Student Loan Repayment question

I've found myself in the very fortunate position where I believe I'm better off paying down my Student Loan than just ignoring it and treating it like a perpetual graduate tax. I was reading the Money Saving Expert guide on repaying student loans and there was just one sentence that I don't totally understand why what is said is true.

It is part of a response to the FAQ :

Q: Would clearing the student loan make it easier for me to get a mortgage?

A: ... I'll assume you're not considering borrowing elsewhere to clear it [the Student Loan]– that's not a good idea at any time ...

Now, this whole article seems very reasonable to me and explains very well the niche circumstances under which it makes sense to start paying off a Student Loan. As a result, when it says that it's "not a good idea at any time", I don't believe they're being hyperbolic and I'm taking the intended meaning to be that it's literally never a good idea. That's what I don't understand though. I think that I am in a position where I would benefit from exactly this.

If I borrowed £15,000 over 5 years at 3.3% on a Personal Loan it would cost a little under £1300 in interest. In the meantime my Student Loan interest is currently 5.4% and the interest compounds for as long as I'm paying the Student Loan. I'm looking at paying this off so the interest figure on the Student Loan becomes relevant. If I pump £15,000 straight into my Student Loan then, after accounting for required repayments on the Personal Loan, I can increase my monthly contributions to a point where my student loan is paid off in 8-10 years.

I've assumed I can get a 3.3% loan on the basis that I have disposable income, a mortgage (which is fixed for the next 3.5 years still - I can't just put all my money into that yet), a good credit history with evidence of handling debt nearing a credit limit well and the best market rates available are at 2.8% - so 3.3% is not the best but not the worst.

I graduated in August 2017 so having this cleared in the next 8-10 years means I get rid of the graduate tax well before my 30 year timer is up. Using the calculator in the linked article I'm likely to end up paying £150k+ if I did nothing to pay it down beyond the 9% taken each month. The same calculator tells me that after adjusting for predicted inflation this £150k would have the buying power of £85k in todays terms. This is significantly more than the current value of the Student Loan (~£60k). My 9% contribution doesn't quite cover the interest accrued each month but is very close to doing so. I would expect by this that within the next 2 years of so the scale will just about tip in the other direction if I do nothing. Either way the value of the loan isn't changing in any meaningful way right now. By putting £15,000 into it today this will change and seems likely to save me tens of thousands of pounds (In todays terms) in the long run. The only expense in doing so seems to be £1300 of interest on a Personal Loan. Given the option to spend £1300 today in exchange for £20k+ tomorrow I tend to think that I should take it.

So, my question: Where am I going wrong or what have I missed? MSE tells me that this is always a bad idea but I'm simply not seeing why.

Posted Dec 1, 2019, 1:20 PM UTC

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