Info about student Loan

Cpu2007

I was checking my repayments and just started wondering what percentage I am paying through paye.

I am a bit confused on how this works. According to the student loan website
http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678642&_dad=portal&_schema=PORTAL

I fall under the plan 1 category(because my course started before 2012); does this mean that my interest rate is variable?

I just calculated the percentage of the loan I am paying against my gross salary and it turned out to be 4.05%, is this in line with the current rate?

Thank you

Lokolo

Your repayment amounts and interest rates are different. They are not aligned at all.

The interest rate on 1998-2012 loans is currently 0.9%.

The repayment rate is something like 9% on anything earned over £17k (I can't remember the exact figure).

Cpu2007

Does this mean that I should be paying 0.9% ?

why I can't see any reference to 9% in the student loan website?

Ed-1

Cpu2007 wrote: »

Does this mean that I should be paying 0.9% ?

why I can't see any reference to 9% in the student loan website?

How and when you repay:

http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678511&_dad=portal&_schema=PORTAL

Student loans only have to paid if you earn over the repayment threshold. In other words the repayment is income-contingent and it is currently set at 9% of income you earn over the threshold. Anything you don't pay is written off by the government after a certain period of time (depending on when you started your course).

Cpu2007

Ok now looks clearer. I wasn't keeping in considering the threshold.

In my case it should be £15,795 (as I've started in 2008)

My question now is, I'm paying 9% on this, isn't it better to pay off with a cheaper loan?

missbiggles1

Cpu2007 wrote: »

Ok now looks clearer. I wasn't keeping in considering the threshold.

In my case it should be £15,795 (as I've started in 2008)

My question now is, I'm paying 9% on this, isn't it better to pay off with a cheaper loan?

Cheaper than 0.9%?

Ed-1

Cpu2007 wrote: »

Ok now looks clearer. I wasn't keeping in considering the threshold.

In my case it should be £15,795 (as I've started in 2008)

My question now is, I'm paying 9% on this, isn't it better to pay off with a cheaper loan?

No your threshold isn't £15,795 - you don't keep the same threshold throughout your repayment. It changes for everyone each year with inflation. It's currently £17,495 and will change to £17,775 from 6th April 2017 - 5th April 2018.

And to answer your other question - no, it's not best to pay anything other than the minimum towards a student loan as (a) it might not need paying (as the government pays it for you if you haven't earned enough) and (b) plan 1 loans will always have below-inflation or at inflation interest which is the cheapest form of borrowing you'll ever get. You only get it once so don't pay back more than you need to when you might need the funds for other things!

Cpu2007

Apology, I have been confusing bits and pieces because of the 9% value.

I understand this now and after doing some calculation, the amount I'm paying is in line with my wage.


This year threshold is £17,495 - I have to pay 9% of my wage but the interest on the loan is just 0.9%, which is the lowest and as you guys pointed out; I won't be finding anything cheaper anywhere else.

Thank you for the prompt replies.

Ed-1

Cpu2007 wrote: »

Apology, I have been confusing bits and pieces because of the 9% value.

I understand this now and after doing some calculation, the amount I'm paying is in line with my wage.


This year threshold is £17,495 - I have to pay 9% of my wage but the interest on the loan is just 0.9%, which is the lowest and as you guys pointed out; I won't be finding anything cheaper anywhere else.

Thank you for the prompt replies.

Also interest is only relevant if you end up paying the full loan back as interest doesn't increase what you pay back unless you pay it all back before it's written off by the government.

Interest could be 1,000,000% and your loan balance could be £1,000,000. You still pay back 9% of what you earn over the threshold until government writes off the rest.

e.g. Say after 25 years you've paid back £10,000. The government would write off the other £990,000 plus interest if you started your course between 2006 and 2011 (and at age 65 if you started your course before 2006).