Well I do not intend to explain the whole application process since you should be able to find all of the information you need well discussed on the world wide web. However, when I graduated I thought I knew everything but it seems some things I just needed to figure out myself. I will make your life a little bit less interesting and will share my knowledge.
And here is now
My degree lasted three years so I accrued 3 years worth of loan which covered my tuition fees. To be precise the amount in fact is £9,698.10. This is including all the interest accrued to date. When you graduate you will no longer use your old Student Loans Company website. The Student Loan Repayment website then becomes available to you with the same login details (ART ID, password and security question) where you will see the total which you owe to the Government (yes, government, local authority, call it whatever) and all the correspondence which should have reached you through post.
NOTE: When you leave the University do not forget to amend your contact details on your University database and The Student Loans Company website, otherwise, your correspondence will not reach you.
Repayment process explained for dummies
Let’s take a primitive example. Say Graduate X gets his diploma in July and enter the jobseekers market to hunt for the graduate job. Oh yes. After a handful of interviews Graduate X is finally offered a position with a salary of £18,000 a year with his contract starting in October 2010. Well, he thinks. I will begin repaying my student loan from November 2010 when I receive my first salary for October. Well well let’s just stop here.
That is what the majority of graduates thinks. No. Graduate X will get his first deduction from the salary for his student loan in May 2011. Yes, you got me right. The repayment begins in the new financial year. So what happens. Government begins the new tax year and they check whether you are earning over £15,795. Whatever you earn over £15,795 gets deducted from you at 9% rate.
Graduate X:
Deducted in May 2011: ((£18,000 – £15,795)/12) x 9% = -£16.88
NOTE: the repayments do vary every month if your monthly income varies (including benefits, overtime, bonuses, etc.).
The other odd thing about the repayment process is that when the money is deducted from your salary, the amount outstanding on The Student Loans Company website account does not gradually decrease. The first deduction from the website for Graduate X will only be visible in April 2012 when a new tax year begins. The deduction will be made in full for the previous financial year (between April 2011 – April 2012).
How the interest is calculated?
Well that is the most confusing bit I guess. Interest will be allocated throughout the year. Even though the amount on the Website is not decreasing gradually with every salary you get – the interest is actually a monthly accrual and even though you cannot physically see it, interest is calculated monthly but the accrual shown is for a financial year. So as the deductions from your salary are made – the interest is re-calculated and allocated for the amount still outstanding each month.
I tried to explain it as simple as possible I think I failed.
Let’s deal with Graduate X so that this becomes clearer.
Graduate X has been paying monthly £16.88 for 12 months until April 2012. This means he has given back £202.50 of his student loan. In May 2012 he receives his first student loan statement which shows the Student Loan with interest accrued throughout the financial year 2011 and the amount given back. So basically what Graduate X has given back is £202.50 minus all the accrued monthly interest times 12.
If the yearly interest was 1.5% (current rate in 2011) and the total amount of loan taken out by Graduate X was £9,000 (assumed for simple calculation purposes), then:
May 2011
£9,000 x 1.5% / 12 months = £11.24 (interest accrued per May)
£16.88 – £11.24 = £5.64 (the amount Graduate X has returned to Student Loans Company in May 2011)
June 2011
£8,994.36 x 1.5% / 12 months = £11.24 (interest accrued per June)
£16.88 – £11.24 = £5.64 (the amount Graduate X has returned to SLC in June 2011)
I hope you can proceed with further calculations throughout the year on your own.
All in all, the more you earn = the more you have to give back = the interest you are paying each month decreases quicker.
What happens to your student loan repayments should you move and start working overseas
If you will be overseas for more than 3 months, you will need to complete an Overseas Income Assessment Form to enable Student Loans Agency to calculate how much you need to repay. Please note that the annual threshold will be different for each country and only a handful of countries such as Norway, Luxembourg or Denmark will have a higher threshold than the UK. This depends on the standard cost of living and therefore is lower in the majority of countries.
Note that to inform the Student Loans Agency of your move overseas and to submit all the relevant documentation is your own responsibility. As you may as well choose to ignore this requirement, please note that if they will finally find a way to reconfirm your previous earnings, you might need to return whatever you earned above the threshold in your country in the past.