Student loans

Ed-1

Tomlee1988 wrote: »

Thanks for the help, I've now set up a payment plan. Glad I'm over that confusion.

Thanks

What do you mean you have 'set up a payment plan'? Why repay more than you are required to if your loan has an interest rate of only 1.5% (below RPI inflation) and is written off after 25 years if not repaid?

Repayment should be automatically deducted from your salary by your employer if you earn over the threshold, just as tax is.

Tomlee1988

I thought because I earn over the £18,000 mark from payment plan 1 I have to pay £12 per month? My employer tbh arnt helpful at all, I work for a family run buisness who have never delt with a graduate before, but if I don't pay back at all the interest will only go up and up meaning more I will owe? If I just leave it for 25 years will it not effect me then?

Ed-1

Tomlee1988 wrote: »

I thought because I earn over the £18,000 mark from payment plan 1 I have to pay £12 per month? My employer tbh arnt helpful at all, I work for a family run buisness who have never delt with a graduate before, but if I don't pay back at all the interest will only go up and up meaning more I will owe? If I just leave it for 25 years will it not effect me then?

You still seem to be a bit confused how income-contingent student loan repayment works.

You took out a student loan for a course that started before 2012 so you repay it according to the rules of 'repayment plan 1'. It is your responsibility to inform your employer that you have a student loan that is eligible to be repaid (HMRC will send a 'start notice' to your employer when they match you to an employment). The repayment threshold for the period 6th April 2014 to 5th April 2015 is £16910. Say you earn £21000. Then your employer by law has to deduct 9% of (£21000 - £16910) = 9% of £4090 = £368 for the year. In practice they will deduct it on a pay-period basis (i.e. every time you get paid so monthly threshold is £16910 divided by 12 etc.).

You are free to make repayments direct to the Student Loans Company but these are totally voluntary and are in addition to the repayments that have to be taken from your salary.

Interest will accrue on the outstanding balance but loans on repayment plan 1 have a large interest subsidy. The rate is currently 1.5% and inflation is higher than this so the value of the amount owed is actually worth less every year than it was the year before. e.g. if prices rise by 2% and the loan has only risen by 1.5% then the loan is worth 0.5% less the year after in real terms (even though the nominal figure has increased). £5 next year will be worth less than £5 this year. So in this situation, the longer it takes to repay the better as the balance in years to come may be worth less than it is today (in fact it can never be worth more as the maximum the interest rate on plan 1 can be is the inflation rate). £100 used to be a lot of money but it is relatively easy to find now. On top of that, if you have any loan left after 25 years, your repayments stop as it is wiped.

Tomlee1988

That's explained it a lot clearer now, thanks for been patien with me, I have informed my employer but they have not chased up anything from my student loan, they seem to waved me away when I talk about it, so infact it's them who are holding this all up, would you ring student loans up to explain my situation and ask them to contact them directly? I have spoke to them as well but never heard anything back?

Ed-1

Tomlee1988 wrote: »

That's explained it a lot clearer now, thanks for been patien with me, I have informed my employer but they have not chased up anything from my student loan, they seem to waved me away when I talk about it, so infact it's them who are holding this all up, would you ring student loans up to explain my situation and ask them to contact them directly? I have spoke to them as well but never heard anything back?

Assuming you finished your course between 6th April 2011 and 5th April 2012, your loan will have become eligible for repayment on 6th April 2012.

The repayment threshold in 2012/13 was £15795.
The repayment threshold in 2013/14 was £16365.
The repayment threshold in 2014/15 is £16910.

In any of these years, did you earn over these amounts? Did you have any student loan repayments taken from your salary?

When did you start your employment? Your employer could face penalties for failing to comply. HMRC should have sent a start notice to your employer when the SLC's records (that you have a loan in repayment status) matched with HMRC's records (that you are in employment). It is then up to your employer to deduct the repayments if you earn over the threshold applicable to any pay-period. Ask your employer whether they have received a start notice from HMRC and if not, you need to contact SLC to find out what's going on, otherwise you could end being penalised.

Tomlee1988

I have been with my employer since 2007 and started my course in 2009, I rang my employers partner who sorts my pay out, told her about my course, also spoke to student loads and discussed that they need to contact my employer to start my repayments, this has never happend so somewhere I expect its been misplaced or forgotten about, I will ring student loans again and ask them to contact again as something isn't right.!

Ed-1

Tomlee1988 wrote: »

I have been with my employer since 2007 and started my course in 2009, I rang my employers partner who sorts my pay out, told her about my course, also spoke to student loads and discussed that they need to contact my employer to start my repayments, this has never happend so somewhere I expect its been misplaced or forgotten about, I will ring student loans again and ask them to contact again as something isn't right.!

It is HMRC that should send a start notice so it might be worth talking to them too. Failing that, it is your responsibility to comply with the regulations which include informing an employer that you have an income-contingent loan if repayments are not being taken (doing this and proactively communicating with SLC/HMRC proves you are doing all that you can to meet the requirements, and it is your employer/SLC/HMRC that was at fault so it is them that would face any penalty and not you). As an existing employee, your employer will not start deducting repayments if they have not been sent a start notice.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/276347/E17_2014_.pdf