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Student loan - paying it off/closing it down

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So.... you hear plenty of stories of a Student Loan not bring closed down properly, with the SLC continuing to take payments when it is all paid, and taking months to refund it etc etc.

 

I’d be grateful if anyone with experience of closing down their Student Loan without getting shafted by SLC could share their top tips. 

Thanks!

 guy127917 20 Sep 2018
In reply to nickinscottishmountains:

Write them a letter saying you expect to pay off within a year and you’d like to switch to direct debit at your current repayment amount. They will adjust it a bit and free. This will cease when you have paid it off. Do it about 12 months before paying it off because it takes them ages to get it sorted. If you get paid bonuses or a variable amount each month you’ll probably still pay too much and have to claim it back!

 mal_meech 20 Sep 2018
In reply to guy127917:

> Write them a letter saying you expect to pay off within a year and you’d like to switch to direct debit at your current repayment amount. They will adjust it a bit and free. This will cease when you have paid it off. Do it about 12 months before paying it off because it takes them ages to get it sorted. If you get paid bonuses or a variable amount each month you’ll probably still pay too much and have to claim it back!

think you also need to tell your employer to ensure it stops coming off with PAYE. Takes at least a month to process if I remember right. If you do it around April (stop payment one year and set up DD when the loan company has received your money if you time it right) it’s fairly easy to divide up the remainder and keep track so over payment is minimal/ last payment is adjusted.

 bigbobbyking 20 Sep 2018
In reply to mal_meech:

I switched to direct debit payments by phoning them up. The call took a long time considering this is some thing almost everyone needs to do, but they did get it set up eventually. I think you can do it any time when you've got less than two years projected before pay off. 

 jonny taylor 20 Sep 2018
In reply to nickinscottishmountains:

If you pay any self-assessment tax then keep careful tabs on what you have paid towards your student loan, because of the (potential) long delay between filling out your return and it actually being credited with the SLC. Plus (much to my surprise) when it didn't add up it actually turned out to be HMRC's fault, not SLC, so  keep a close eye on both

 knthrak1982 20 Sep 2018
In reply to nickinscottishmountains:

It was pretty painless for me. They notified me by post that I was expected to pay it off within the the year and I should  call to switch to direct debit to avoid overpayment.

It is a long phone call. Have all your pay slips to hand covering the period since your last SLC statement (unless you know you pay the same SLC contribution every month) because they only get told of your payments every year by HMRC.

The only thing that caught me out is that my pension contribution is by salary sacrifice (it's a negative payment in rather than a deduction). So when I stated my pre- sacrifice salary, they told me my monthly payments should be higher; high enough that there wouldn't be enough months at that rate to allow for DD payments, and I'd have to pay the full balance. However, they did accept my post-sacrifice salary and allowed for the lower DD payments. Just something to bear in mind if you have a similar arrangement. 

I didn't need to notify my employer. The payments stopped within a month. They delay the DD payments to allow for the time it takes to stop PAYE.

XXXX 20 Sep 2018
In reply to nickinscottishmountains:

I didn't know about the direct debit thing and when I did phone it was too late. I left it until there was a small amount left and phoned them up. Paid the remainder over the phone. You need to time it right between payment dates and payroll dates. I didn't over pay at all and it was all a LOT easier than I'd been expecting.

 

 

 joshtee25 20 Sep 2018
In reply to nickinscottishmountains:

Honestly thought this was a joke thread when I saw the title. I recently got my student loan under £20,000. My pension payment is equal (to the £) to my monthly SL repayment. Not sure how I feel about this! 

XXXX 20 Sep 2018
In reply to joshtee25:

You have my sympathy. Some of us were lucky enough to go when it was still affordable. My fees were £1000 a year. My loan was only £14000 when I left uni and it took me 14 years to pay off. My older brother had no debt.

 

 

 guy127917 20 Sep 2018
In reply to bigbobbyking:

> The call took a long time considering this is some thing almost everyone needs to do

I think this is slightly optimistic for new style loans!! I feel extremely lucky to have enrolled in the £1000 a year era

 knthrak1982 20 Sep 2018
In reply to joshtee25:

Yeah I don't envy your generation. I graduated in 06 with a 14k loan. In my first graduate job, which was well-paid, I wasn't even covering the interest (which is fortunately a lot lower now). It took me 11years before I paid it off. 

 kathrync 20 Sep 2018
In reply to knthrak1982:

> It was pretty painless for me. They notified me by post that I was expected to pay it off within the the year and I should  call to switch to direct debit to avoid overpayment.

