Student Loan 2015 Discussion

silvercar

Anon said:

The thought of graduates paying back for up to 40 years must be concerning for students and parents alike.

It needs to be viewed as a graduate tax, rather than a loan that is written off. 

DaveO

Viewing as a graduate tax is a ridiculous suggestion when it is a loan and the debt increases due to the level of interest charged.

Even if you do view it as a tax who would support an increase in income tax on their income above the repayment threshold of this level?  Graduates are in effect paying tax at a rate of 29% on any income over the threshold (a threshold lower than the average UK wage).

Would you like another tax band introduced such that any of your income over £27295 was taxed at 29%?

Rhetorical question because of course you would not and would squeal like a stuck pig if any government proposed such a tax increase.

The way we treat graduates in this country is outrageous.  They will end up paying many times the actual cost of their tuition. The Universities just get the £9.2k for three years.  The graduates will pay far more over decades so who benefits from all the money the graduates pay? Not them and not the Universities.

Its just obscene when you consider University education is free in countries like Germany.

Anon

silvercar said:

Anon said:

The thought of graduates paying back for up to 40 years must be concerning for students and parents alike.

It needs to be viewed as a graduate tax, rather than a loan that is written off. 

I understand the main principles, it is whether the advice changes with the new system. Whether viewed as a loan or a tax, they are starting repaying from a lower salary level and for 10 years longer than the 2022/3 system, however it is framed. More graduates will pay more back than they would have done starting last September, perhaps double, as @MSE_Martin has highlighted. 

I know it is a moot point for most people as few would be able to pay direct rather than take out the loan, even if it would potentially be a better option.

silvercar

Anon said:

silvercar said:

Anon said:

The thought of graduates paying back for up to 40 years must be concerning for students and parents alike.

It needs to be viewed as a graduate tax, rather than a loan that is written off. 

I understand the main principles, it is whether the advice changes with the new system. Whether viewed as a loan or a tax, they are starting repaying from a lower salary level and for 10 years longer than the 2022/3 system, however it is framed. More graduates will pay more back than they would have done starting last September, perhaps double, as @MSE_Martin has highlighted. 

I know it is a moot point for most people as few would be able to pay direct rather than take out the loan, even if it would potentially be a better option.

I’ve seen figures suggesting about 10% of UK students are not in the loan system, ie funded from their own / family/ inherited/ savings or employer funding.

Hugsi

I was browsing the Student loans guide on the main site. Under section 3 "How do students loan repayments affect my pension contributions." the guide states: 
However, some defined benefit schemes take the pension payment pre-tax, but after national insurance. In which case, you'll have slightly higher student loan contributions.

Defined contribution schemes (this is what most people now have). If you pay into a personal pension, whether monthly via your company payroll or directly as a lump sum, student loan contributions are worked out using your gross pay (unless you pay into your pension by salary sacrifice).

You can do a self-assessment tax return to have the pension contributions taken into account. But decide if it's worth the hassle of doing a self-assessment return if you don't already. For each £1,000 you pay into your pension (£800 net) each year, you could pay around £90 extra in student loan repayments.

I pay a sizeable amount into my pension leading to hundreds of pounds overpayment on my student loan each year and so decided to register for self-self-assement for this reason. My attempt to register was rejected, the feedback on my SA1 was "We can't register you for Self Assessment because the information you've given on the form shows that you don't meet the conditions for Self Assessment."

Has anyone any experience in this area? Is the guide on the website incorrect? Or why would my attempt to register for the purpose described above have been rejected?

Any input would be appreciated, thanks in advance.

kaMelo

A PAYE employee's student loan repayments are calculated on gross pay subject to NI. Pension contributions (or any other type of deduction) made via a net pay arrangement reduces income subject to NI, ergo reduces student loan repayments automatically.

Pension contributions made via relief at source do not reduce gross pay subject to NI therefore do not reduce student loan repayments.

In summary, self assessment makes no difference for an employee on PAYE as pension contributions alone do not reduce student loan repayments. The method used to make the contributions may do so.