Student Loan (old style) deferment - help!

Giraffe01

Hello,
Some advice needed please...

I have an old-style (pre-98) student loan that I have been deferring since I graduated as I never earned above the income threshold. My income has been around 1k off the threshold for the past few years and my annual payrises are quite small but I was bracing myself for having to start repayments in 2012 or 2013. This would have suited me fine as I have about 1 year left of repayments on an HSBC graduate loan and in terms of affordability I would effectively be replacing monthly graduate loan repayments for the student loan repayments next year.

However, this year the student loan deferment threshold has dropped from £27,070 (2009/2010) to £26,449 (2010/2011) and combined with my small payrise has left me earning £18 per month above the deferment threshold for 2011. The repayments come to £160 per month which I just cannot afford.

My first step was to try calling SLC to discuss smaller, more affordable repayments starting this year but they were unwavering and insisted this was only possible if I proved I was on an IVA or payment plan and under-paying my mortgage and the aforementioned graduate loan. Obviously I don’t want defaults on my mortgage and I am reluctant to mess around with my graduate loan (with just 1 year to go) which I have been paying back (£275 per month!) for the past 7 years without any defaults. My final option was to ask my employer to reduce my salary so that I qualify for deferment. It has been quite humiliating :embarasse and obviously something that has never been requested of them before but they agreed and as we are paid in arrears, they have made my newly reduced salary effective 1st March 2011.

My application for deferment is supported by 3 months payslips – my most recent payslip (which I will get next week) will be showing my new monthly wage which falls below the threshold but the previous two will be showing the higher wage, £18 above the threshold. Has anyone had any experience of applying for deferment supported by payslips reflecting differing salaries (of which one or two of the older ones are above the deferment threshold)? I am so worried that, after all this, my deferment application won’t be successful anyway and I will be left seriously out of pocket by the repayments and my salary reduction.

Any advice greatly appreciated!

BreadcrumbTrail

I am in exactly the same boat. Seems perverse of the SLC to *decrease* the threshold after years of pathetic pay rises (I presume this had the knock on effect of less grads going over the threshold than expected). People are less able to afford it, so they drop the threshold, thereby forcing more people to pay back as well as ramping up the interest on the loan to match the ever increasing RPI.

I suggested the salary cut option to the SLC and they got pretty stroppy with me (they are incredibly rude over the phone) but admitted when pressed that it would be a legitimate course of action. In the end I couldn't bring myself to go this route, so I'm going to have to try to find the £165 each month on top of all my other bills.

Like you, I'm well aware that I'd have to pay it back at some point, but it's not really feasible to put the rest of your life on hold in the event that they throw a curveball and drop the threshold, which has *never* happened before.

If your latest pay slip shows you over the threshold, I believe you can supply a letter from your employer to prove your actual salary. Worst case, they may make you pay it back for three months, by which point you'll have three pay slips under the threshold to present them with.

ElmerFudd

I can't provide any help I am afraid but am in a similar situation. I hadn't realised that they had actually lowered the threshold but that explains the situation I am in now. Combined with a recent payrise I have been thrown £35 ish over the threshold each month so will be having to pay just over £165 too. Fortunately I can just about afford it, though I am a bit annoyed as I had wanted to start to make a dent into my £10k high interest credit card, and wanted to start paying them back next year regardless of whether or not I could defer or not.

nix_2

Hi there.

I'm too in this awful situation. I couldn't fathom why I'd gone over the limit as I'm in the public sector and we've been having minimal pay rises for the last two or three years. I'm now £35 over this threshold and have to pay £105 off a month. I tried to reason with them that it's an awful lot of money to find out of nowhere and can it be reduced. The answer was no and even if I was £1 over I'd still have to pay. I said if I was only a pound over I'd reduce my salary at work and they said a lot of people do that! I still couldn't understand why I'd gone over and asked if the threshold was reduced to which she said no and last years deferment total was £2080 which is complete and utter cobblers as I've now got the actual figure from their site and it was £2254 which would still have put me just under.

