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Are loan repayments 9% or not?

I'm reading this article in the guardian and it says

Clegg also said students were better off under the new system because someone on a wage of £24,000 was paying back an average of £22.50 a month, compared with £67.50 a month under the previous system.

9% of 24,000 is not 22.50 a month. :confused:

Reply 1

Mallika

It's 9% of everything over the £21,000 threshold. So,

24000-21000=3000*9%= £270 a year

£270/12=£22.50 a month

Reply 2

balotelli12

Jeez!!!

Thank god some people understand how it works.

Reply 3

The_Internet

Just to add to the above, tax works in a similar way. ie: you get a personal allowance (I pay no tax for instance :biggrin:

Despite technically earning more than the threshold) Any way, they take your wage minus £21,000 (April to April) and do the calculations from that

Reply 4

nohaynada

Original post by Mallika

It's 9% of everything over the £21,000 threshold. So,

24000-21000=3000*9%= £270 a year

£270/12=£22.50 a month

So if someone earns 24,000 for 30 years, 3000 x 30 = 90,000. 9% of 90,000 = the government only gets back 8100?

WHUT :confused:

Reply 5

Sellsword

Original post by nohaynada

So if someone earns 24,000 for 30 years, 3000 x 30 = 90,000. 9% of 90,000 = the government only gets back 8100?

WHUT :confused:

Well it's likely they're going to get a raise/promotion at some point, but yeah, not everyone is going to be paying back this loan over their lifetime. High earners will be doing most of the paying back as they'll be paying the whole thing back + more taxes.

Reply 6

balotelli12

Original post by nohaynada

So if someone earns 24,000 for 30 years, 3000 x 30 = 90,000. 9% of 90,000 = the government only gets back 8100?

WHUT :confused:

Anyone who starts earning on £35K a year will never pay the loan off.

Reply 7

nohaynada

Original post by balotelli12

Anyone who starts earning on £35K a year will never pay the loan off.

What do students have to earn to be able to pay it off?

Reply 8

Mallika

Original post by nohaynada

So if someone earns 24,000 for 30 years, 3000 x 30 = 90,000. 9% of 90,000 = the government only gets back 8100?

WHUT :confused:

Yep, though realistically your income will increase in the next 30 so they should start to pay more

This could be helpful to you:
http://www.studentfinance.direct.gov.uk/scheme/dgv/pws/repayment-calculator.html

Reply 9

balotelli12