Ask us anything: Should I overpay my student loan or invest?

0:02Damo, what are you doing? well while we're waiting for our next podcast episode i'm sat here reading this magazine that's on the table about wallpaper very very quaint very old school you know what i never realized how much i missed those little rip-off sniffy perfume things that are in the middle but yeah i think um magazines are making a comeback mate in a world where everything feels digital and i'm just dying to put down a screen all of the time i quite enjoy sitting down with a magazine and having a read of it it's almost like you know buying a vinyl record yeah feels more real more tangible the music's more authentic it's richer yeah that's right which kind of leads us into today's sponsor one of the best finance publications in the uk is money week they're in print and online so you can get that nice magazine feeling in your hands money week sift and summarize the biggest stories in finance and then add their own journalism on top it means no more endless scrolling if you want to give money week a try you can get six issues in print and on the app absolutely free by visiting moneyweek.com forward slash money.

1:01After your trial, you'll save an extra five pound on a quarterly subscription exclusive to Making Money listeners. That's moneyweek.com forward slash money. And there's a link in the description for you. Welcome to our minute in a galaxy. I wanted to give a different feel to it either.

1:26Alfie sent us a message. Hi guys, really enjoy your podcast. Thank you, smart guy. It has really given me a sense of control over my money and future, which I didn't have before. So thanks for that. I know you have touched upon it before, but I'd love to know your opinion on student debt and investing. I currently sit at 45k pounds in debt, standard student loan arrangement for my study years, which is charged out at 7.1 % interest. I work at a top restructuring firm for the last four years and I'm a chartered accountant, so I'm fortunate enough to have a good salary and a bonus each year, but my debt continues to grow as the interest outweighs payments.

2:03How can the government or student finance expect anyone to pay this debt off if someone in a solid financial position is not even reducing theirs? Do you think I should focus on trying to take chunks off this debt using my yearly bonus or should i continue with my early investing savings plans i understand this is not financial advice smart guy but would appreciate your thoughts on it right i mean just to just to caveat this like we graduated a long time ago and it was we were on the student plan one i think at the time which was very different the interest rate was super cheap um the advice was always you know don't overpay it there's no point the question about how do they expect people to ever pay this back?

2:44I think the answer is they don't. I think most people will end up getting the debt wiped and paying back a lot. The university and education system in the UK has gone from, in quite a quick amount of time, from something that supports people from poor backgrounds getting a higher education to now just absolutely straddling people from poor backgrounds with shed loads of debt in order to get a degree. I'm glad that this, that Alfie's come out and has a good job. But there's a lot of people that come out, go into bog standard jobs and have just got 40k a debt that's growing at 7%. It's a bit outrageous.

3:17You see it getting taken off your, if you get the original one, you get it taken off your salary. Yeah, that's it. And at 7%, if this was a loan and it was at 7%, like a traditional unsecured loan, not a student loan, where it's wiped at the end of a period of time, I would be saying it makes sense to potentially overpay the loan than invest because you'll get a better return from clearing the loan than you will potentially from investing you know if interest rates keep going up you might get a better return on cash but for this it because the debt's wiped at the end if i don't know what the best answer is to be honest you're going to need to use a calculator to work out whether you should be overpaying it or not he stands the risk of that he actually will pay it off within the time period so it makes sense to hammer it down so he pays less over the time, but I wouldn't know without crunching the numbers.

4:05I mean, I thought that they take out your salary and it's only if you're self-employed, you can - You can overpay though. Yeah, you can overpay. You can call up and make overpayments, but yeah, they'll be taking it off his salary. And one thing that I've seen is that they're thinking of pushing the age of when it's wiped up by five years. I was about to say that. So they could just keep moving the goalpost. It's completely changed. Like the whole getting a student loan now is not as beneficial as it was back in our day. I don't think getting a degree full stop is very beneficial, unless it's a technical skill that you get end up with at the end i think it's quite an expensive course for for what it is um i mean everyone's entitled to their opinion but i just think if i was asked would i do uni again at three times the cost with four times the interest rate i'd probably like i presented that 20k debt i had two percent you thinking about putting your kid in uni you think it's gonna it's a decision you make closer to the time yeah i mean if he wants to go he can go that's up to him yeah i would probably encourage him more to go traveling do you know i mean i I could say go traveling for a year.

5:01And then when you come back, work in a business, you know, rather than go to uni necessarily. I think it took me about eight years to pay off my first student loan. Yeah. And then I did an MBA. So now I've got another student loan, which I'm paying off now. But, you know, it's almost cyclical. I think the student, like our parents, no one could go to uni. So they told all of us, you've got to go to uni because you'll get a great job. So we all went to uni. And then now it's like, well, don't go uni, just get an apprenticeship or something. And I think it just kind of rotates and maybe we'll be tailored or not all our kids or probably wouldn't waste your time going to uni.

5:33Don't go to uni. Yeah, but anyway, that's not the question. I'm sure there's a calculator online where you plug in your amounts and it'll tell you whether it's worth overpaying or not. I don't want to say off the top of my head because the interest rate is quite high, but there's this point of it gets wiped at the end. Yeah. So yeah, in answer to this question, that's how they expect anyone to pay their debt. It gets wiped off. They don't expect you. They don't expect you, but if you've got loads of money, they expect you to pay it off. Well, I think I've worked out that if my son did the exact same degree that I did and came out and earned like 40k a year consistently, he would pay back three or four times what I did for the exact same course.

6:10It's pretty ridiculous. They've just bent students over. Yeah, at the worst time in your life when you really don't have money. Yeah, you're straggling the generation with debt like that. So they hit me with, then they hit you with a credit card as well, just on top, a little icing on the cake. And a parking fine. And a parking fine.

