Student loan interest rate

dantera

Hi all! 

I was wondering if anybody knew whether the interest rate calculated on a student loan uses gross or net income? 

A bit of background...

I stopped my part time open uni course a number of years ago when my child was born due to time constraints and have a student loan but much less debt than is typical so I anticipate I'll end up paying the full balance before I retire. I'm on plan 2.

I've recently received a pay rise which will mean I hit the threshold where the rate of interest on my remaining balance will increase to 7.3% from the 4.3% it is at present. 

Id like to pay the loan off asap and will likely make some payments independently of what comes from my salary. I was mainly wondering however if I increase my pension contributions to bring me below the earnings threshold (which I am only just above) would this keep me on the lower interest rate? 

Any help greatly appreciated!!

silvercar

I’ll move this to the student board.

silvercar

https://www.gov.uk/government/news/student-loans-interest-rates-and-repayment-threshold-announcement--5

Seems to suggest that it is the same income that is used to calculate whether and by how much you are over the threshold for repaying.

This sentence “ Variable interest, dependent upon income. RPI (4.3%), where income is £28,470 or less, rising on a sliding scale up to RPI + 3% (7.3%), where income is £51,245 or more.” Looks like it has to be the same income as the same word is used twice on the sentence without any change in definition.

Ed-1

dantera said:

Hi all! 

I was wondering if anybody knew whether the interest rate calculated on a student loan uses gross or net income? 

A bit of background...

I stopped my part time open uni course a number of years ago when my child was born due to time constraints and have a student loan but much less debt than is typical so I anticipate I'll end up paying the full balance before I retire. I'm on plan 2.

I've recently received a pay rise which will mean I hit the threshold where the rate of interest on my remaining balance will increase to 7.3% from the 4.3% it is at present. 

Id like to pay the loan off asap and will likely make some payments independently of what comes from my salary. I was mainly wondering however if I increase my pension contributions to bring me below the earnings threshold (which I am only just above) would this keep me on the lower interest rate? 

Any help greatly appreciated!!

It's gross income. That can only be reduced if your employer offers salary sacrifice which means you give up some salary in return for bigger pension contributions from your employer.

dantera

Hi all, thank you very much for your help! Looks like I'll have to concentrate on paying it down asap!

All the best!