Student Loan - Drop in Interest to Balance

GeneralSpender

Hello,

I have a post-1998 pre-2012 student loan with a fixed interest rate of 0.9%. I am now coming to the end of a PhD program conducted in the USA and have thus not paid any of the amount off so far. It has therefore gradually been increasing over the years since I graduated in 2011.

I recently received my annual statement from the Student Loans Compant and noticed something that made me raise an eyebrow. From April 2015 until August 2015 every month I was having approximately 34 pounds added to my outstanding balance (amounts added prior to that are not immediately available to me). From September, however, this figure fell to approximately 21 pounds and has stayed that level consistently over the following months. The reason for this 33% drop in the amount of interest added to the balance is not immediately clear to me (though I am a little out of touch).

Before making what I fear could be a long phone call to the SLC to investigate, I was wondering if anyone might be able to explain the reason for this sudden, large and consistent drop in the amount of interest my repayment amount it accruing.

If I was for a long time paying too much, I would of course want to get this sorted out and have my overall debt reduced accordingly. I suspect though that there is likely to be a far simpler explanation of which I am presently ignorant..

Ed-1

GeneralSpender wrote: »

Hello,

I have a post-1998 pre-2012 student loan with a fixed interest rate of 0.9%. I am now coming to the end of a PhD program conducted in the USA and have thus not paid any of the amount off so far. It has therefore gradually been increasing over the years since I graduated in 2011.

I recently received my annual statement from the Student Loans Compant and noticed something that made me raise an eyebrow. From April 2015 until August 2015 every month I was having approximately 34 pounds added to my outstanding balance (amounts added prior to that are not immediately available to me). From September, however, this figure fell to approximately 21 pounds and has stayed that level consistently over the following months. The reason for this 33% drop in the amount of interest added to the balance is not immediately clear to me (though I am a little out of touch).

Before making what I fear could be a long phone call to the SLC to investigate, I was wondering if anyone might be able to explain the reason for this sudden, large and consistent drop in the amount of interest my repayment amount it accruing.

If I was for a long time paying too much, I would of course want to get this sorted out and have my overall debt reduced accordingly. I suspect though that there is likely to be a far simpler explanation of which I am presently ignorant..

The interest rate is set on 1st September each year to be the lower of that year's March RPI inflation rate or the current bank of England base rate + 1%. The interest rate was 1.5% (bank rate of 0.5% + 1%) until 31st August 2015 and then dropped to 0.9% (March 2015's RPI rate) on 1st September 2015:

http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,6678642&_dad=portal&_schema=PORTAL

March 2016's RPI rate was 1.6%. On 1st September 2016 the rate will change again from 0.9% but what to will depend on the bank of England's base rate at the time. It is currently 0.5% but Brexit may well lead to a cut to 0.25% or even 0% in which case the student loan interest rate will change to 1% above that.

The interest rate has no impact on your repayments. This is solely determined by your income and the repayment threshold which changes on 6th April every year based on the prior year's March RPI rate:

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

The repayment threshold is currently £17,495. It will change to £17,775 on 6th April 2017 (as March 2016's RPI rate was 1.6%). You repay 9% of anything you earn over this threshold.

GeneralSpender

Very clear and incredibly concise answer.

Thanks!