Repaying your student loan 854
by Admin
Posted on 09-12-2022 10:10 AM
No. This is a common misconception about student loan repayments, but it has the potential to be quite alarming. Your postgraduate (and undergraduate) loan repayments will only ever be taken from the income you earn over your threshold. For example: if you earn £25,000 in one
year
and have an english postgraduate loan, you will be eligible to make repayments during that year. This is because £25,000 is above your repayment threshold of £21,000. However, you will only repay 6% of £4,000 (your income over £21,000) not 6% of £25,000 (your full salary).
This is the difference between repaying £20 a month or repaying £105 a month - quite significant!.
Postgraduate loan repayments started from april 2019, and in very basic terms, student loan repayments of this type of loan are due at a rate of 6% for all the 2019/20, 2020/21, 2021/22 and 2022/23 tax years : on your earnings over £21,000 a year, whether from employment or self-employment (note that your earnings are calculated before taking off tax, national insurance contributions (nic) or pension contributions). On other income over £2,000 a year if you are required to fill in a tax return under self assessment and have total income above the £21,000 repayment threshold. However, the calculations of the repayments are more complicated if you are still repaying a plan 1, plan 2 or plan 4 student loan.
You'll start repaying your loan in the april after you've finished or left your course, as long as your income is at least £20,195 per year (for academic year 2022/23), £1,683 per month or £388 per week (before tax and other deductions). Bear in mind that this income threshold changes each year. Your repayments will be 9% of your income above the threshold. Northern irish postgraduate loans are combined with undergraduate student loans for repayment purposes, so you'll make a single monthly or weekly payment of 9% of your income above the threshold, not two separate payments. If you leave your course early and your loan has already been paid to your university, you'll have to repay the amount that has been overpaid regardless of your income.
The uk repayment threshold is £21,000. Repayment amounts will be 6% of income above the relevant threshold. Students also repaying undergraduate student loans will repay both concurrently (total of 15% deduction from salary). Interest will accrue at a rate of rpi +3%. Repayments for postgraduate loans will start from 6 april the academic year after you finish your course. *based on repayment thresholds and percentages for students who started an undergraduate degree on or after the first september 2012 (9% of income above £27,295 for undergraduate loans). Full details explaining the repayment of postgraduate loans can be found on the student loans company website.
How much you repay
You have a postgraduate loan and a plan 2 loan. Your annual income is £28,800 and you are paid a regular monthly wage. This means that each month your income is £2,400 (£28,800 divided by 12). This is over the postgraduate loan monthly threshold of £1,750 and the plan 2 threshold of £2,274.
Your income is £650 over the postgraduate loan threshold (£2,400 minus £1,750) and £126 over the plan 2 threshold (£2,400 minus £2,274). You will pay back £39 (6% of £650) to your postgraduate loan and £11 (9% of £126) to your plan 2 loan. So your total monthly repayment will be £50.
Warning: if you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit, a hire- purchase agreement, a consumer-hire agreement or a bnpl agreement in the future. Warning: the cost of your monthly repayments may increase. Apr stands for annual percentage rate. Lending criteria, terms and conditions apply. Cost of loan example: loan repayments are deferred for the first 12 months but interest will apply on loan balance from the date of first drawdown. The indicative cost based on an interest rate of 5.