HMRC making money out of student loans

NOWSE

I have just looked at my son's recently received student loan statement and, besides being horrified by the amount of interest being accrued each month, was struck by how his monthly repayments are applied to reduce the loan.
Rather than the money going to reduce the loan each month (as with a mortgage) the money is retained by HMRC until the end of the tax year and then passed to the loan company as a lump sum. As a result my son pays more interest whilst HMRC have use of the money.
If any other loan had such a repayment system there would be uproar.
How is the government allowed to get away with this?

badmemory

If you think that's bad just hope he never has a period of unemployment or ill health and needs to defer. If he does they sell the loan to a debt collector for 10p in the £ or less and they try every trick in the book to not defer it. Lying about anything is their normal method of working. Look for the thread Erudio student loans.

If you think PPI was bad re mis-selling "you aint seen nothing yet". This is going to be the big mis-sell of the 2020s. They have conned our kids, at below 18 in many cases, into signing up for something which they have no way of understanding the consequences of, whilst telling them what a great deal they are getting. Basically the adults involved in this should be ashamed of themselves, but they aren't they are too busy taking their cut.

The above thread should be required reading for any parent whose child is going to have to take out a student loan.

ETA If only HMRC were actually making money out of this, but that would imply a degree of competance. They don't even know until the end of the tax year (actually end of May following the end of tax year) how much has been paid off in most cases.

Lokolo

Maybe if you had done some research you would know that when student loans company receive the end of year tax record for the student, they recalculate the interest. This is based on monthly earnings and the payments are applied on the last day of the month.

Why you're looking at your son's statement is beyond me in the first place, I am hoping he gave it to you rather than you just reading his statement.

Ed-1

Lokolo wrote: »

Maybe if you had done some research you would know that when student loans company receive the end of year tax record for the student, they recalculate the interest. This is based on monthly earnings and the payments are applied on the last day of the month.

Why you're looking at your son's statement is beyond me in the first place, I am hoping he gave it to you rather than you just reading his statement.

Correct (almost).

To be clear: this thread is about income-contingent student loans (not mortgage-style student loans).

The process is as follows:

When a student loan enters repayment status (on 6th April after the course is finished) the Student Loans Company freezes interest on the loans on 6th April every year until they receive the income and repayment data from HMRC a few months after the end of the tax year. They then calculate the interest for the preceding tax year and apply any repayments as if they were received in 12 equal monthly installments on the last day of each calendar month in the tax year.

While the Government do have plans to sell-off pre-2012 income-contingent student loans, unlike the old mortgage-style student loans, they will be much less vulnerable to the underhand tactics of debt collectors as repayment will still be through the UK tax system and the point of contact for borrowers will remain with the Student Loans Company, not with the loan owners.

Income-contingent student loans will be cancelled at age 65 (for loans taken for courses starting 1998-2005), after 25 years (for loans taken for courses starting 2006-2011) and after 30 years (for loans taken for courses starting 2012 onwards). Repayment is 9% of income earned over £17,495 (for pre-2012 loans) and 9% of income earned over £21,000 (for post-2012 loans). There's no messing around with deferment. Earn below either threshold and the repayment is nil. What a deal indeed.

The below document explains all the processes in detail:

http://www.practitioners.slc.co.uk/media/7856/repayment-guidance-chapter-2016-17.pdf

NOWSE

Lokolo wrote: »

Why you're looking at your son's statement is beyond me in the first place, I am hoping he gave it to you rather than you just reading his statement.

What has me looking at my son's student loan statement got to do with you?

If you must know, he showed it to me because I actually give him whatever money has been been deducted in respect of the loan. I do this because do not like the idea of him being lumbered with this debt but cannot afford to repay the loan in full.
But, as I said, what's it got to do with you?

Lokolo

NOWSE wrote: »

What has me looking at my son's student loan statement got to do with you?

Nothing really, I just find it very rude if you had done so without their permission. Bit tetchy aren't we.

missbiggles1

NOWSE wrote: »

What has me looking at my son's student loan statement got to do with you?

If you must know, he showed it to me because I actually give him whatever money has been been deducted in respect of the loan. I do this because do not like the idea of him being lumbered with this debt but cannot afford to repay the loan in full.
But, as I said, what's it got to do with you?

Of course, you may well be paying them money that wouldn't need paying if the outstanding debt is cancelled, which would make your actions, however well meaning, pretty pointless.