Student Loan Repayment Vs Lottery Win?

Ed-1

Grumpy_chap said:

I am not knowledgeable so only reading the links and comments from @QrizB and @silvercar.

Reading those sources, the win itself would appear not to be subject to SL deductions but the interest earned subsequently would appear to be subject to SL deductions.
AIUI, the win would not require the individual to complete SA but the subsequent interest income (unearned income) would require SA.  
The link provided appears to refer to SL deductions applying when unearned income exceeds £2k AND SA is required, which would be met in the case of living of interest / investment returns from the lottery win but not the actual win itself.

You are only required to make student loan repayments on unearned income (the full amount of unearned income if it's over £2,000 in the tax year) if you are in self-assessment. If you are not in self-assessment you are not required to make any additional repayments. Simply having unearned income from interest does not require you to be in self-assessment.

Grumpy_chap

Ed-1 said:

You are only required to make student loan repayments on unearned income (the full amount of unearned income if it's over £2,000 in the tax year) if you are in self-assessment. If you are not in self-assessment you are not required to make any additional repayments. Simply having unearned income from interest does not require you to be in self-assessment.

Yes, but the OP was talking about a lottery win of sufficient size that means the individual is

JakeHyde said:

just about able to live off interest for the time being.

For most people that will be interest income above £10k and therefore require the individual to register for SA:
https://www.gov.uk/apply-tax-free-interest-on-savings#

"You need to register for Self Assessment if your income from savings and investments is over £10,000"

That would seem to support my interpretation that the unearned income exceeds £2k AND SA is required, hence SL deductions apply.

Ed-1

Grumpy_chap said:

Ed-1 said:

You are only required to make student loan repayments on unearned income (the full amount of unearned income if it's over £2,000 in the tax year) if you are in self-assessment. If you are not in self-assessment you are not required to make any additional repayments. Simply having unearned income from interest does not require you to be in self-assessment.

Yes, but the OP was talking about a lottery win of sufficient size that means the individual is

JakeHyde said:

just about able to live off interest for the time being.

For most people that will be interest income above £10k and therefore require the individual to register for SA:
https://www.gov.uk/apply-tax-free-interest-on-savings#

"You need to register for Self Assessment if your income from savings and investments is over £10,000"

That would seem to support my interpretation that the unearned income exceeds £2k AND SA is required, hence SL deductions apply.

Only if it's taxable interest.

JakeHyde

la531983 said:

JakeHyde said:

la531983 said:

To be fair if I won a shed load of money I would be clearing the student loan straight off anyway! 

Interest in a savings acc. is much higher than the interest on a student loan, at least thats what Uncle Martin told me. 🤣🙈

Well yes but if I quit work off the back of winning millions and I still had a student loan debt I morally wouldn't feel right leaving it outstanding.
I would pay the mortgage off so why not everything else? 

It's not a massive amount, not exactly a jackpot, just enough to buy myself a small modest house instead of renting, and make sure my elderly dad is safe and secure. We lost Mum last Christmas, out of nowhere, so Dad needs me now more than ever.

Respectfully, I'm not interested in what is 'moral', but more what is 'legal'. I met a teacher from my old Uni, and she admitted, it was the first time they ran the course, and didn't exactly know what they were doing, and it felt like it too.  But I am still stuck with the bill regardless.

I'm just trying to approach this methodically, instead of emotionally.

https://www.youtube.com/watch?v=IJKFu1yEKBc&t=202s

After watching this older MSE video on Plan 1 loans, and reading some of the more recent comments, it's made me think, at 6.25% interest, maybe it WOULD make sense trying to clear the debt, after all.  

I 'only' owe £16,500 which has been about £4k interest over 20+ years. But now at 6.25%/year, I'll be incurring over £1k/year interest, is that right?

It looks like my loan won't be written off until I'm 65, that's just under another 20 years. So it looks like there's no hiding from it. 

I've never previously earned enough to qualify paying back my loan, I've never been a high earner. Basically an unpaid carer for my parents for the past 10 years.  So I'm trying to do the best I can, to protect my savings, and give myself a future.

But... 6.25%. urgh! 😖  I think I might have to bite the bullet. What do you think?

@QrizB @Silvercar Thank you for all your advice, it has been invaluable. 

silvercar

If you use a chunk of it to buy a house, you won't have that much interest, so work out what your likely yearly payments will be. Then forecast your total income going forward and decide if you will have repaid the loan (current outstanding amount I would use) by the time it is written off. If you will have paid off the loan, then you may as well pay it now and save having to pay some interest. If you won't have paid off even the current balance, you may as well let it run its course.

QrizB

I agree with silvercar's post immediately above.

Work out your likely SL repayments for the next 20-ish years, and compare these to what £16k in the bank (or ISA, or whereever) is likely to earn you (after tax) over the same period.

Then decide whether to pay off the loan, or just make the payments until you're 65.

JakeHyde

@QrizB @silvercar 65 years old... urgh! Haha! That's 20 years too many, of hiding under a duvet! 
Great advice thank you so much.  Also thank you @Ed-1  I didn't realise there was a 'Page 2', until now! haha
Are student loans deducted from income, before tax?
Sorry I'm abusing your knowledge far too much. You've all been awesome! 

silvercar

JakeHyde said:

@QrizB @silvercar 65 years old... urgh! Haha! That's 20 years too many, of hiding under a duvet! 
Great advice thank you so much.  Also thank you @Ed-1  I didn't realise there was a 'Page 2', until now! haha
Are student loans deducted from income, before tax?
Sorry I'm abusing your knowledge far too much. You've all been awesome! 

Sadly not.

JakeHyde

silvercar said:

JakeHyde said:

@QrizB @silvercar 65 years old... urgh! Haha! That's 20 years too many, of hiding under a duvet! 
Great advice thank you so much.  Also thank you @Ed-1  I didn't realise there was a 'Page 2', until now! haha
Are student loans deducted from income, before tax?
Sorry I'm abusing your knowledge far too much. You've all been awesome! 

Sadly not.

  Ooooph, that stings! 

JakeHyde

la531983 said:

To be fair if I won a shed load of money I would be clearing the student loan straight off anyway! 

Sadly with interest being at 6.25% I think paying it off would be the smartest option. Without any Martin Lewis secret insight/logic, I can't see a smarter way to deal with the debt. No savings accounts are offering more than the 6.25% interest.