Student Loan Repayment in Wales - Lower sums

Bigsey

My two sons owe £15,000 and £10,000 respectively for various reasons on their student loans, yet reading the advice on repayment, the sums being used in the advice appear to be much higher. Both live and have studied in Wales. One has completed a degree (the £15k) and one has only completed year one and is not returning to his studies.

I am wondering what the advice is regarding these lower value loans, whether to pay them off in full, pay them via a 0% credit card and manage them that way, or utilise the advice to only pay when earning for each exceeds £21,000. Each son currently earns less than the £21,000 threshold, yet my main concern for these lower values loans is that the 3.1% interest currently being applied will soon mount up. I am also concerned that 2021, when the threshold and other elements may change and want to clear the debt if it's the most appropriate thing to do.

Many thanks all in advance.

Bigsey

timeuk

If you are a student in Wales who studied at university in the year 2010/11 or 2011/12 then you will be happy to hear that you may be able to take £1,500 off of your loan repayments.

It is part of a new initiative that means if your first payment to the student loans company is over £50 they will deduct a total of £1,500 from your loan amount. If you pay back under £50 with your first repayment then you will have an amount lower than £1,500 deducted (dependent on a number of factors).

The discount applies to a maintenance loan taken out from Student Finance Wales in the years stated above and can only be deducted with the first repayment of your loan.

Here at Save the Student! we would advise you to try your best to make sure that your first loan payment is £50 or above, whether you are in work or not. Overall, the deduction will not only save you the initial cost but also the interest that may be added.

Are you eligible for the maintenance loan discount?
Below is a list of the criteria that you need to pass in order to be eligible for the maximum discount:

Welsh student
Received all installments of the maintenance loan in the academic years 2010/11 or 2011/12
Makes the first loan payment of £50 or above (can be less for smaller discount)
How do you make the first payment?
The first payment can be through your employer or through yourself. Your employer will make the payment for you at 9% of your earnings (although you could ask them to increase it to £50 for the first payment).

If you are currently unemployed or still in university then you may want to make the payment yourself. This can be done online on the Student Finance Wales website or over the phone.

All in all, you can pay by credit or debit card, direct debit, standing order, through the tax system, i.e. PAYE or Self-Assessment or cheque.

The minimum payment is £5.

How much of your Loan will be cancelled?
According to the Welsh Student Loans Company, the calculation to work out the amount of your Maintenance Loan that is cancelled is complex and depends on:

the value of your first repayment;
the amount of Maintenance Loan you took out in academic year 2010/11 or 2011/12; and
your total outstanding balance at the time you make your first repayment.
You can check on the Welsh Student Loans website here in order to get a better idea of how your individual case would be handled.

Bigsey

Many Thanks time. My sons have already made a partial repayment to reduce the amount by up to £1500.

They studied 2013-16 (degree completed) and 2015-16 (on studied year 1) respectively.

Mogley

Whilst your sons are earning less than £21k, the loan will be increasing in value by inflation. Currently that rate is 1.6% but this is rising to 3.1% in September 2017. Interest rate history provided in this link.

If you have the funds readily available to pay off their loans for them and have no other use for that money then by all means help them out.

However, if like most people you don't then my general opinion in this situation is to:
1) Make sure they live within their means (use these forums to make the most out of their hard earned cash)
2) Save for a deposit for a house using the Help to Buy ISA or Lifetime ISA. 25% bonus from the government beats inflation at 3.1%.
3) Take advantage of workplace pensions and salary sacrifice where possible to keep taxable earnings low.
4) Pay the 9% contributions through PAYE when salary is above the threshold (currently £21k).
5) When they have their own house, are living within their means and have a good savings pot (so as not to go into debt for any reason), consider overpaying the student loan.
6) Do not consider going into debt to pay off the student loan even if it's at 0%!! The student loan terms always beat any other form of credit.

I graduated in 2003 and am due to finish repaying my student finance this year. I have never worried/considered overpaying. Although the payment thresholds have changed over the 14 years, other terms and conditions have remained the same.

ViolaLass

Martin's advice still stands, even if they owe less than in the examples given.