Repaying Student Loans 2009/10 guide discussion

silvercar

Far too little information for such an 'esteemed' moneysaver

Lets make it simple for everyone should we...

Wouldn't call myself 'esteemed', I was trying to make things very simple.

Post degree and in first job (that is highly likely to be less than 41k) or not earning, the rate would be only 0.9% from April after graduation, for all except those who start on a very reasonable first salary.

It would be possible to find a savings account paying more than 0.9%.

HTB ISA is going to deliver 25% bonus plus interest of 3-4%, so would be a good first port of call for someone considering buying a home in the future.

Then the loan starts increase at the new RPI of 1.6% until they are earning £41k by which time it is back at 4.6% at current (historically low) figures.

Son just checked his interest rate and it is currently 0.9%. (3yr degree Sept 12- June 15). He is studying at the moment, so not earning.

nmtd

From this site...

/news/loans/2016/04/graduates-set-for-september-interest-rate-hike-as-inflation-creeps-up

Likely interest rate from Sep 2016: Every September the rate changes based on March's inflation (RPI) rate. You pay RPI + 3%, so it'll likely rise from 3.9% to 4.6%.

I too raised the HTB ISA as one thing to consider.

All I am saying is that I very much disagree with the "No! No! No!" statement from Martin Lewis in his guide - for the 2012+ cohort its not as simple as that - you have to look at the whole picture - and 2 of the three reasons he quotes are weak for this set of students - and getting weaker still as RPI increases.

nmtd

silvercar wrote: »

Son just checked his interest rate and it is currently 0.9%. (3yr degree Sept 12- June 15). He is studying at the moment, so not earning.

I am not saying you are wrong in your sons circumstance - as he has graduated (well done!) but not earning he will now be paying 0.9%. However, that is ignoring the 3.9% his loan was accruing between 2012 and April 2016.

His 0.9% will also increase to 1.6% this September, and when he starts earning it will be 1.6% at £21k increasing by 0.15% for every extra £1k earnings.

At a fairly typical starting salary of £25k (London/SE) you will imediately be paying 2.2% and its likely that a students earnings rise the fastest in their first few years of work - I really don't think it will take that long to reach an interest rate of 3%+ and at that point the advantage of putting money elsewhere evapourate

Jimmithecat

Thanks for that nmtd - I've also been looking at the figures and it doesn't make sense to not start paying down the debt rather than having cash sitting in low paying accounts.

nemo183

Sorry, but the idea of the SLC wanting to be fair is ludicrous. The air of casual contempt with which they have operated, charging 41p per minute to call them, using a repayment calculator that assumes that all students are men (and in any case contains completely out of date figures), being economic with the actualite, issuing retospective changes, issuing loans that cannot be repaid etc.etc.

Look, these are not signs of fairness. No doubt the SLC would say they were only following orders but in the wholesome might say they morally bankrupt usuries.

Ed-1

nemo183 wrote: »

Sorry, but the idea of the SLC wanting to be fair is ludicrous. The air of casual contempt with which they have operated, charging 41p per minute to call them, using a repayment calculator that assumes that all students are men (and in any case contains completely out of date figures), being economic with the actualite, issuing retospective changes, issuing loans that cannot be repaid etc.etc.

Look, these are not signs of fairness. No doubt the SLC would say they were only following orders but in the wholesome might say they morally bankrupt usuries.

SLC are nothing more than administrators. It's the government that set the repayment terms and policy.

tesuji

Hi, wondering if anyone can offer me some advice.

I have both a Plan 1 type loan, and a plan 2 one. Obviously I want the plan 2 one to be paid off first, is there anyway I can ensure the 9% being deducted from my pay slip is going towards the plan 2 loan and not the plan 1 loan?

Thanks

sheramber

tesuji wrote: »

Hi, wondering if anyone can offer me some advice.

I have both a Plan 1 type loan, and a plan 2 one. Obviously I want the plan 2 one to be paid off first, is there anyway I can ensure the 9% being deducted from my pay slip is going towards the plan 2 loan and not the plan 1 loan?

Thanks

https://www.gov.uk/repaying-your-student-loan/what-you-pay

If you have Plan 1 and Plan 2 loans

You still pay back 9% of your income over £17,495 a year.

If you earn between £17,495 and £21,000, your payments only go towards your Plan 1 loan.

If you earn over £21,000, your 9% payments go towards both your loans.

tesuji

sheramber wrote: »

If you have Plan 1 and Plan 2 loans

You still pay back 9% of your income over £17,495 a year.

If you earn between £17,495 and £21,000, your payments only go towards your Plan 1 loan.

If you earn over £21,000, your 9% payments go towards both your loans.

Thanks for the information. Any idea if I can make all of the 9% payments go towards the Plan 2 loan, or adjust the split somehow?

Ed-1

tesuji wrote: »

Thanks for the information. Any idea if I can make all of the 9% payments go towards the Plan 2 loan, or adjust the split somehow?

No you can't as this policy is set down in regulations. In fact the actual submission to the minister in 2011 has been released through freedom of information which explains how the decision on repayments for dual borrowers was arrived at. This can be found here:

https://www.whatdotheyknow.com/request/230088/response/579884/attach/4/Annex%202%20Submission%20Dual%20loan%20repayments.pdf

HOWEVER, the good news is the Government has frozen the higher £21,000 threshold for at least 5 years which reduces the amount going towards your plan 1 loan, and increases over time the amount going to your plan 2 loan. For this reason, you're one of the few borrowers (like me) that should be praising the freezing of the higher threshold (unlike Martin Lewis). You, as I am, should be hoping the plan 1 threshold is allowed to catch up before the £21,000 threshold is increased (in that way, all repayments will go towards the plan 2 loan first).