'Capital' for purposes of benefit claims

Derivative

I am currently a student and I am squirreling away some of my student loans as there is a net gain from doing so (1.5% interest on loan, 3-5% interest depending on savings vehicle).

I am currently eligible for the NHS Low Income scheme (form HC1) which provides support for those with low amounts of capital (below £16k).

In addition, after my studies there are various benefits that may be available to me if I do not secure employment quickly (Income Based JSA, for example).

My question is whether or not I can legitimately offset my student loan against my savings for the purposes of such claims, if I am above the cap. I estimate my total student loan liability to be ~£29-30k following the end of year 4.

If not, is there anything questionable about me paying down the student loan in order to be able to claim such benefits if needs require? Would this be considered deliberate deprivation of assets?

Thanks for any help. Not directly tax-related I know.

jennifernil

You cannot offset your student loan.

If you repay a loan that you didn't need to repay at the time, purely in order to claim benefits, from my reading of it, that would be considered deprivation of assets.

Derivative

jennifernil wrote: »

If you repay a loan that you didn't need to repay at the time, purely in order to claim benefits, from my reading of it, that would be considered deprivation of assets.

Is there a time limit, or is it purely about intent?
If I begin to pay down the loan now in anticipation, does that make a difference?

Also, what are the penalties for such an action? Simply not being able to claim, or something more severe?

jennifernil

If you start making regular payments well ahead, that is likely OK I should think.

No penalty, you just won't be able to claim.

Derivative

jennifernil wrote: »

No penalty, you just won't be able to claim.

Okay, thanks.
My main worry at the moment is that by 'stoozing' my student loans for a few hundred quid in interest and a bit of collateral, I might be leaving myself up sh*t creek in the case that I don't walk straight into a job after graduation.

Voyager2002

EdgEy wrote: »

Okay, thanks.
My main worry at the moment is that by 'stoozing' my student loans for a few hundred quid in interest and a bit of collateral, I might be leaving myself up sh*t creek in the case that I don't walk straight into a job after graduation.

Unless student loans are massive, you are unlikely to have more than 16K, or even 5K, at the time you graduate. If that were to happen, all that you would need to do would be to live on the excess money until your capital fell below the limit so that you could claim.

Derivative

Voyager2002 wrote: »

Unless student loans are massive, you are unlikely to have more than 16K, or even 5K, at the time you graduate. If that were to happen, all that you would need to do would be to live on the excess money until your capital fell below the limit so that you could claim.

As stated in post 1, I estimate my total student loan liability to be ~£29-30k following the end of year 4 - I can't calculate it exactly as the loans increase in line with inflation each year.

I am currently looking at breaking even or being slightly in the black (5k max) on graduation as I have a few external sources of income and live on rice and beans.

So on graduation, I may have around ~30k, but also a 30k student loan liability. If all goes well, I manage to find a full time job quickly after graduation (that is, of course, Plan A).

My problem is with Plan B - graduate unemployment is rather high at the minute. I'll leave University with some savings, but with an outstanding student loan liability, leaving me net negative - personally (though I understand DWP will not see it this way) I do not consider those 'savings' as mine if they're owed to SLC.

It seems that I will be better off, in that case, long term, if I paid off the loan until I got underneath 16k in savings in order to qualify for benefit payments.

My concern is not with surviving, but that paying regular payments now could potentially put me on a better footing long term, as I would not have to, in effect, put myself further into debt in order to get by.

Essentially I am wondering whether or not the DWP will make any distinction between me intentionally paying down my student loans now, or waiting until graduation when my situation becomes a bit more clear. In both cases my intent will probably be fairly obvious.

jennifernil

It is a tricky situation. What year are you in now?

Our daughter had the same problem, but not from the same circumstances.

She had not taken any loan in her first degree (on my advice as she was only entitled to the minimum and it complicated the issue.....we are in Scotland), and she had saved out of her part-time earnings.

Then she did a PhD with a very good stipend plus some uni employment, so she ended up with over £16k savings (but no loan) so could not claim anything after her stipend ended and she started her present job....about 4 months.

We loaned her about £1000, plus she used some savings, not a lot as she is very frugal. Calling in favours from friends also helped (eating out at their place).

About 6 months before, she paid off all her debts, mainly a loan from her brother for her flat, so there was nothing stopping her claiming once her savings went below £16k.

But she got a very good job so is now very happy, and she has now repaid us!

Derivative

jennifernil wrote: »

It is a tricky situation. What year are you in now?

Year 2. Essentially the issue is - obviously having a lump sum in the bank is great for many reasons, house or rental deposit, car, any unforeseen medical expenses, etc. So I'd like to avoid repaying unless I will have to claim. By then, it seems it will be too late, as it'll be obvious I paid back for those purposes. A dilemma if ever there was one.

But she got a very good job so is now very happy, and she has now repaid us!

Glad she got everything sorted out.

Savvy_Sue

Voyager2002 wrote: »

all that you would need to do would be to live on the excess money until your capital fell below the limit so that you could claim.

Note that - in the past at least - those responsible for paying benefits would decide how long you could survive on your 'excess' money for, all other things being equal.

So as well as NOT being able to splurge it all at once on a fancy foreign holiday (or paying back your SL), you also can't rely on living a champagne lifestyle to get your savings back below the limit. If you are £1000 over the limit, and 'they' say that you can live on £50 pw (and I'm not sure what the current limits are), then you may find that any claim for means-tested benefits made before 20 weeks have elapsed will either fail or have very close scrutiny. Likewise if you don't claim immediately, but your bank statements show that 3 months ago you were over the limit and now you're not, 'they' will want to know where the money has gone.

Derivative

Savvy_Sue wrote: »

Likewise if you don't claim immediately, but your bank statements show that 3 months ago you were over the limit and now you're not, 'they' will want to know where the money has gone.

Are there any hard and fast rules for how far they can go back?

I will probably be a lot more certain about whether or not I'll land a graduate position 6 months - 1 year before graduation.