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Student Loan Repayment

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    Not sure if this is the best forum for this; if it isn't, please move.

    I've just been onto the student loans repayment website and checked it out briefly. When I was applying for the loan, I hadn't a clue how they take it back and always thought I'd figure it later since in any case, I wanted the loan. And now, it's 'later' and I have to actually figure it out. Talking to others during my degree whenever the topic briefly came up, they didn't seem to know much more than myself but from the jist of what was going round, I got the impression that you start earning more than 15k and they automatically deduct some kind of percentage of your wage each month.

    Having just looked at the repayment website, there's an option to set up a new direct debit. Does this mean that I can decide how much I'd like to give each month? For example, set a base amount I'm comfortable with i.e. say £100 per month and then pay more if I earn more that month (due to overtime hours, etc). Have I got it right in thinking I can decide how much to give back each month rather than there being an allocated amount that I must give back each month?
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    I think the direct debits are only if you want to give a set amount back a month above the minimum that you have to pay, which is 0 if you earn under the threshold.


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    If you're earning over £15k you have to pay back a certain amount (9% of earnings over £15k), this is compulsory, but you can set up direct debits where you can pay back more than what is required so the loan gets repaid quicker.

    Have a look at this link to see how your repayments are calculated.
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    I just read through the link - every time I get a pay-slip, is it my responsibility to ensure I pay 9%? I wasn't aware up until now so if I've missed some payments, am I liable? I don't understand how they can know if I don't pay everytime - not that I don't intend to. Just unsure of how it works.
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    (Original post by Preeka)
    I just read through the link - every time I get a pay-slip, is it my responsibility to ensure I pay 9%? I wasn't aware up until now so if I've missed some payments, am I liable? I don't understand how they can know if I don't pay everytime - not that I don't intend to. Just unsure of how it works.
    No, I'm pretty certain it comes out of your pay automatically, like an extra tax.
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    Also, is it advisable to try and clear the loan asap? I've just done the calculation and I'd owe about £20 this month however yesterday when I thought it'd be upto me to decide, I thought I'd set aside £100 a month - even then it'd clear slowly. I saw the figure yesterday and felt a bit overwhelmed and do want to try to reduce it because its such a lump amount but at the same time, is it unnecessary pressure if they're happy to take ~£20 per month?
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    (Original post by SpicyStrawberry)
    No, I'm pretty certain it comes out of your pay automatically, like an extra tax.
    Oh right okay. That's fine then. I thought I had to actively do something. Thanks for the help As you can see, I was very cluless but I have a much better idea now, thanks.
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    If you can afford to pay more off, then there is no harm in doing so. But, if you have other debts [esp. credit cards] you'll probably be best focusing on those, as they will have a higher rate of interest.
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    (Original post by Preeka)
    Also, is it advisable to try and clear the loan asap? I've just done the calculation and I'd owe about £20 this month however yesterday when I thought it'd be upto me to decide, I thought I'd set aside £100 a month - even then it'd clear slowly. I saw the figure yesterday and felt a bit overwhelmed and do want to try to reduce it because its such a lump amount but at the same time, is it unnecessary pressure if they're happy to take ~£20 per month?
    I'd strongly recommend you prioritise paying off any other debts you may have first e.g. credit cards, because student loans haven't got much interest and there's no pressure to pay them off early. With other bills, you have to pay back regularly regardless of your income.
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    I thought the threshold was if you earned over £21k? When did it become £15k?
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    (Original post by aspirinpharmacist)
    I thought the threshold was if you earned over £21k? When did it become £15k?
    15k's for the old tuition fee level, 21k rate starts in the 2012 academic year
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    (Original post by Moscardini)
    15k's for the old tuition fee level, 21k rate starts in the 2012 academic year
    Ah, that's alright then. In that case, I'm going to sneak back to where the 2012 students belong and stop bothering you...:ninja:
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    If you are financially able to repay your loan early you can. But do not do do if you have any other debts that you are paying interest on at a higher rate.

    If you intermittently have extra cash, put it in an ISA and you can either pay the interest you earn to help overpay your student loan or wait until you have put aside enough to pay the balance of your loan. If not having debt, even a benign student loan type gives you peace of mind, the repay it early if you can afford it.

