I know this about Student Loans...BUT...surely this isn't allowed?

[Deleted User]

...I still don't think that the student moneysaving bit of the site is the right place for this query. It's more of a general loan enquiry that just happens to involve a student loan.

I wonder if anyone can help or offer their thoughts?

I've just had a tussle with HMRC and the Student Loans Company.

I've been repaying my loan via PAYE for the past 7 years. I also have a small income through self-employment, so I also make payments via my self-assessment at the end of each tax year.

Every year I get my statement and it shows that my balance hasn't reduced. I still owe £10k even though I've paid over £6k towards them. Obviously, I was a bit concerned by this.

When I spoke to both HMRC and SLC what I learnt is this:

Each month, my employer deducts student loan repayments from my salary. It passes them over to HMRC.

Whenever I complete my self-assessment, I also pay money to HMRC.

At the end of the tax year, HMRC notify SLC of how I have paid and the balance is then reduced accordingly. Because of the delay in processing, this means my balance can be reduced any time from 13 - 23 months after that money has been deducted from my salary/earnings*.

However, unless I have got things very wrong - I am still being charged interest on the balance until HMRC notify SLC that I have made payment. So, I am getting charged interest on a balance even though I'd made payments to reduce it.

Surely this can't be right? It doesn't seem like it would be allowed from any loan provider, let alone SLC?

*so, just to give you some examples:

May 2009 - April 2010 - I pay £X via PAYE for student loans
January 2011 - I pay £Y via self-assessment for student loans (for the 09-10 tax year)

HMRC notifies SLC in April 2011 that I have made payments via PAYE - which is 23 months after May 2009.

HMRC notifies SLC in April 2012 that I have made payments via SA - which is 16 months after January 2010.

In other words, I lose the benefit of that money as soon as it is deducted from my monthly salary, but I still get charged interest on that money (on my student loan) for up to 2 years before the balance updates.

Tixy

It does take into account when the payments were made and the interest is adjusted for this

From here http://www.direct.gov.uk/en/EducationAndLearning/UniversityAndHigherEducation/StudentFinance/RepayingStudentLoansCoursesStartingFrom1998/DG_10034867

This extract
Interest on income contingent student loans

Student loans are different from normal commercial loans:

• the interest rate is subsidised by the government
• you don’t have to start making repayments until you’ve left your course (and, for income contingent loans, until you’re earning over £15,000 a year)

Interest accrues on student loans from the date they’re paid to you until they have been repaid in full.
If you repay your loan through PAYE or Self Assessment, the Student Loans Company will receive details of your repayments from HM Revenue & Customs (HMRC) after the end of each tax year. When these details come through, the amount of interest you are charged will be adjusted to reflect when you actually made the repayments.

[Deleted User]

Tixy wrote: »

It does take into account when the payments were made and the interest is adjusted for this

From here http://www.direct.gov.uk/en/EducationAndLearning/UniversityAndHigherEducation/StudentFinance/RepayingStudentLoansCoursesStartingFrom1998/DG_10034867

This extract
Interest on income contingent student loans

Student loans are different from normal commercial loans:

• the interest rate is subsidised by the government
• you don’t have to start making repayments until you’ve left your course (and, for income contingent loans, until you’re earning over £15,000 a year)

Interest accrues on student loans from the date they’re paid to you until they have been repaid in full.
If you repay your loan through PAYE or Self Assessment, the Student Loans Company will receive details of your repayments from HM Revenue & Customs (HMRC) after the end of each tax year. When these details come through, the amount of interest you are charged will be adjusted to reflect when you actually made the repayments.

Thanks for flagging this up.

It does make me wonder why I haven't had any payments applied to the balance since 2005 though! I've paid off £7k to a £10 balance and it still shows as £10k

Tixy

Deleted_User wrote: »

Thanks for flagging this up.

It does make me wonder why I haven't had any payments applied to the balance in 2005 though!

Yep - I'd be a bit worried about that as well. Worth chasing that up make sure there isn't some issue with the allocation of your payment (slightly different wording of your name? mistake on your NI number at SLC or something?)

CLAPTON

Deleted_User wrote: »

...I still don't think that the student moneysaving bit of the site is the right place for this query. It's more of a general loan enquiry that just happens to involve a student loan.

I wonder if anyone can help or offer their thoughts?

I've just had a tussle with HMRC and the Student Loans Company.

I've been repaying my loan via PAYE for the past 7 years. I also have a small income through self-employment, so I also make payments via my self-assessment at the end of each tax year.

Every year I get my statement and it shows that my balance hasn't reduced. I still owe £10k even though I've paid over £6k towards them. Obviously, I was a bit concerned by this.

When I spoke to both HMRC and SLC what I learnt is this:

Each month, my employer deducts student loan repayments from my salary. It passes them over to HMRC.

Whenever I complete my self-assessment, I also pay money to HMRC.

At the end of the tax year, HMRC notify SLC of how I have paid and the balance is then reduced accordingly. Because of the delay in processing, this means my balance can be reduced any time from 13 - 23 months after that money has been deducted from my salary/earnings*.

However, unless I have got things very wrong - I am still being charged interest on the balance until HMRC notify SLC that I have made payment. So, I am getting charged interest on a balance even though I'd made payments to reduce it.

Surely this can't be right? It doesn't seem like it would be allowed from any loan provider, let alone SLC?

*so, just to give you some examples:

May 2009 - April 2010 - I pay £X via PAYE for student loans
January 2011 - I pay £Y via self-assessment for student loans (for the 09-10 tax year)

HMRC notifies SLC in April 2011 that I have made payments via PAYE - which is 23 months after May 2009.

HMRC notifies SLC in April 2012 that I have made payments via SA - which is 16 months after January 2010.

In other words, I lose the benefit of that money as soon as it is deducted from my monthly salary, but I still get charged interest on that money (on my student loan) for up to 2 years before the balance updates.

if you have repaid 6k over 7 years on an original 10k loan and it's still 10k then there is something very wrong especially as for one year the interest rate was zero

do you have your yearly statements?
if you want to post up the figures maybe we could try to check them for you