Student loan interest/repayment a scam?

qqg3

Can't believe I only just noticed this.

HMRC deduct money from my paycheck every month for student loans repayment, but then they sit on it until the end of the financial year before handing it over to the Student Loans Company as a lump sum.

Meaning, throughout the year, SLC are applying interest each month based on a 'static' balance that I have effectively paid money toward?!

I always assumed my monthly student loans repayments were applied directly rather than being held by HMRC (who I assume also make bank on the interest of that balance themselves).

Net result, we get screwed over because excess interest is being applied :mad:

How did this system come to be and why are more people not in uproar?

IAmWales

Have you only just started paying? It's nothing new.

Complain to your MP if you're not happy. They won't/ can't do anything about it but at least you'll have made your point known.

Birdie100

Just to reassure you- when HMRC hand it over to SLc they also report the date(s) the payments were made to them, so the interest is then calculated as if the payment was made on the day you were paid.

Shakin_Steve

The way I look at it is: For most people, if you decide you want a degree, you are going to be paying out 9% of everything you earn over £21K for 30 years (at today’s values). The actual size of the debt is irrelevant.

Ed-1

Birdie100 wrote: »

Just to reassure you- when HMRC hand it over to SLc they also report the date(s) the payments were made to them, so the interest is then calculated as if the payment was made on the day you were paid.

Nearly. The student loan repayment regs state that interest is to be calculated as if the repayment had been received in equal monthly installments on the final day of each calendar month in the tax year.