Help With Student Loans - HERE!

mayb_2

my son has just told me - he was told by a fellow ex student that thought he had repaid the debt in full - that the tax man takes your debt repayment and holds on to them for a year before passing this on to the SLC - during this time the SLC continues to add interest to the debt you owe without taking in to account the repayments made through tax. Therefore, when his friend thought he had paid off £4000 the SLC have said they have not received this from the tax man and the money is still accruing interest.

Can this possibly be true? If not what has made him think that this is the case - he says the SLC gave him this information when he chased his repayment.

Tirian

mayb wrote: »

my son has just told me - he was told by a fellow ex student that thought he had repaid the debt in full - that the tax man takes your debt repayment and holds on to them for a year before passing this on to the SLC - during this time the SLC continues to add interest to the debt you owe without taking in to account the repayments made through tax. Therefore, when his friend thought he had paid off £4000 the SLC have said they have not received this from the tax man and the money is still accruing interest.

Can this possibly be true? If not what has made him think that this is the case - he says the SLC gave him this information when he chased his repayment.

Part true, part not. The loan repayments are taken directly from wages by HMRC. They are supposedly passed on to the SLC after the end of each tax year. During this time, the loan does accrue interest - however, the system is supposed to work in such a way that when HMRC pass on the payment to SLC, the SLC will calculate how much interest should apply had the payments been applied to the debt at the time when they were taken from the pay packet. They are then supposed to backdate the account with the payments and the revised interest calculation.

In actual fact, it's more complicated even than this, because HMRC have not been passing on the information & payments to the SLC as they should have been for many of the loans, therefore the SLC have been unable to give the correct account balances.

So basically, in theory you should not end up any worse off paying this way than if you were making repayments directly to the SLC. In practice, the whole thing has been a shocking !!!!-up and nobody really knows where things stand. The only way to get things moving, it seems, is to send a copy of any relevant P60s, which should act as proof of the amount of Student Loan repayments made.

boiledcabbage

sly_dog_jonah wrote: »

Bad news for those with student loans, the interest rate will be rising from 2.4% to 3.9% on 1st September 2007. The interest rate is governed by the RPIX figure for the previous March, and these figures out today show that the interest rate will leap 1.5%.

http://www.statistics.gov.uk/cci/nugget.asp?id=19

This means all students and graduates will be spending more time paying off their loans, but of course they are still much cheaper than commercial loans.

That figure of 3.9 is March's CPI, not RPI - THAT currently stands at a massive 4.8.
But the point you're making is right, it's not the best of news!

Tirian

ha! I'll be spending LESS time paying off my loans, since I have already saved up enough to offset them anyway. And if the interest goes up to 4.8% in September, then I'll be paying them off straightaway then. No point in having the money in savings if all the interest I earn gets eaten up by the interest on the loans.

Mind you, if base rates go up significantly between now and then, I might reconsider that plan ... one benefit of being priced out of the housing market is that base rate rises are all good for me!

boiledcabbage

I'm in the same boat as you but will NOT be paying it off when the rate goes up in September. As a basic rate tax payer, there will be savings accounts paying around 5.0% after tax by that time (assuming 2 rate rises of 0.25%) - I'm referring to savings accounts rather than ISAs.

Paying 4.8% on a student loan debt of 13k offset against savings paying 5% may only give you £30ish over the course of a year but surely when you're young it's about having capital rather than interest? Maybe you have other savings locked away but I would think twice before getting rid of the capital I've spent the last 2 years building up.

boiledcabbage

I can't think of any financial reason for paying off student loans early, but it could be a psychological decision, i.e. getting rid of debts for peace of mind

sly_dog_jonah

boiledcabbage wrote: »

That figure of 3.9 is March's CPI, not RPI - THAT currently stands at a massive 4.8.
But the point you're making is right, it's not the best of news!

The SLC Loan interest rate is linked to the RPIX not the RPI. Therefore the interest rate as of September 1st 2007 will be 3.9% not 4.8%. Doh your'e right it's RPI not RPIX, sorry boiledcabbage

RPIX inflation – the all items RPI excluding mortgage interest payments – was 3.9 per cent in March, up from 3.7 per cent in February.

Mine are in a Cash ISA fixed at 6.1% (tax free) until October 2008, so there's still no point paying back early as there's still a 2.2% 1.3% margin for me at least.

mayb_2

I know everyone has already had this thought before, but I cannot understand why the government gets away with telling students that they will not repay the loan until they earn x amount - but fails to emphasise the fact that the money starts to earn interest from the moment it hits your bank account. If you are not earning enough to pay the loan back your loan becomes more expensive than the persons who is earning enough, so a double wammy for some there.

Congratulations to those of you able to put away savings towards this but payments of any sort towards the loan must reduce your ability to pay a mortgage etc and slow you down some more.

How many of you I wonder feel that it is a good system - bearing in mind that you are paying taxes towards education at the same time you are repaying your debts. The more you earn the more you pay. I can see a time coming when students will feel that the end will not justify the means. As a country we need your brains and education - one day we will regret that we did not value that enough to give it to you freely.

fairy_dust_3

Hi, i'm now applying for my 3rd year loan 2007-08. Does my mam have to provide evidence of her divorce that was 5 years ago if she presented it the first time? (i am not sure if she did this for last years loan). Or as her circumstances have not changed will it be ok just to say that they have been provided before?
Thanks.

CarolC_2

Hi
My son has been excepted at kingston Uni to do Foudation Studies in Art & design. This is classed as Further education not higher education but still has Tuition Fees (about £900) and accommodation costs ( £3500 for the year). Can you advise how we can get student loan as I can't find anything in the normal channels
Thanks
Carol