Minimum repayment amount and interest

BadGrenola

Hi,

I graduated in June this year, and have found a job with £25k salary before tax, which I start in January. I'm trying to figure out how much and how often I'm required to pay back (i.e. minimum amounts - I know you can make early payments anytime), so I know what portion of my salary goes towards it. I just read a moneysavingexpert guide on student loans.

(Won't let me post the link )

Is it correct that I take my monthly salary before tax (£25k/12=£2083.33), subtract the "monthly threshold" (£1250), giving £2083.33-£1250 = £833.33, and then multiply by the "minimum repayment rate" of 9%, giving a total of £833.33*0.09= £75.

So I need to pay back a minimum of £75 per month?

Also do the "monthly threshold" and "minimum repayment rate" (£1250 and 9% respectively) change? If so how often do they change and when?

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Also on the link above it says the annual interest rate is the LOWER of:

Bank of England base rate (0.5%) + 1% = 1.5%

OR

Rate of Inflation (RPI index) = 5.3%

So the lower rate is 1.5%. Just wondering how often do the Bank of England base rate and the RPI Index change? If it is annually, then on which date do they change each year? Just want to know this so I can keep track of how much I have remaining to pay, and how much more I need to pay.

Apparently I have to start making repayments in Apr 2012, so I don't know how these changing numbers will affect me.

HappyMJ

Just use income tax calculator at listentotaxman. http://listentotaxman.com/index.php

Your calculation is correct. It's £75 per month.

BadGrenola

Thanks, good to know my numbers are right, but out of interest do you know how often the following figures change, and when (Or if they are fixed):

monthly threshold (£1250)
minimum repayment rate (9%)

RPI index (5.3%)
BOE base rate (0.5%)

I'm guessing the last two change on the 1st april every year, and I think the former two may be fixed?

MrsManda

The 9% and monthly threshold don't change (unless you are paying from overseas) but the interest rate changes in September.

How and when is the interest rate decided?

The interest rate is set by the Department for Business, Innovation & Skills (BIS) each year. It is normally based on the Retail Price Index each March and takes effect from the September of that year.

http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678571&_dad=portal&_schema=PORTAL#section4

BadGrenola

Ok great, thanks alot

amiehall

When the interest rate is determined from RPI, it changes each September based on RPI the previous March. At the moment it's based on BOE base rate + 1% and it would rise whenever the base rate rose. BOE rate is re-evaluated every month. So basically the rate for this year is capped at 5.3% until next September and it will track interest rates up and down below this value until then.

WillowCat

The change in interest rates doesn't change your monthly repayments though, they are still always 9% above the threshold.

The threshold hasn't been altered since this type of loan was introduced, however they will be increasing by inflation, I think from next april. This will lower your monthly repayment, assuming your salary remains the same.

Poolie

The monthly threshold has changed one in the history of the income contingent repayment loans. It changed from £10,000 per annum to £15,000 per annum around 2005 if I remember correctly.

From 6th April 2012 till 5th April 2016, the interest rate will rise by "Previous Threshold" + ("Previous Threshold" * Previous Year's March RPI percentage)

Therefore threshold from 6th April 2012 to 5th April 2013 will be £15,795

"Previous Threshold" + ("Previous Threshold" * Previous Year's March RPI percentage)
£15,000 + (£15,000 * 5.3% [March 2011 RPI])
£15,000 + £795 - Would be rounded to nearest £5
£15,795

The Education (Student Loans) (Repayment) (Amendment) Regulations 2011 784

jollyme

Is the change of threshold calculation from 2012 for ALL loans or those taken out from 2012 onwards?
I mean is the OP's threshold fixed at 15k or might it vary with RPI etc calc?

Poolie

The threshold calculation will affect all loans taken out after 1998 as per the regulations.

jollyme

Is the before tax figure after pension contributions or before pension contributions? Thanks