Best Way to Repay a Student Loan
Posted on 09. Mar, 2010 by admin in General
If you apply for a student loan to pursue further education in a tertiary institution it is not unusual that you would incur student debts in the process. After graduating in a university being faced with a huge amount of student debt and looking for debt management solutions can be quite a difficult situation. Some people take out a loan and deposit some of it in a high interest account.
This is a good debt management strategy because they are earning interest income higher than the loan rates. The rule is student loans made before September 1998 needs to be repaid in 60 or 84 monthly installments. The number of months will depend on the number of loans you took. Whichever period is required, payment starts in April a year after graduation. Student loans made after September 1998 have different repayment terms. The repayment is required in April a year after you graduate or left the course. But you are only required to make payments once you are employed and are earning above £15,000 per year, £1,250 per month or £288 per week. If your income is beyond these amounts then 9% of the excess will be deducted from your salary by your employer using the PAYE system. The rate on all student loans changes every 1st of September each year. The rate is based on the inflation rate as provided by the Retail Prices Index (RPI).
From September 1, 2008 to August 31, 2009 the rate was pegged at 3.8% on the loan balance. If the debtor is not able to find work or earns less than the £15,000 minimal, then he or she need not repay the student loans after September 1998. After 25 years has lapsed since the loan was first granted or when one reaches the age of 65, whichever comes, the loan is written off. The rate of interest in student loans is often lower than commercial loans. There are a variety of options available for the debtor to be able to repay the debt. Interest is charged on the remaining capital balance of the loan so it is a good debt advice to pay the loan early. You can make payments even if your earnings are below £15,000. If you wish to reclaim the payments made you can ask for a rebate through the Student Loan Company. Refunds are made at the end of the Tax Year in April.