> It is a long phone call. Have all your pay slips to hand covering the period since your last SLC statement (unless you know you pay the same SLC contribution every month) because they only get told of your payments every year by HMRC.

This happened to me too.  Although, by the time I got the letter, the remaining balance was less than the value that is taken by PAYE and it was too late in the month to stop the next PAYE payment.  I opted to let one more payment go out, then called on the day that my salary was released to ensure the next payment was stopped.  That was stopped with no problems, and I got the small value I had overpaid back around a month later.

I think a lot of the previous problems are caused by the fact that if you pay by PAYE, HMRC only hands off the payments to SLC once a year.  It seems like SLC have realised that this is a problem and are now issuing notifications in the year you are likely to overpay so you can sort it out - it is also not a problem if you stay on top of it yourself.  It really only seems to be an issue if it hasn't been caught as PAYE payments will keep going out until the end of the tax year.

 

 Toccata 20 Sep 2018
In reply to nickinscottishmountains:

Back in the day you just declared yourself bankrupt on graduation and the debt was cleared. The loophole was closed pretty quickly.

1
 maxsmith 20 Sep 2018
In reply to nickinscottishmountains:

When you only have a few months worth of payments to go, ring them up and settle the balance with a bank transfer.  They cancel the payment order to your employer at the same point. That's what I did last year and it all worked out perfectly.

 ianstevens 20 Sep 2018
In reply to guy127917:

> I think this is slightly optimistic for new style loans!! I feel extremely lucky to have enrolled in the £1000 a year era

Should make the final payment super-easy for the £9k/yr generation though. No need to phone to change PAYE to DD, just die instead at the ripe old age of 85 and not have to consider paying it off at all. (I was a 3k/yr student and have £25k left to pay, which will take about 15 years at my current salary)

Post edited at 13:54
 guy127917 20 Sep 2018
In reply to ianstevens:

Brexit aside, student tuition fees is probably the single biggest issue which has left me disillusioned by national politics. It’s now a totally bizarre system which doesn’t really seem to benefit anyone!?

 mal_meech 20 Sep 2018
In reply to bigbobbyking:

> I switched to direct debit payments by phoning them up. The call took a long time considering this is some thing almost everyone needs to do, but they did get it set up eventually. I think you can do it any time when you've got less than two years projected before pay off. 

I did it by phone too, but in Scotland, and some time ago, not sure if it's relevant to the OP / still available / better to do it in writing too...

 mal_meech 20 Sep 2018
In reply to guy127917:

> Brexit aside, student tuition fees is probably the single biggest issue which has left me disillusioned by national politics. It’s now a totally bizarre system which doesn’t really seem to benefit anyone!?

mostly it benefits accountants:

https://www.bbc.co.uk/news/education-45421621

 Philip 20 Sep 2018
In reply to nickinscottishmountains:

What out if you do self assessment as they try to screw you while in the direct debit phase.

 Offwidth 20 Sep 2018
In reply to mal_meech:

I think you mean governments because it takes a huge lump of public debt off the main UK balance sheet. In that, its similar to PPIs and I've been saying for years as the loan amounts and repayments grow its becoming a scandal waiting to happen in the same way. Imagine the effect on the economy when the 30 years are up and 50%+ of Student Loan debt, year by year, goes back on the UK balance of payments..

GoneFishing111 20 Sep 2018
In reply to knthrak1982:

Jeez, my loan adds up to nearly 70k!

 

 Ben Bowering 20 Sep 2018
In reply to nickinscottishmountains:

> So.... you hear plenty of stories of a Student Loan not bring closed down properly, with the SLC continuing to take payments when it is all paid, and taking months to refund it etc etc.

> I’d be grateful if anyone with experience of closing down their Student Loan without getting shafted by SLC could share their top tips. 

> Thanks!

