No intention of paying back the loan.

sebastianj

I know someone who graduated about 5 years ago but has not had much luck with a descent job and now he has no intention of paying back the loan. His parents are worried and they asked if they could settle it, if the amount was reduced.
I have no idea how this works, any one with any knowledge, please do suggest what they should do.

seb

Maggie.Moo_2

Graduating about five years ago meant he would've started around 2006/2007, is that correct?

It's possibly different for him but under the current system, you don't have to pay back any of the loan unless you earn a certain amount and then it's wiped after a certain number of years. All repayments I believe are automatically taken from your salary and so you won't have anyone chasing you and I'm told that student debt isn't viewed negatively (like personal debt). Bottom line being that parents paying back any money is just wasting the parents money because he doesn't need to pay anything back right now.

There are some who argue that you should pay it off if you can but as far as I'm concerned, I signed an agreement which states that I will pay back X amount per month when I'm earning over Y per year and any remaining debt after Z years will be wiped. Considering how big my debt will be (started after the tuition fee increase) plus interest and a typically low paying career field, I also have no intention of paying back my loan in full either (unless I happen to land a very well paid job). I view it as an investment - getting a degree is supposed to help me get a well paid job but there's no guarantee of that and as such I'm not risking any of my own money and I'm only paying back an amount proportional to my salary. I have worked and saved a fair sum of money while at university but there's no way I'm giving that back to the SLC when I don't have to.

It may be worth someone verifying the information for the dates but I think the system has been the same (but with varying details) since 1998, although I could be wrong as I've only been interested in student loans since 2012.

sebastianj

the papers i have seen show that his balance brought forwad was 10410 pounds, interest on that in 2008-09 was 455 pounds, in 2011 interes was94 pounds, then every year it has been below 170 pounds.

it is so confusing, cannot understand the process.

seb

Maggie.Moo_2

I won't lie, those figures mean nothing to me :P

I just did a quick Google and this popped up straight away: http://www.moneysavingexpert.com/students/student-loans-repay

I think it confirms my "don't pay anything directly" attitude Might be worth showing your friend and his parents the page, I personally don't see a problem with not paying it off even if parents are happy to deal with some of it.

The government sell-off may be a problem but I have absolutely no knowledge about that so it may be worth looking at in more detail.

corf999

It used to be the case that if you reached 48 years old any outstanding balance was written off - not sure that is still the case now.

He will need to pay it back when his income reaches a certain level - until then as the interest is low it may be better just to leave it.

Maggie.Moo_2

Yep, assuming he started uni between 2006 and 2011, he only begins repayments once he's earning above £16,910 and any remaining debt is wiped 25 years from the first April after graduation (or when he reaches 65 years of age if he started between 1998 and 2005).

Ed-1

sebastianj wrote: »

the papers i have seen show that his balance brought forwad was 10410 pounds, interest on that in 2008-09 was 455 pounds, in 2011 interes was94 pounds, then every year it has been below 170 pounds.

it is so confusing, cannot understand the process.

seb

Pretty much everything you need to know about the repayment system (for loans relating to courses starting Sep 1998-Aug 2011) is here (I've linked to the interest rates page): http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678642&_dad=portal&_schema=PORTAL

It's really quite simple when you know the ins and outs of how it works.

All student loans from 1998 onwards are income contingent which means they are repaid as a percentage of your salary (i.e. just like a tax). All loans taken from 1998 onwards are repaid at 9% of your annual earnings above a threshold. The threshold for loans taken before 2012 is £16910 from 6 April 2014 to 5 April 2015 and £17335 from 6 April 2015 to 5 April 2016. It will change by the retail price index from the previous March (RPI is a measure of inflation) on 6 April every year (i.e. it is indexed to changes in prices). The RPI for March 2014 was 2.5% so the threshold changes from £16910 x 1.025 = £17335 this April. In April 2016 it will change by the RPI for March 2015 which is released on 14th April 2015.

The interest rate on these loans is either the Bank of England base rate (which has been 0.5% since March 2009) + 1% or the RPI from the previous March, whichever is lower.

A loan is written off when you reach 65 if it was taken out in relation to a course starting Sep 1998-Aug 2006 or 25 years from the April after the course finished (i.e. when the loan became eligible to be repaid) if it was taken out for a course starting Sep 2006-Aug 2011.

For loans taken for courses starting from 2012 onwards, the threshold is £21000 and interest rates vary between RPI and RPI+3%.

A loan is written off 30 years from the April after the course finished (i.e. when the loan became eligible to be repaid) if it was taken out for a course starting Sep 2012 or later.

A table on Wikipedia sums things up nicely:

http://en.wikipedia.org/wiki/Student_loans_in_the_United_Kingdom#Repayment_and_interest

sebastianj

I am jut told that he joined the UNI in 2003-2004, he graduated in 2007. Does that make life harder for him?

seb

Ed-1

sebastianj wrote: »

I am jut told that he joined the UNI in 2003-2004, he graduated in 2007. Does that make life harder for him?

seb

It means he repays 9% of his salary above £16910 (rising with inflation each year) and if the balance isn't cleared by the time he reaches age 65 then anything left is written off, but it also means he only paid the approx £1,000 tuition fees at most so his balance will be lower than those with later loans.