Student Loan vs Direct Debit

[Blueheartpinkheart]

I am looking for a bit of advice from anyone who has swapped their student loan from salary deduction to direct debit.
I am in the last 12 months and the SLC keeps asking me to switch to DD in order to avoid overpayment.
£162 is deducted from my wage and the DD payment is £116. Is the wage deduction before or after tax? Will I be better or worse off in the long run paying DD?
When my loan is fully repaid, will I have the extra £162 or will it be £116?
The whole thing is mind boggling so any help would be much appreciated! Thank you.

I don’t understand all of your question but this is how it worked for me - direct debit replaced the the deduction from wages. You will be no worse off doing it this way, you may have a bit of an overlap when they start the direct debit but may not cancel the wage deduction in time. This may mean you have a month where you pay both but both will come off the owed amount. I think I ended up with an overpayment of about £30 once it was all sorted and got it back within a couple of months. It’s much easier for them to control the direct debit and see how much debt you have left - the deduction from wages often only provides an annual view so that’s while they are keen to move people off and avoid the hassle of overpaying. Hope that helps.

Definitely do it! You won’t be any worse or better off in terms of tax. The direct debit is lower but you can always top it up to what you’ve currently been paying. The best thing about it is that it means you won’t overpay when you come to the end of your loan.

In contrast, the way they do it now is that they set the direct debit for three months’ time so that your payroll will definitely have been cancelled. So there shouldn’t be any overlap.

Thank you for the responses so far. I'm not worried about an overlap although I'm sure that can happen. My thoughts are, what if the £162 they are currently deducting from my salary is before tax and when I stop paying my loan via my wage, I won't have that extra £162 in my bank because they will tax that along with the rest of my wage. Sorry if it's not making sense.
Have you all swapped to DD?

The student loan is deducted after tax in either scenario. So you won’t be taxed more.

Say currently you get paid £1000 a month. £200 goes out in tax, £100 NI and £50 student loan. You’d get £650 in your bank account. If you switch to direct debit then you’ll get £700 in your bank account.

Yes I swapped to DD and to be honest it has worked out really well. As you say, for some reason the direct debit is less than them taking it directly out of your pay. I did tell myself I’d make additional payments to make up the difference but actually it’s been really helpful having a bit of extra cash each month!

Agree that you should do it.

The overpayment usually occurs because it can take a while for your records to be updated, so you carry on having your student loan deducted even though it has been fully repaid.

It was a few years ago for me, but there was a 3 month gap between telling them I want to pay by DD, and the DD payments being taken. Again, it was to address the risk of any overpayment.

This is a great explanation, thank you.