Graduated from the 'Old' loan system, now studying PGCE with 'new' system.

Mother_soontobe_Teacher

Hiya.


I have just graduated and seeing as I started in 2011, I am under the 'old' loan system.


However, I am about to start a PGCE in September and thinking about taking a loan.


I am wondering how does it work once I am entitled to pay. As these loans will be on different % of interests.


Does the 'old' loan get paid off first? or because the 'new' one is of more interest, this gets paid first?


I hope this has made sense!


thank you

Ed-1

Mother_soontobe_Teacher wrote: »

Hiya.


I have just graduated and seeing as I started in 2011, I am under the 'old' loan system.


However, I am about to start a PGCE in September and thinking about taking a loan.


I am wondering how does it work once I am entitled to pay. As these loans will be on different % of interests.


Does the 'old' loan get paid off first? or because the 'new' one is of more interest, this gets paid first?


I hope this has made sense!


thank you

Your pre-2012 loan gets repaid according to repayment plan 1 (9% of earnings above the plan 1 threshold which is currently £16910 but goes up every April by RPI so from next April will be £17335). Your post-2012 loan gets repaid according to repayment plan 2 (9% of earnings above £21000). However, having loans under both repayment plans means repayments from earnings between the 2 thresholds (i.e. 9% of the difference between £17335 and £21000) goes to your plan 1 loan and anything over £21000 goes to your plan 2 loan. So your plan 1 loan repayments are effectively capped until the plan 2 loan is fully repaid.

See the bottom of this page:
http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678490&_dad=portal&_schema=PORTAL

It is covered in the regulations here: [url] http://www.legislation.gov.uk/uksi/2012/1309/regulation/6/made[/url]

Mother_soontobe_Teacher

That is incredibly helpful! Thank you very much!


I am happy that the loan with the much higher interest will get paid first!

Advisor1

Ed-1 wrote: »

Your pre-2012 loan gets repaid according to repayment plan 1 (9% of earnings above the plan 1 threshold which is currently £16910 but goes up every April by RPI so from next April will be £17335). Your post-2012 loan gets repaid according to repayment plan 2 (9% of earnings above £21000). However, having loans under both repayment plans means repayments from earnings between the 2 thresholds (i.e. 9% of the difference between £17335 and £21000) goes to your plan 1 loan and anything over £21000 goes to your plan 2 loan. So your plan 1 loan repayments are effectively capped until the plan 2 loan is fully repaid.

The threshold does not always increase, granted the last couple of years it has but that's not guaranteed - if you look back it remained at £15k for some time.

Ed-1

Advisor1 wrote: »

The threshold does not always increase, granted the last couple of years it has but that's not guaranteed - if you look back it remained at £15k for some time.

Yes, that's because when Labour set it in 2005 (after raising it from the original £10k) they didn't index-link it (as part of the top-up fees 'deal' they outlined an intention to do so in April 2010 but the March 2009 RPI was negative so put it off for a year (keeping it at £15k) and then lost power so it was left to the Coalition to decide what to do with it). The Browne review recommended it should be increased to £21k but the Coalition decided to only apply this to new students on the £9k fee system and the existing threshold has now been index-linked to RPI since 2012 so is guaranteed to go up by the March RPI each April. This is set out in the regulations. See my thread about this:
https://forums.moneysavingexpert.com/discussion/4921914