I've been told an interesting tale about student loans. The story is that when the Inland Revenue takes student loan repayments, rather than delivering them straight to the Student Loans Company, they hold it until the end of the financial year and then send an annual lump sum. This means that the government can make interest on the money students pay them while students then become liable for the added interest the SLC charge for not receiving the money until the end of the year. Essentially, because the government withhold the payment till the end of the year, students are being charged interest on money already paid.
Can this really be true? Is it another Gordon Brown stealth tax?
Eh? It's our (taxpayers') money that is leant to students at well below market rates. If they don't like it they can pay their loan off early.
ReplyDeleteI can't say for sure, but I reckon that this is a bit of an urban myth.
ReplyDeleteHowever, it is very easy for a "myth" like this, if indeed it is a myth, to be perpetuated due to the unbelievably shoddy running of the Student Loans Company. I haven't received a statement from them in over 2 1/2 years and I've paid back around £2k in that time. It would be nice to receive confirmation that they are taking it from my balance!!
This is a campaign on facebook....I'm yet to see evidence that its true though.
ReplyDeleteI signed the petition. It's a disgrace. Students can't afford to pay their loans off early as we are already forced to get massive loans out due to the introduction of tuition fees. They couldn't run effectively enough to get the loans out on time last year so students even had to get out additional high interest loans to cover themselves at the start of a semester
ReplyDeleteStudent loands are basically a 'graduate tax' these days charged at 9% on earnings over £15,000.
ReplyDeleteBut the £15,000 threshold never changes every year like all the other tax thresholds do, in effect meaning graduates get a tax rise every year.
i've heard a lot about this at Uni, there's a petition on the Downing St website....
ReplyDelete...and how are we meant to pay off our loans early? not all of us are lucky enough to land jobs in the first year out of uni, which we can afford to throw a comfortable excess of £15'000 at the SLC, as well as live!
And also as a student with two part-time jobs to get me through i resent the 'taxpayer' jibe. I pay tax on my second job which i've never seen a re-bate for despite numerous phonecalls - we contribute to this economy doing all the crap jobs for a few years, living in often appalling housing, risking life and limb doing medical trials and being guinea pigs for trainee dentists/optometrists because the NHS stops at 18!
yes sure we drink alot, but my GOD. wouldn't you?!
First, it's bollocks:
ReplyDeletehttp://www.theyworkforyou.com/wrans/?id=2006-06-14a.34.3&s=speaker%3A13574#g34.4
The SLC garnishes wages monthly and although a statement is issued annually, the bills are settled month by month.
What's the alternative - paying as a lump sum each year?
There probably is some truth in it. As an employer I have to make deductions every month for student loan repayments for some of our staff. We pay them over to HM Revenue & Customs every month along with the PAYE & National Insurance, but it's not until we submit the annual P35 reurn about now that the tax office know how much of what we've paid relates to sudent loans, or which of our employees it relates to.
ReplyDeleteI assume Iain nabbed this from the Facebook group on this. Note that most of the students are from what we in the trade call 'Shit Universities' like JHU and UEA.
ReplyDeleteNot exactly the cream of the crop there.
I didnt even know there was anything on Facebook on this. Someone emailed me about it.
ReplyDeleteWhile we're on this, I've heard that the amount of money coming back into the treasury from student loans is well below expectations.
ReplyDeleteIt seems that the mass student population is not getting paid as well as was projected on graduation (surprise, surprise) and so the income stream isn't great.
Selling the debt is Gordo's way of shifting the pain, which can only get worse as more graduates flood onto the market.
Anybody have any further details about this?
This is a partial truth. As a recent graduate I saw the petition and as (now) a tax analyst I decided to look into it. Whilst the Revenue only present that withheld via PAYE to the SLC yearly (I presume for cashflow and admin purposes) there is no question of interest being levied upon the balance that has effectively been paid off.
ReplyDeleteThis has been confirmed to me by both the SLC and HMRC.
I think this notion originates from SLC's website, which is vague to say the least.
"Eh? It's our (taxpayers') money that is leant to students at well below market rates."
ReplyDeleteMuch of that money will have been paid to Gordon by their parents.
They are simply taking back that which is rightfully theirs. Before being forced to give it back again.
My loan is still earning interest for me so I have no complaints.
It seems everyone of relevance that I know has heard of it. It could be a case of Three Mile Island syndrome, but it seems to be a genuine issue.
ReplyDeleteJust wait till the loan book gets sold..............
ReplyDeletethen things wil go crazy, proper ROI will occur, at the students expense.
Robert - a word of advice: don't take a job in the city.
ReplyDeleteIt's the income that is being securitised, not the loan book itself.
Incidentally, unless Iain is a student, I see nothing here to justify the headline except his desperate desire to stick one on Brown.
Not much time for Brown myself, but if Tories hate him so much they are prepared to make up headlines like this, he can't be all bad.
In my experience:
ReplyDelete1) HMRC only tell the SLC how much I've earned about six months after the end of the tax year
2) The interest I pay is based on how much I owed at the beginning of the tax year
Therefore there is a lag and I pay interest in that period when I shouldn't.
By the way I am generally in favour of a true education market, but I hate the fact that we were told that student loans would only be ever at "inflation" but HMG has picked the rate of inflation which suits it most, not the one you see quoted by Ed Balls.
Sources say this is false.
ReplyDeleteMind you, I wouldn't put it past them
I'm hearing a lot about this but nothing explaining if this is a con or not.
ReplyDeleteDo some research Iain and find out what the craic is for us.
Also, don't forget that while the government proclaims "inflation" is at historic lows, and awards public sector pay rises and tax band changes accordingly they charge student loans at the far more market rate RPI level, which is edging toward 5% these days. Not the free loan I was promised...
ReplyDeleteYes Iain, it's true. Sadly it is little known in the student world, though it seems a small campaign is afoot to alert students to this. It is also mentioned in the notes for students on their student loan forms, informing students that because the loan payments are not picked up by the company until the end of the year, it is up to them to make sure the payments have been taken correctly.
ReplyDeleteSurely to sell the Loan Book the Government will have to make clear the default rate and how much has been written off to date.
ReplyDeleteCan this really be true? Is it another Gordon Brown stealth tax?
ReplyDeleteDo bears shit in the woods?!?
To the first 'anonymous' - the loans might be below market rates, but they're still profitable for the government or whoever they sell them off to.
ReplyDeleteI always thought that the worst thing about student loans was the compound interest you build up while at university, when you can't pay any of it off.
English student fees also find their way over the border in Scotland to help scottish universities. Is there any one to stand up to this robbery?
ReplyDeleteIain, this issue has been bugging me for a while, so I decided to ring the nice wee chappies at the SLC in Scotland to check. Although interest is calculated monthly and yet they only get the PAYE portion yearly, the SLC amend the interest accordingly when they receive the details from HMRC. What people should be worried about (in my opinion) is any government plan to privatise the SLC. Working for an MP, I have seen the chaos that they can cause in people's lives whilst under government control....imagine what it'd be like in private hands?!
ReplyDeleteThose nice people (!) at NUS have provided an explanation of the situation here:
ReplyDeletehttp://www.nusonline.co.uk/news/274146.aspx