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How exactly does the student loan work?

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    I am basically a Bulgarian student studying in the UK at the moment (2nd year Marketing on a £9000 a year for 3 years scheme) and I am wondering how exactly does the student loan work?

    Basically, when you graduate, they take away a % of what you earn, right? And it is in the following way: If you earn £22,000 (which is £1000 more than the threshold to start re-paying £21,000), they take 9% a year of that £1000 difference, which is £90 a year or around £7,5 a months.

    If I am right (because my gf who has graduated and is currently working, told me all of this), then you have to earn really, really high salaries in order to re-pay the student loan after 25 years and probably not many graduates manage to do so.

    But if that is correct, how do then uni's manage to deal with those student loans that they give to students? That's basically thousands of thousands of student loans given away to students every year. How do universities get their investments back?

    Also another question. If I fail uni, the conditions for re-paying the loan are the same as if I graduate, right? They still take a % of my month salary? What about savings? If I have savings in my Bulgarian bank account (not the UK one), can Student Loan take my savings for the repayment of my loan or they don't touch those money? What if the savings are in my UK account? Same thing?

    I know these are a lot of questions, but I hope that you can help me. Really appreciated.
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    Your savings are ignored. It's purely your salary before tax and national insurance. (NI)

    You're right - it's 9% of anything over £21k per year.
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    (Original post by venom0706)
    I am basically a Bulgarian student studying in the UK at the moment (2nd year Marketing on a £9000 a year for 3 years scheme) and I am wondering how exactly does the student loan work?

    Basically, when you graduate, they take away a % of what you earn, right? And it is in the following way: If you earn £22,000 (which is £1000 more than the threshold to start re-paying £21,000), they take 9% a year of that £1000 difference, which is £90 a year or around £7,5 a months.
    You're correct yeah.

    If I am right (because my gf who has graduated and is currently working, told me all of this), then you have to earn really, really high salaries in order to re-pay the student loan after 25 years and probably not many graduates manage to do so.

    But if that is correct, how do then uni's manage to deal with those student loans that they give to students? That's basically thousands of thousands of student loans given away to students every year. How do universities get their investments back?
    The university gets the money directly from the government, they are not the ones who lend out money. The government of the UK knows that not everyone will pay it back in full and knows that in some senses it will be part subsidising the education of a large contingent of uni-goers - it tries to somewhat offset this by applying interest to the original amount of the loan year on year.

    That way even if some people don't earn enough to repay, those who do will at least offset against that with what would be a longer period of repayment to cover both the loan and the interest applied.

    It's quite similar to why we have tax brackets..

    Also another question. If I fail uni, the conditions for re-paying the loan are the same as if I graduate, right? They still take a % of my month salary? What about savings? If I have savings in my Bulgarian bank account (not the UK one), can Student Loan take my savings for the repayment of my loan or they don't touch those money? What if the savings are in my UK account? Same thing?
    No, they can't take your savings unless you voluntarily agree to paying off your loan with some of those savings or if you were ever found to be evading repayment even though you were making enough to be eligible for repaying - student loans company is fully entitled to making you pay a lump sum on the repayments that you tried to evade if that were to happen.




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    Thanks for the replies!

    What about dropping out of uni? Will the conditions for repaying the loan be the same? Again, a percentage of my salary will be taken, without the savings being touched upon, right?
 
 
 
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