I can't believe they can be allowed to do this? Surely when we signed the agreement they cannot just pull a figure out of the air so they can get more people to pay? I was under the impression the figure is 85% of the national average wage? Surely this couldn't have dropped that drastically in one year? Is there anyone we can complain to like the financial ombudsman or something as I've heard there are numerous horror stories about SLC 'losing' deferment forms and the like.

I probably could have just about found the money but I took a new car loan out in November assuming my minuscule payrise wouldn't dent the student loan deferment rate. And to be honest, it's also a matter of principle that they can't just bully people like this and put them in even greater hardship what with fuel prices, transport prices, all types of inflation this year.

Wobblydeb

Sadly yes, national average salary has dropped. I guess that's the impact of all those well paid bankers (and other white collar workers) losing their jobs.....

The first salary drop in 20 years of this style student loan(http://www.slc.co.uk/statistics/facts%20and%20%20figures/mortgage_style_loans.html#def) is backed up by research elsewhere in 2010:

http://www.dailymail.co.uk/news/article-1293121/Average-annual-salary-drops-2-600-just-months.html

dreavi

Wobblydeb wrote: »

Sadly yes, national average salary has dropped. I guess that's the impact of all those well paid bankers (and other white collar workers) losing their jobs.....

The first salary drop in 20 years of this style student loan(http://www.slc.co.uk/statistics/facts%20and%20%20figures/mortgage_style_loans.html#def) is backed up by research elsewhere in 2010:

http://www.dailymail.co.uk/news/article-1293121/Average-annual-salary-drops-2-600-just-months.html

I'm afraid wobbly is correct, average wages have lowered so the SLC has lowered their threshold as they are perfectly within reason.

I had a more modern student loan that i took out in 2000 and they took £70 a month to repay it, finally shifted it a few years back. If you took yours out pre 98 you've had a good decade to think about it so you cant blame them for calling it in now nor you for seeking to defer it.

Unfortunate but cannot be helped

webcat

To be honest I am a little surprised by your response.

Pre 1998 loans make no distinction between someone earning £27,000 and £54,000. Regardless of your income you still have to pay the same amount each month. On average £165.00.

What this means is that individuals with lower incomes, have to pay a significantly larger portion to their income. Unlike Post 1998 loans where you pay a % in relation to your income - Which is fairer.

The problem this year has been that for the first time EVERY the threshold fell, which meant that individuals previously entitled to deferment, were no longer exempt, even if they were a £1 over.

What this mean't was that individuals were in effect expected to absorb a loss of £165 a month, with no notice what so ever. The problem was exacerbated by the SLC's policy toward those caught out by change.

There wasn't time to individuals to prepare. According to the SLC's own calculation it considered those individuals couldn't afford to pay for the previous ten years.

Nothing changed when they lowered the threshold, they didn't have any more money in their pockets in fact they had less, as massive inflationary pressures in the economy were reducing the value of their money.

It has also demonstrated that using average national income to determine when an individual begins to repay the debt is flaw. This year perhaps they should have frozen the threshold at last years level.

In light of this event the government needs to review the original assumptions on which the Pre 1998 system was established and except that a variation to the payment terms may be require in extra ordinary circumstances, if the problem persist. For example calculating payments based on a % of what you earn, like the post 1998.

Ultimately I think you will find that the people who have posted here want to pay back what they owe. They are not trying to avoid paying their debts. They just can't afford to.

CLAPTON

well, people who took out these loans knew the repayment terms
people who took out post 1999 loans have to start paying once they earn over 15,000 so relatively speaking you are all lucky (i.e. you could have been saving up some money knowing that one day you will need to pay)
and it seems that some people have taken out additional borrowings (car loans, CC debts) in the interim ; why was that a priority rather than repaying the taxpayers funded loans?

