Repayment
Prior to the 1998/9 academic year, repayment was made under a fixed-term or 'mortgage-style' system of 60 monthly instalments which began when the graduate earned over a specified threshold (£27,734 for the 2011/2012 financial year). This system was criticized because no matter what the size of the loan, it had to be repaid in 60 monthly instalments.
Loans taken out for courses that began after 1 September 1998 but before 1 September 2012 are repaid under the so-called 'Plan 1' variant of an income-contingent repayment (ICR) scheme. Repayments do not begin until the April after graduation or leaving a course. Thereafter, repayments are fixed at 9% of gross income above a threshold of £15,000 per (tax) year (for 2011/2012, equivalent to £1250 per month or £288 per week). Repayments are usually taken directly at source, via the PAYE system and so can vary monthly or weekly, depending on the yearly amount the gross earnings for that period equate to, in relation to the threshold. Repayments continue, depending on income, until either the loan is paid off, or the customer (as debtors of the SLC are termed) reaches age 65, dies, or through disability becomes permanently unfit for work, at which point the loan (plus any interest) is cancelled. For loans taken out after 1 September 2006 (but before September 2012), the loan is cancelled 25 years after the April when the loan first became eligible for repayment (in England, Wales and Northern Ireland; for Scotland it is 35 years), as opposed to at age 65 (this is potentially beneficial to young, low-earning graduates, but apparently penalises mature students). The current threshold of £15,000 has been in effect since 6 April 2005. From 6 April 2012, new regulations come into effect that will see the threshold increased in line with inflation (as determined by RPI, the Retail Price Index). The Department for Business, Innovation and Skills have confirmed that from 6 April 2012 the threshold will rise by 5.3% to £15,795.
Loans taken out for courses beginning after 1 September 2012 (which will be much larger due to the increase in tuition fees) will be repaid under a new 'Plan 2' variant of the ICR scheme. Such loans would not be due to enter repayment until at least April 2016. Under this scheme, repayments will also be calculated as 9% of gross income, but above a larger threshold of £21,000, which is also due to rise in line with RPI, from April 2017. Under Plan 2, loans are cancelled 30 years after the April in which they become eligible for repayment.
Read more about this topic: Student Loans In The United Kingdom
Famous quotes containing the word repayment:
“Parents vary in their sense of what would be suitable repayment for creating, sustaining, and tolerating you all those years, and what circumstances would be drastic enough for presenting the voucher. Obviously there is no repayment that would be sufficient . . . but the effort to call in the debt of life is too outrageous to be treated as anything other than a joke.”
—Frank Pittman (20th century)
“A man’s indebtedness ... is not virtue; his repayment is. Virtue begins when he dedicates himself actively to the job of gratitude.”
—Ruth Benedict (1887–1948)