or to use for other useful things like learning to drive or even towards a home.

We started with a £1,000 pot, and my wife and I put in £75 in each month, while also tucking any birthday or Christmas cash into it. It’s had a 35 per cent return at the time of writing and is hurtling towards a five figure sum already.

The diverted student loan savings will help turbo boost it further and I’m excited to see it grow into a pot we can be proud of. 

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This fund spreads money around the world at a very low cost, as it is a passive tracker fund.

This is the kind of fund that often gets mentioned as an ideal investment portfolio building block and the Lifestrategy range offers the chance to mix shares and bonds depending on how much risk you want to take. 

My daughter has a long investing horizon, so I’m happy to go all into shares for her.

If I had an early tip for early-20s Lee starting out in personal finance? It would be to fiddle about with a compound interest calculator tool.

I can now fritter away hours doing just that and it’ll be part of any financial wisdom I pass onto Brooke as she grows up.

That calculator was the boot up the backside I needed to start saving for her. It’s a vital tool for tackling financial procrastination. 

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