6:30Okay, next question's for you, Tomein. Yeah, star of the show. Yeah, I'm the sidekick, as people keep saying. Lovely. Adam got in touch on YouTube. So what kind of work do you do in crypto? And how do you see crypto blockchain space in the coming years in terms of uses? Good question, Adam. Probably a good time for me to announce that I've actually started a new career. Not because I don't believe in crypto. You hate it. I hate it. This is all a scam just to get you all in. No, I'm pumped up to everyone and I'm retiring. I work in a venture capital fund now. Venture Rock, cool company, America, Dubai, investing in companies, venture capital, but I'm still involved in crypto.

7:13I do have a crypto, a small crypto fund I manage, which I won't name here because that might be seen as advertising. And I also still work, I'm an ambassador for CoinStore Exchange, which is where I used to work. CoinStore is like a big crypto exchange and they list new crypto projects. My job was, is my ambassador role is to find good crypto projects or the new ones like Dogecoin when it first came out or the new up and coming ones and convince them to come onto CoinStore crypto exchange for a small fee. Do they pay to go on the exchange? They do. It's not a small fee, it's a big fee. It's like, yeah, 30 grand upwards.

7:49Okay. But yeah, they pay to come on the exchange and once they're on the exchange, every normal people my mom like my friends everyone can just go online and buy their token it's a bit like um working for nasdaq or the footsie and then putting companies on there but they move through the ranks don't they so they might get listed on a smaller exchange like coin store and then if they do really well they could move up to say a coinbase or that coin store is like a medium medium one you've got yeah coin store and then coinbase and binance are the biggest biggest two in the industry yeah so once they go on there they're like the big league but binance might be looking at coin store going, oh, this coin's doing well on there, bring it on to - So coin store is a bit like a launch pad.

8:24So where crypto projects go to start, they grow, they get more users, more people buy the coin, and then they move on hopefully to financial Coinbase eventually. But that costs a lot more money. Why did you leave, I suppose? Well, the crypto market crashed, as everyone is aware. To be honest, my missus was giving me a lot of headache. She's like, we have a kid now, you need to get a more stable job. I'm like, yeah, but next year we'll be millionaires. And she's like, we can't wait for next year. We have a kid this year. So yeah, I wanted something a bit more stable, venture capital, get out loads of businesses and I still get to do a little bit of crypto on the side.

8:58So what do you do with the VC fund? So we look for projects which are companies in series A. So they're generating around one to three million pounds per annum and they've already had some investment in the past. And essentially what we're looking for is to inject a bit like Dragon's Den. We're trying to inject some capital into them for like a partnership of their company, some equity. So now you're out of it, you can say what you want. Where do you think crypto is going? Straight underground. No, I don't think it's a bubble. I think it's here to stay. A few reasons. You know what the governments see?

9:34You hear about the central digital CBDC, central bank digital currency. That's like all these governments. Bank of England were talking about it with us, weren't they? Exactly. They all want to digitalize, have a digital pound, digital dollar. So I think all of that, when countries and governments are getting involved, that's going to push the price of Bitcoin and other cryptocurrencies up. I've seen BlackRock are trying to do the spot ETF, which I think people are getting pretty excited about, which is where you can hold Bitcoin. Like you could buy spot gold tracker funds or funds where they actually buy physical Bitcoin or gold and then you can store it inside of a tax wrapper.

10:08Exactly. So that looks good. the thing about the the digital bank the banking digital currencies when the bank of england spoke about it they want we asked them if they would pay interest on it like other banks get from them and they were like no and i think if they pay interest on it at the bank rate then that's an attractive thing otherwise it's just a fully tracked token isn't it the problem with about it is that everyone feels that you're going to lose all your freedom and that the government will say see everything you spend your money on yeah which kind of makes things like bitcoin a bit more attractive because they're meant to be kind of autonomous or kind of - Yeah.

10:42I think you could still see where the money's been spent, but it's a bit harder and it's not a centralized government that's looking at it. The government's not in control. Yeah. Watching and in control of your assets. But I mean, with all these, I think the future of crypto is more towards NFTs and like AI and gaming and all these things, but there's so many, the main part about NFTs is about ownership. So if we wanted to buy a house together, we could both have buy it 50-50 and now we both have an NFT, which shows I own 50 % of this house, same with art, same with anything. So for things like mortgages, ownership, I think crypto and NFTs have a future.

11:15It's really finding - That's more like the blockchain technology, right? It's the blockchain technology, exactly. So it's really finding like the best use cases, even for things like, what do you call it when you're, supply routes, supply routes and like the most efficient way to deliver items. Blockchain is really good for that and also for like security. So it has a lot of uses, it's just crypto finding its feet and where it's actually going to be useful rather than just now everyone's like, maybe it can make me rich. We actually need to find like uses for the crypto. But I think it's here to stay.

11:42If it wasn't the banks, when all the governments would be looking at digital currency. And I think maybe five, 10 years, we all have digital currency and it's a bit more normal to us. And once it, like the internet, once everyone's like, what's the internet? Now everyone uses it. It's like an adoption curve. Adoption curve. So right now we're really at the bottom of the curve. I think in 10 years, everyone's going to know what Bitcoin is and everyone's going to understand digital money. It's just the learning curve and the journey. But obviously this is not financial advice. I wouldn't advise anyone to copy what I did because I've made a lot and I've lost a lot.

12:13But overall, I'm in the, which one's a good one? The black, the red, the black, the black is a good one. What do you want to ask us or future guests? Email us at makingmoneyatkindling.media or just slide into the DMs. This isn't advice. whilst we discuss individual examples, we can't give you personal financial advice. What we can do is offer a perspective and discuss the issues. I'm Damo. I'm T. And we'll be back next week answering some more of your questions.