When I found out I'd overpaid my loan I rang slc. They sent me a cheque there and then, and explained and apologised about the hmrc annual payment issue and that the at the end of the tax year the paye payments would stop and they would send me another cheque for the balance. As promised that is exactly what happened. Happy days - I could forget about loan repayments and I had a couple of juicy cheques to celebrate with  

However  every silver lining has its cloud. Roll on a couple of years and my p60 showed slc deductions every month for the previous year, and checking back, for another 6 months before that. Wtf I thought / loudly shouted out in the office. Turned out they'd refunded me very slightly more than I was due. They'd sent a letter to where I no longer lived (why tell them I'd moved - I'd already paid off my loan). Rather than email or ring me the cheeky twunts restarted paye deductions to continue until the end of the tax year I spotted their incompetent wheeze.

 

 ianstevens 20 Sep 2018
In reply to guy127917:

Yeah, it makes no sense at all to me. Whilst far from the top echelons, I'm above the median salary. 

In reply to nickinscottishmountains:

Thank you all, for your advice here.

Another thought.... 

PAYE deductions are pretax, direct debit deductions are from bank account therefore after tax. 

So if you’re on the 40% tax rate, £100 taken off from PAYE to pay loan becomes £60 in your bank.  So £100 by direct debit is £166 pretax as PAYE. So, suppose you have £1200 left to pay in a year, that is either 12x £100 pcm via PAYE, or 12x £100 post tax, equivalent to 12x £166 pretax.  In orher words, paying it off by direct debit costs more than by PAYE, but I guess it gives some level of control to protect you from them right royally mucking it up?

Thoughts?

Post edited at 23:35
XXXX 23 Sep 2018
In reply to nickinscottishmountains:

Not true I'm afraid. SL payments are paid after tax even on PAYE.

 gethin_allen 23 Sep 2018
In reply to joshtee25:

The difference is that with the current fees and loans you aren't really ever expected to pay it off unless you earn a really good wage from the day you graduate (which very few people do) until the day it clears in 30 years as the current rules stand.

It's effectively a % tax on graduates for 30 years and the majority of people graduating now won't pay off anywhere near their full student debt.

I think my load expires at retirement age so someone graduating in say 2006 taking the full loan allowance will be much worse off than someone with a seemingly ludicrous ( circa £50k) loan graduating this year.

 

 

 nufkin 23 Sep 2018
In reply to Toccata:

>  Back in the day you just declared yourself bankrupt on graduation and the debt was cleared. The loophole was closed pretty quickly.

I was vaguely under the impression that if you hadn't paid off your loan after twenty years it was written off. Perhaps that was just a campus myth/wishful thinking

 tlouth7 24 Sep 2018
In reply to gethin_allen:

> The difference is that with the current fees and loans you aren't really ever expected to pay it off unless you earn a really good wage from the day you graduate (which very few people do) until the day it clears in 30 years as the current rules stand. [my emphasis]

But unlike any other loan they can unilaterally alter the repayment terms at any time (and have done so). Somewhere down the line they could realise that not enough money is coming in and extend or abolish the 30 year limit.

The bit that really gets me is that HMRC takes money off me each month, but only pays SLC once a year in arrears - so I pay interest (currently 6.5%) on money that has already been taken off me.

 gethin_allen 24 Sep 2018
In reply to tlouth7:

"But unlike any other loan they can unilaterally alter the repayment terms at any time (and have done so)."

Have they? could you tell me when?

I know that they have changed the loan schemes but these have not been applied retrospectively.

The payment system and interest is awkward.

The system of paying a relatively large percentage of earnings above a fairly high threshold (calculated annually) after tax is deducted (also calculated annually) means that small changes in circumstances would change the amount payable quite dramatically and they probably want to do the calculations based on your final annual income.

They could always send you the bill at the end of the financial year with amount based on your income but you wouldn't gain much as you wouldn't get much interest on the amount if invested and the SLC would probably get dragged through the mud in the media for demanding potentially large amounts of cash from poor cash strapped students. Also, graduates would be required to sort themselves out and save up the cash.

XXXX 24 Sep 2018
In reply to gethin_allen:

In 2009 the government chose not to charge interest on loans when rpi went negative.

In 2016 they froze the repayment threshold.