josyd

Hi I have a student loan taken in 1995 and have deferred it as I have never earnt above the threshold. I have varying wages as I teach part time and sometimes do extra supply work when it is available, this means that I haven't always had the last 3 months payslips showing below the threshold. The SLC have always accepted a letter from my employer with the yearly fixed salary not including any supply as sometimes this is there and sometimes not so cannot be relied on. Hope this helps.
Also re the previous post about repaying taxpayers funded loans, surely students become taxpayers ( often at a higher rate due to good qualifications) and fund other services which are used by the entire public? Often a car loan is necessary to buy a car to be able to get to work to begin repaying the loan. Once you have your qualification it doesn't always equal full time well paid work life tends to get in the way!

an9i77

I believe they willl look at your current earnings (get a letter from your company to prove) rather than the payslips before your pay drop, so don't worry too much about the three months payslips issue. Alternatively if you do have to pay for two months (to get three payslips showing your current salary) you can always then backdate the deferment (for up to three months) and they will pay you back the money you have paid. I know its not exactly the same situation but I had to defer when I went on maternity leave and they allowed me to do this based on my (reduced) income after the mat leave started even though the previous two months I had been earning above the threshold. It doesn't make sense for them to prevent your deferment when you will only apply again in two months time and possibly backdate anyhow.

Also, what's to stop your employer putting your salary back up once you have had your deferment accepted - you will be covered for another year then by which time you were going to start to pay it anyway.

mwg78

I had an out of the blue deferment refusal last year, my salary was below the repayment threshold, but I also receive a car user allowance, for making my car available for work which took my income above this figure.

I tried their official complaints section, on two points. One why had they included an expense as being 'income' when other expenses such e.g. travel and subsistence aren't included. I also asked to clarify why in the same circumstances the year before I had been granted a deferment (I wasn't happy with the call centres response which was: I had got lucky!) I also asked them to clarify what were expenses and how this was reflected in any agreement. I did get a response from them which maybe of some use to people and I have pasted it below. I did like the bit where they said they only check a random subset of applications for deferment and it might just be your unlucky day that they don't accept it on the face of it.

"The situation is that your Deferment application was rejected due to your payslips showing a lump sum payment and not specifying this was a non taxable car allowance.

In order to reassess your application for deferment we require you to send confirmation from your employer that the lump sum on your payslips is a non taxable car allowance. This letter should be on company headed paper, signed and dated.

The processes that are in place mean that only randomly selected applications are fully assessed and this may be why your deferment was accepted last year when you were over the threshold and not this year.

Please see listed below details of what is included in your assessment.

Items to be included when calculating income
Salary
Overtime Payment(s)
Childcare Vouchers (Non-Taxable)
Allowances
Profit share
Performance Related Pay
Holiday Pay
Pension Payments
Luncheon Vouchers
Special/Additional Responsibility Payments
Foster Carer's Allowance
Benefits (eg Child Benefit, Working Tax Credit, Children's Tax Credit ,
Housing Benefit etc unless specifically classed as excluded on the
reverse of the Deferment Application Form)
Bonus#

# If Bonus is listed as Christmas or Annual; take 1/12th of the payment and add to each monthly payslip.

If Bonus is Quarterly then take 1/3 rd of the payment and add to each month

Items to be excluded when calculating income

Arrears of Back pay (which cannot be allocated to a specific period)
Expenses
Mileage
Any payment which is received and deducted in the same month
Non-Taxable Payments (although we do include pension payments and
childcare vouchers)
GTC Payments (these are usually annual payments made to teachers to
cover the cost of their teaching certificate) approx £40.00 at the
moment.
Please see the reverse of the Deferment Application for
benefits/payments which must be declared but will be excluded from
the calculation of income eg War Pension, Long Term Incapacity
Benefit, Employment and Support Allowance"

In the end I sent the letter off, but having spoken to my employer's HR department they confirmed that the allowance wasn't subject to income tax but was NIable. This appeared to be the criteria for requiring repayment. I didn't bother pursuing it any further and started repaying and I have noticed the £145s disappear, with mixed feelings - good to have finally started getting rid of the debt, but with the negative interest rate on the loan last year wouldn't have minded a deferment. It did make me wander if the lump sum payment was paid annually and not on each payslip how would they know that you were in receipt of it - I assume unlike new style loans there is no direct link to HMRC.