Student loans: The breakdown


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The Independent Online

If you're confused about loans, interests and repayments - you're far from alone. Here's the breakdown on when and how much you should be paying.

You won’t have to start paying back your student loan until you are earning at least £15,000 a year (£1,250 a month or £288 a week). If your weekly/monthly income varies and at some intervals student loan repayments are taken out of your account - but over the year you have earned less than £15,000 - you can apply to get the money back.

Contrary to popular belief, if you work overseas you do still have to pay back your student loan, you just make your repayments in a different way. If you are self employed, you will work out your repayments based on the annual threshold of £15,000 - similar to the way that you calculate your tax and National Insurance.

Any ’unearned income’ from other sources like savings or investments, still counts towards your total income. You’ll need to make extra Student Loan repayments through Self Assessment.

Your Student Loan repayments will be 9% of anything you earn over £15,000, not 9% of the total amount you earn.

The interest rate set for the academic year is the maximum which can be charged, and usually remains the same throughout the year. However, cuts to bank base lending rates triggered a low interest ‘cap’ at several points in late 2008 and early 2009. This meant that the interest rate for income contingent Student Loans was reduced a number of times:

- from 1 September to 4 December 2008, the interest rate was 3.8%

- from 5 December 2008 to 8 January 2009, the interest rate was 3%

- from 9 January to 5 February 2009, the interest rate was 2.5%

- from 6 February to 5 March 2009, the interest rate was 2%

- for 6 March to 31 August 2009, the interest rate is currently set at 1.5% (though this could change)

From 1 September 2009 to 31 August 2010, a 0% interest rate will apply to income contingent Student Loans. The lucky students who graduated before 1998 will then have an interest rate of -0.4% which means their student loan will actually decrease. But fortunately, if you’re starting university now, what you take out is what you’ll have to pay back - so they’ll be no complicated interest repayments to have to think about.

If you’re about to start university and are unsure how much you will receive in your loan you can work it out on the government finance calculator.

If you’d like to pay off more of your student loan you can make voluntary payments simply by paying by debit/credit card online or calling a Student Loans Company customer adviser.

Before you begin repaying your Student Loan, you will receive an annual statement for the year ending 31 August. When your account becomes due for repayment, you will be sent a statement for the period ending 5 April.

If you’d like to check how much your student loan currently is, use the Student Loan Repayment Company. If you don’t remember your login details call their Customer Support Care on 0845 300 50 90.