How do repayments work

nheather

My son started university in 2012, the first year of Plan 2. He has a learning disability so has had difficulties along the way and has just graduated - but he got there and has secured a job graduate job so really well done to him. :T

The past academic year was limited to completing an assignment report so no actual university attendance. He completed that work in Feb 2018 but clearly had to wait until July for the degree award.

He had already secured the graduate position to start in Sept 2018 but the company offered him the opportipunity to work from March 2018 on a lower paid intern-basis (below the replayment threshold).

In September he started the graduate role proper and is now earning above the threshold.

Yesterday he received a letter from SLC informing him that he is due to start making repayments (the 9% on earnings above the threshold) from April 2019.

That all makes sense but I have some questions

1) how does his employer know to start taking deduction from next April rather than now
2) if they do may payments now, can he (should he) reclaim them back from SLC
3) does his earnings now affect the interest rate (admittedly the increase would be small anyway) or does that rule only kick in from April 2019
4) if they do take payments now does that mark the start of the 30 year clock or is that still April 2019

He also has a lot of disposable income at the moment. He is living at home and we aren’t charging him anything (nor do I want to). I’ve already advised him to pay a good sum into the company pension to maximse the employer contributions. He already has a good car sorted so he coukd really do with some idea about what to do with the rest of the money.

Of course there is paying off the student debt, but his is quite big because of tye extra years he has done. It will never be paid off under normal repayment arrangements so I’m not convinced its the best use of his money - would he just be paying off money tyat would ultimately get written off anyway. It seems to me that paying it off is only worthwhile if you can make a big dent in it and you think your career is going to successful and high paying in the future.

Many thanks for any help and advice.

Cheers,

Nigel

Ed-1

nheather wrote: »

1) how does his employer know to start taking deduction from next April rather than now

HMRC issue a 'start notice' to his employer. His employer should also have given him a starter checklist to fill in which woukd ask if he has a student loan for a course starting in September 2012 or later and whether he left the course before 6th April.

2) if they do may payments now, can he (should he) reclaim them back from SLC

Yes. The plan 2 threshold is £25,725 in 2019/20.

3) does his earnings now affect the interest rate (admittedly the increase would be small anyway) or does that rule only kick in from April 2019

Earnings only affect the interest rate from 6th April after leaving the course. The rate is the maximum RPI+3% until then. However the system is under review so the interest rate formula may change next year.

4) if they do take payments now does that mark the start of the 30 year clock or is that still April 2019

The write off policy is currently the 30th anniversary of the date the borrower became liable to repay. That's 30 years following 6th April after leaving that course.

Would he just be paying off money tyat would ultimately get written off anyway.

Yes

Answers in bold above.

agrinnall

First of all, congratulations to him for graduating and for securing a good job. that's a great achievement.


Ed has answered your main questions, but I thought I'd address your later points.

nheather wrote: »

He also has a lot of disposable income at the moment. He is living at home and we aren’t charging him anything (nor do I want to). I’ve already advised him to pay a good sum into the company pension to maximse the employer contributions. He already has a good car sorted so he coukd really do with some idea about what to do with the rest of the money.

He should look at some of the options for saving to buy a property, Lifetime ISA and Help to Buy ISAs, which are basically free money from the government.

It seems to me that paying it off is only worthwhile if you can make a big dent in it and you think your career is going to successful and high paying in the future.

I'd agree with your assessment, and if you read Martin's guide it'll probably come to the same conclusion.


https://www.moneysavingexpert.com/students/repay-post-2012-student-loan/

raigee

Thanks for such reply!