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Original poster

Student loan repayment query

29 replies

CaptainBeakyandhisband · 30/08/2022 12:33

I’ve just had the very welcome surprise of a letter that my student loan will finish repaying in the next 12 months. I am now being encouraged to move from the salary sacrifice to the direct debit scheme but am trying to work out if this is some kind of con. Moving to the direct debit reduces the monthly payment to 60% of the current monthly amount and extends the remaining term to 24 months - and seems to increase the actual amount repaid by 20%. My understanding is that the SLC repayment is taken before tax, but not sure if I’ve got this right, but ultimately it appears that it’s going to cost me more to switch. Does anyone know? Should I just leave it as it is and then pay off the balance early next summer?

OP posts:
Original poster
CaptainBeakyandhisband · 30/08/2022 18:02

Anyone??

OP posts:
modgepodge · 30/08/2022 18:32

I think they suggest you do this because their admin isn’t great and people end up overpaying staying on the PAYE one and having to claim back. I think they suggest this to avoid overpaying. However as you say, with interest you don’t want to be extending the term of the loan unnecessarily, and on PAYE I think it comes out before tax so you pay less tax (I could be wrong on this).

if overpaying and having to wait to claim it back isn’t a problem for you, it sounds like you’d be better of continuing as you are.

but I am no expert. I’m not sure I’ll ever pay off my student loan 🙁

Original poster
CaptainBeakyandhisband · 30/08/2022 18:40

Thanks. So I owe £3600, but if I take their DD repayment plan for the required amount and duration it will be £4300!

my student loan has really shot down in the last year or so. I thought I would be much older by the time it was paid. But I went to uni pre-2006 so that makes a difference

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General money
kitkatkitkatkitty · 30/08/2022 18:50

You can overpay directly on gov.uk website so you'd be in the same position

Original poster
CaptainBeakyandhisband · 30/08/2022 18:53

You mean just pay the £3600? Not sure I can manage that just yet, but could be useful to pay the bulk off closer to the time.

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kitkatkitkatkitty · 30/08/2022 20:46

Oh no, I meant if they have reduced the payments by transferring them to direct debt and increasing the term and so interest... you are able to over pay by any amount that suits.

I've just started to look into this just to try and clear it a bit quicker and didn't realise how easy it was to make one off payments.

Might be an option for you too?

Queenie6655 · 30/08/2022 20:57

If you could
Can you call them up and pay in full over the phone?

Just wondering
I'm in sane boat too

anotherpotoftea · 30/08/2022 21:01

I set up a direct debit and it’s for the same amount I was paying through my payslip. It’s not taken off after tax. Give them a call?

Original poster
CaptainBeakyandhisband · 30/08/2022 21:03

Yes - I’m wondering if the most sensible plan would be to save half the remainder over the next 6 months or so and just pay in full towards the end of the FY

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Queenie6655 · 30/08/2022 21:03

Snap thinking the exact same

My loan is around 2300

Can't wait to get rid of it

Queenie6655 · 30/08/2022 21:05

Stick it on my interest free credit card

Gosh I was lucky now looking back
No tuition fees
Bursery of 10k for my pgce

And a scholarship for my doctorate
Otherwise no way could I go to uni

Headabovetheparakeet · 30/08/2022 21:06

Just keep paying as you are and try to clear it with a lump sum once it's down to a manageable amount. You may end up overpaying a month (I did), but it's easy enough to get it back.

Original poster
CaptainBeakyandhisband · 30/08/2022 21:09

My loan was pretty sizeable (for that time period) - full maximum loan amount as I came from a low income background (but tuition was paid for me). Think I started with £16k borrowed but didn’t earn enough to repay until I was 25. It will have taken 13 years to pay off overall.

I’m a bit reluctant to take it from savings just now as I have tuition for a masters to pay.

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Horcruxe · 30/08/2022 21:09

I started getting the emails and letters as well. But they started about at least a year before the loan would end.

I calculated how long it would take til the loan was about 2-3times my usual monthly payment and then just did a lump sum payment.

justanotherlaura · 30/08/2022 21:27

I had a work share scheme payout that ended up paying off the end of my student loan and a bit more, I called them up and they were really quick to refund, the payment came off again the month after as it was too close to payday to stop it but I called them up again and was refunded within the week

I'm pretty sure you can set the direct debit to anything over the minimum so you could keep it the same as now if you wanted

Original poster
CaptainBeakyandhisband · 30/08/2022 22:50

I guess the amounts can probably be changed once the DD is setup, it’s just not clear and I don’t want to make a change that I can’t undo.

im also a little concerned that the interest rate is set in September, so it might really rocket next month with inflation being so high.

OP posts:
solarbirdscalm · 30/08/2022 23:23

CaptainBeakyandhisband · 30/08/2022 22:50

I guess the amounts can probably be changed once the DD is setup, it’s just not clear and I don’t want to make a change that I can’t undo.

im also a little concerned that the interest rate is set in September, so it might really rocket next month with inflation being so high.

The interest rates have already been set, the government agreed to cap them. www.moneysavingexpert.com/news/2022/08/student-loan-interest-cap-september/

Original poster
CaptainBeakyandhisband · 31/08/2022 06:17

Thanks @solarbirdscalm I didn’t realise. But gosh those plan 2 loans are criminal, especially for people earning over £50k

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minifigures · 31/08/2022 06:40

You can just ring and pay off the balance at anytime, but if your still paying it via payroll you will overpay and have to reclaim.

It's. A great feeling when it's gone!

Original poster
CaptainBeakyandhisband · 31/08/2022 06:58

Yeah, it’s just the values and duration for switching to direct debit would be considerably more than I actually owe. I’m assuming that in reality the duration would be shorter and just stop when I reach the end of the amount but it’s so unclear. I think I will likely end up paying the balance when it gets a little lower, in a few months time.

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Trying81 · 31/08/2022 07:29

It isn’t salary sacrifice and doesn’t come out before tax (I wish!!)

It can take them 3 months to let payroll know to stop deductions, so I would change to DD but closer to the time

HPandTheNeverEndingBedtime · 31/08/2022 07:39

As it doesnt come out before tax and you are so close to the end if your job is relatively secure you could beat the interest rates by taking out a very low interest loan or CC and paying it off with that in full, which would allow you to spread the cost over a longer period of 0% or low interest without accruing the interest.

I'm envious, I have both Plan 1 and 2 loans and don't think I'll ever pay them off. The interest added onto the balance is always far more than I pay off a month.

Original poster
CaptainBeakyandhisband · 31/08/2022 08:17

Thanks both - I was trying to work out the answer to that question yesterday, I had sort of worked it out from my payslip but glad to have it confirmed.

I also didn’t think it would ever be paid off (I’ve always opted not to pay it down before for that reason). It was a very welcome surprise (and I initially assumed it was an error).

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CuriositysCat · 29/03/2023 19:36

I realise that this is a very old thread but resurrecting in case someone can answer my question.

DH is due to finish paying off his student loan v soon (hoorah!). Trying to work out how much better off we’ll be but confused by the tax. He has been paying approx £350 pcm. Will he get £350 extra in his pay packet? Or will this be taxes? He’s in the 40% tax bracket. Would this mean that we get 60% of the £350? Or is it scaled to allow for tax allowance in some way? Thank you.

Anotherturnipforthebooks · 29/03/2023 20:20

I think it's taken after tax so you should get all £350 back once repayments finish.