Should I Pay Off My Student Loan? 2008/09 article discussion

phlash

cdl911....

Deductions for employees are on a PAYE basis yes, as this covers most people.

In your case, presumably your dividends are greater than £15,000 per annum, which forms part of your yearly income. The fact this is not a wage does not mean it does not form part of your income. Therefore you still need to repay, it just means you now have to manage it yourself because you dont have the ease of PAYE.

See the page below.

http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,3867326&_dad=portal&_schema=PORTAL

BlaEm

I think I'm right in thinking that HMRC hold on to the student loan deductions for an entire year, then pay it off to SLC in one chunk - so in other words, even though you are making payments, the balance isn't decreasing, so you are getting charged cumulative interest on top of the interest you are being charged each month..

I have been making voluntary overpayments to make sure I at least cover the interest charge since I started work (I graduated 2008 and have just received my first loan-deducting payslip!), having 'phoned them up to ask what my average interest charge has been. This means that each month I am not getting charged cumulative interest on last months interest, as I have already made a payment directly to them to cover this...?

I have also been calling them to make sure they have received my direct debits - no random lost payments for me, so far.

Have I had a good idea here, or have I completely misunderstood how it works? I could do with the extra spending money if it's not helping me out

Chris2685

BlaEm, if you read the thread you will see that most people say you should not overpay at all...

atypical

BlaEm wrote: »

I think I'm right in thinking that HMRC hold on to the student loan deductions for an entire year, then pay it off to SLC in one chunk - so in other words, even though you are making payments, the balance isn't decreasing, so you are getting charged cumulative interest on top of the interest you are being charged each month.

I'm not sure if that's true and I'd be surprised if it is but regardless, you'd be better off putting those overpayments in a savings account paying over 1.5% (the current interest rate).

Have you read this?

argood

BlaEm wrote: »

I think I'm right in thinking that HMRC hold on to the student loan deductions for an entire year, then pay it off to SLC in one chunk - so in other words, even though you are making payments, the balance isn't decreasing, so you are getting charged cumulative interest on top of the interest you are being charged each month..

I have been making voluntary overpayments to make sure I at least cover the interest charge since I started work (I graduated 2008 and have just received my first loan-deducting payslip!), having 'phoned them up to ask what my average interest charge has been. This means that each month I am not getting charged cumulative interest on last months interest, as I have already made a payment directly to them to cover this...?

I have also been calling them to make sure they have received my direct debits - no random lost payments for me, so far.

Have I had a good idea here, or have I completely misunderstood how it works? I could do with the extra spending money if it's not helping me out

That's really not the case at all.

Your employer deducts the money from your wage each month and passes it to HMRC at the end of the tax year. HMRC then inform SLC of your deductions over the past tax year and SLC update your account with the relevant info, including readjusting your interest.

So you aren't getting charged excess interest at all.

BlaEm

Thanks - they're not being cheeky, after all, then!

rb10

BlaEm wrote: »

Thanks - they're not being cheeky, after all, then!

No, it's all quite fair. You just won't see the effect of your payments on https://www.studentloanrepayment.co.uk until it's updated after the end of each tax year. That's the only place where HMRC keeping the payments until April makes a difference.

sly_dog_jonah

When SLC get the lump sum from HMRC for your PAYE repayments, they adjust the interest on the loan to take account of when the deductions were taken from your payslips. You shouldn't be worse off.

Making extra payments, particularly if you are already stretching your finances isn't a sensible move, since you would be better off saving the cash into a tax-free cash ISA (assuming the interest rate is greater than the SLC rate, currently 3.8% for pre-1998 loans and 1.5% for post-1998 loans). SLC debts don't appear on any credit file.

Oldernotwiser

BlaEm wrote: »

Have I had a good idea here, or have I completely misunderstood how it works? I could do with the extra spending money if it's not helping me out

Apologies if I'm repeating myself but it's worth pointing out that normal loan repayments are made ofrom gross income whereas extra payments are paid after deductions, making it an expensive way of going about things.

whitfreak

cdl911 wrote: »

Having read the article I an still unsure as to whether I should pay off my (and my wife's) loans.

I am a Company Director and as a result neither pay personal tax nor make contributions to my loan, since the deductions are made through an assessment of your PAYE. If the current circumstances prevail I could conceivably work until I am 65 and never make another contribution to paying off my loan. This seems somewhat cheeky! Should I pay it off manually?

Additionally, my wife is expecting a baby and will give up work. This puts her in a similar position, with no PAYE earnings she will stop contributing to the repayment of her loan too. Is this they way it is meant to be?

Thanks in advance for your help.

Chris

I presume as a company director and therefore self employed you fill in a self-assessment tax form each year. When you fill this in you'll find a box which will work out your loan repayment for the year. This will be based on your total income, so any profit you extract from the company, other dividends, interest on savings etc.... presuming it breaks the threashold anyway. This is the same for everybody who fills out a self assessment form, so your wife maybe still continue make small repayments depending on her non-work (and unearned income whatever that is?) income.