Student Loan Repayment Threshold (monthly or annual)

Payments are due with each pay period not annually

andymet87 wrote: »

Morning all,

My wife and I are just reviewing our finances... we are both company directors and receive minimal salary plus dividends. I have paid off my loan but my wife has a considerable amount outstanding. She has an undergraduate Plan 1 loan.

The government website states that "The thresholds [for repaying] are £364 a week or £1,577 a month (before tax and other deductions)". There is no mention of an annual threshold.

Given the salary/dividend income she will be doing a self assessment tax return at the end of the year. Please can someone advise if the student loan repayment threshold can also be interpreted as being £1577 x 12 months, so £18,924 over the course of a year?

(I appreciate that the threshold is reviewed every financial year)

Thanks in advance! :beer:

The threshold is annual but you pay back each month based on how much you are above the monthly threshold. This can cause problems when people are not paid equal amounts each month and earn close to the thresholds (may be the case for you?).

Explained in this link
https://www.moneysavingexpert.com/team-blog/2018/12/student-loan-borrower--why-working-extra-shifts-or-getting-a-bon/

Imagine you earn 1250 every month (15000) per annum, since you earn under the threshold therefore you pay nothing back.

If one month you got an extra 3000 bonus you would pay loan repayments if £240 (9% of 4250-1577). How we at the end of the year, since your earnings are lower than threshold (only 18000) you can claim back the repayments.

However - Once your annual salary goes over the threshold you cannot reclaim any overpayments, even if you paid back more than you “should have” based on your annual salary.

In the example above if the bonus had been 4200 you would pay £348 (9% of 5450-1577). At the end of the year you have earned 19200, above threshold, therefore cannot claim back.

However if you had been paid 1600 per month (annual 19200) you would only have paid back £25 (12 x 9% of 1600-1577).

N. B. This also impacts people working less than a full tax year.

Hope that helps/actually makes sense!