The monthly payment/HMRC annual payment moan is a red herring though. They retrospectively apply the correct interest at the end of the year.

 

 

 gethin_allen 24 Sep 2018
In reply to XXXX:

> In 2009 the government chose not to charge interest on loans when rpi went negative.

So this benefited those with loans

> In 2016 they froze the repayment threshold.

I thought this was a change only to those taking out a repayment after a set date.

> The monthly payment/HMRC annual payment moan is a red herring though. They retrospectively apply the correct interest at the end of the year.

I did wonder if something like this was happening as I know HMRC pay you back interest on any tax that you overpay on PAYE.

As much as I dislike the idea of wealth influencing educational prospects I think the current system actually results in a good deal for students considering the amount the average student will repay from the overall loan and that you can borrow a significant sum for living expenses which on the old system would have had to be found in cash.

It's very discouraging for students to have this hypothetical debt hanging over them but so long as they understand the repayment system and the amount they are likely to repay they should be reassured.

This doesn't mean I like the system as it has much wider impact on the universities as the students are now customers which are to be lured en masse and appeased in any way possible and often have demands (not expectations) far beyond what is reasonable.

 tlouth7 25 Sep 2018
In reply to gethin_allen:

The repayment threshold freeze applied to all Plan 2 (2012 onward, £9000 a year) borrowers. This has now been addressed (raised to £25000) but demonstrates what could happen in the future.

You are correct that the money paid by HMRC to SLC in arrears is applied correctly, I was wrong about this. Nice to know I don't have to be angry about it any more.

 Offwidth 25 Sep 2018
In reply to gethin_allen:

If you don't reduce payments when RPI drops that benefits the company not the students. Thats what happened when RPI went negative.

I support the strerling efforts made by some to explain why taking loans should not put off the poor. Eg

https://www.moneysavingexpert.com/students/student-loans-tuition-fees-chang...

However I still think this ignores several realities. 

1 There are better ways to manage HE funding. Most other countries dont have such large loans and the only country that does has a system arguably on the verge of collapse. The article I linked above show the motivations were as much about moving the debt off the balance of payments as anything else and this could have terrible consequencies in a few decades time.

2 Disadvataged kids do get put off. All the research show this.

3 Many VCs act like snake oil salesmen. They claim stuff that simply isn't true to market their institutions.  Their leadership is about marketisation not maximising benefits of HE for their students and staff.

Most recently we have this nonsense from the retiring VC of London Met.

https://www.theguardian.com/education/2018/sep/25/scandal-university-came-b...

The cheeky bugger neglects to deal with the fact that for years they happily accepted millions from overseas students who hardly ever turned up to class.  He also claims better graduate employability than Oxbridge (willful misuse of statistics). The stuff about his union pal who tells him to bypass the unions (really?) is pretty rich as well (unless bypass means harrass and constructively dismiss) . I'm no fan of London Met union politics but would suggest that you get such radical responses to really nasty management systems. The practices from London Met in terms of huge number of zero hour staff seem like a con to me as does the statement they have turned thngs around and are financially sound (everyone claims this and with the poor governace of Post 92 institutions its very hard to verify and I thiink some institutions are taking huge risks)

As a result of all this many academics like myself advise great caution for kids from disadvantaged backgrounds going to University. Consider work with CPD, a degree apprentiship maybe or go to Uni abroad (iit's much cheaper and most courses are available in English) . I find it sad but it's a reality that the safety net of an upper middle class family removes much of the risk (and cuts repayment costs)

In reply to gethin_allen:

> It's effectively a % tax on graduates

No, it isn’t. I suppose you could tenuously say it’s a tax on graduates in exchange for the amount of money given in loan, but that’s pushing it a fair bit.

 gethin_allen 25 Sep 2018
In reply to nickinscottishmountains:

I don't really get what you're arguing. 

My point was that fees were introduced and the loans introduced to pay them so effectively the counteract eachother. The repayment system seems to assume that the whole loan will never be paid off so all that is paid is a % of earnings above a threshold and someone with a £30 k loan will pay off the same as someone with a £50 k loan if they both graduate and earn the around the average wage.

XXXX 26 Sep 2018
In reply to nickinscottishmountains:

Looks like a tax. Smells like a tax...


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