Student Loan Arrears Accrued

Temiska

I recently moved abroad for work commitment, and the student loan company increased my repayment schedule since I moved. I called them to discuss that I cannot afford to pay the increased amount, and after assessing my situation we agreed to £80-100/month regularly without missing payment. They said you will have to pay the arrears accrued when your situation improves. However, the arears are accumulating very fast and with the interest rate being high, the payments I am making is not reducing my load at all. I am not sure what that means if I am not able to pay the arrears? 

if you have and advise, please help. Thanks in advance

silvercar

Unless you are going to be in a position where eventually the loan is cleared in full, then don't worry about the high interest rate on the loan or that you are not reducing the loan at all. This will get written off eventually.

You do have to worry about the arrears and the payments you currently should make. When abroad, the thresholds are adjusted for the cost of living in the country you are in, to ensure some parity between repayment levels. Either your living costs are high, for the country you are in or your lifestyle is especially expensive.

At the time the loan is due to be written off, you will need to have cleared any arrears that have accrued, but  not the actual loan, so concentrate on that. Is your income likely to increase? Will you be coming back to the UK at all? 

Temiska

@slivercar, thank you for the prompt response. 

Yes, the living cost here is very high hence I am struggling. The thing is when I called student finance company they agreed to reduce the amount I can pay monthly but never explained about arrears and what they meant, or if the current 6.25% interest applied to the arrears as well as to the main repayment amount.

i will have to call them again for clarification. They keep sending me emailed asking to make payment even if on the phone they agreed for the amount I can pay. 

it is strange, this would have not happened if I lived in UK.

silvercar

Temiska said:

@slivercar, thank you for the prompt response. 

Yes, the living cost here is very high hence I am struggling. The thing is when I called student finance company they agreed to reduce the amount I can pay monthly but never explained about arrears and what they meant, or if the current 6.25% interest applied to the arrears as well as to the main repayment amount.

i will have to call them again for clarification. They keep sending me emailed asking to make payment even if on the phone they agreed for the amount I can pay. 

it is strange, this would have not happened if I lived in UK.

More guidance here: https://www.gov.uk/government/publications/overseas-earnings-thresholds-for-plan-2-student-loans

if slc have accurately recorded your income, then you should make the payments that were calculated against this. If you can’t afford that at the moment, then in time you will need to make up the missing amount. Your loan won’t be written off while you have arrears. Any arrears will attract the current standard interest rate for the loan. Although they interest is applied to the arrears and so increases the loan, I’m not sure if the interest on the arrears specifically needs to be cleared before write off, or whether it just forms part of the general interest charged. But you definitely need to pay the arrears themselves at some point.

nokia1100

Did you read the small print about permanent gap years when you took out the loan? How much (roughly) is the balance?