    Check what the interest rate is going to be for the year, they review it every March and implement the increase in September. If you are on the pre 2012 student loan repayment, then Bank Base Interest rate is used to set the interest rate, it is currently 1.5% but could go up in future substantially if the economy improves. If you are paying loans under the post 2012 rules, your interest will be tied to the inflation rate plus up to 3% in you earn 21k - 40k. So if inflation goes up substantially, your outstanding loan will grow faster. I think if you earn less than 21k and have surplus income and know that you will earn in excess of 40k in the future there is a case for making voluntary one off payments to reduce your loan. This is because you only get charged the rate of inflation as interest. If you are on track to earn more than 40k, you will likely not benefit from the loan being written off after 30 years.

    If you get your loan statement and you work out that there is less than 12 repayments left, if you have the funds, then that is a good reason to repay the outstanding amount in a lump sum. This is because your tax code will be set for the year, student loan company only tell the HMRC at the end of tax year to stop collecting loan repayment. So if you clear the loan after the 1st month payment from your salary, you may make another 11 unnecessary payments. Which you will have to reclaim from the student loan company. You might not pick up on this overpayment until you get annual statement.
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    (Original post by aspirinpharmacist)
    Ah, that's alright then. In that case, I'm going to sneak back to where the 2012 students belong and stop bothering you...:ninja:
    (I'm also a 2012 student :P i just like lurking)
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    http://www.moneysavingexpert.com/stu...nt-loans-repay

    Basically... it says it would be silly to do so! It's better to save the money (as above).
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    (Original post by linkdapink)
    http://www.moneysavingexpert.com/stu...nt-loans-repay

    Basically... it says it would be silly to do so! It's better to save the money (as above).
    That assessment is based on you remaining below 40k for the duration of your working life and a future government not retrospectively changing the rules.

    It is not silly not to want to have debt, but you should not cause yourself hardship to repay it early. Nor should it be a reason for not going to university.
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    (Original post by Moscardini)
    (I'm also a 2012 student :P i just like lurking)
    Lurking is fun. *hides under lily pad and waits*
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    (Original post by edjunkie)
    If you are financially able to repay your loan early you can. But do not do do if you have any other debts that you are paying interest on at a higher rate.

    If you intermittently have extra cash, put it in an ISA and you can either pay the interest you earn to help overpay your student loan or wait until you have put aside enough to pay the balance of your loan. If not having debt, even a benign student loan type gives you peace of mind, the repay it early if you can afford it.

    Check what the interest rate is going to be for the year, they review it every March and implement the increase in September. If you are on the pre 2012 student loan repayment, then Bank Base Interest rate is used to set the interest rate, it is currently 1.5% but could go up in future substantially if the economy improves. If you are paying loans under the post 2012 rules, your interest will be tied to the inflation rate plus up to 3% in you earn 21k - 40k. So if inflation goes up substantially, your outstanding loan will grow faster. I think if you earn less than 21k and have surplus income and know that you will earn in excess of 40k in the future there is a case for making voluntary one off payments to reduce your loan. This is because you only get charged the rate of inflation as interest. If you are on track to earn more than 40k, you will likely not benefit from the loan being written off after 30 years.

    If you get your loan statement and you work out that there is less than 12 repayments left, if you have the funds, then that is a good reason to repay the outstanding amount in a lump sum. This is because your tax code will be set for the year, student loan company only tell the HMRC at the end of tax year to stop collecting loan repayment. So if you clear the loan after the 1st month payment from your salary, you may make another 11 unnecessary payments. Which you will have to reclaim from the student loan company. You might not pick up on this overpayment until you get annual statement.
    Yeah, my dad advised the same sort of thing and told me to not take pressure when there isn't any and since the interest rate is low, I shouldn't worry to pay it back asap since as a person who wants to own property (long term goal) I may have to take loans out in the future so its better to have money to spare that I can pay back slowly without a huge interest rate. I think I just freaked a little finding out I owe so much at the start of my 'adult life' but after reading this and talking to my dad, I've calmed down and I'll take it easy with the repayments. Thanks for your help and to everybody else as well.

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Updated: June 29, 2012
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