How is the current student loan repayment via HMRC fair?

ReflexReaction

I don't get it.

I pay student loan repayments every month. However, the tax man holds onto these payments for a WHOLE year, only giving them to the student loans company in April.

So wait a minute, I'm paying interest on the amount I've paid the Government in repayments since the PREVIOUS April, every month until the FOLLOWING April, while the government hold onto my money and earn interest themselves?

This doesn't seem fair at all. I am paying interest on a loan I've paid a large amount off this year!

MrsManda

I don't think your understanding is quite right.

Yes the HMRC doesn't tell the SLC how much you have repaid until the end of the financial year.

However once the SLC has this information I believe they divide the total repaid into 12 equal amounts which are then paid to your account as 12 monthly installments. The interest is then calculated and added to your account.

For example if you repay £1200 over the year the SLC will presume that you repaid £100 each month and work out the interest on that basis.

ReflexReaction

I see, OK that makes sense! So I do not pay interest on money I've already repaid.

Thanks!