It will be a long time before the difference between the interest rates will amount to anything significant but, yes, I agree that it would be sensible not to pay off a low interest loan until she is asked to pay it off. She is paying 3.3% interest on the loan and savings accounts will earn six-point-something percent. If she keeps the loan and the savings, she will be incharge of the money and will be in a stronger financial position than if she pays off part of the loan. She will also earn a couple of hundred pounds or so each year from the differnce between the interest rates.

Some people, however, do not like to owe money and prefer, purely for piece of mind, to reduce their debts to a minimum.

My daughter (currently working and resident in Switzerland) has a £12000 student loan gathering approx £400 interest each year. Currently she is below the mandatory payment salary level and therefore is not compulsory required to start to pay off the loan. She has savings of some 8000 and my thoughts on this are that she should open a savings account in the UK with a high interest rate to outstrip the interest on the SL. If she regularly puts money into the account it should eventually outstrip the SL and therefore pay off the load with interest left over. OMD