Student loan repayment

Student loan problems

Q I graduated with a BA in 1998, having taken three years of student loans to a total of around ?5,500. I then completed a post-graduate certificate of education (PGCE) in 2001, taking out a further student loan of around ?3,500.

Having secured a job with Westminster council's education department, earning ?32,500 a year, I started making the agreed student loan repayments of ?150 a month.

But when I got my payslip last month, I realised that a further ?168 had been deducted for the second loan, so I am actually paying ?318 a month in total.

I contacted the Student Loan Company to check whether one of these loans could be deferred or if a new, lower payment for the two could be worked out, but was told neither of these things were possible.

This seems to me to punish anyone who has the good fortune to secure a job paying more than a newly qualified teacher would earn. I am considering finding a new loan to pay off my existing two.

PD

A I think the SLC has made a mistake with your loan repayments.

Most graduates begin repaying their student loans the April after they graduate, provided their gross monthly earnings exceed 85% of the national average wage. Otherwise, they can defer repayment.

But most graduates have only one type of loan - either income-contingent (the newer style) or fixed term (the older style). Anyone who takes more than one course, as you did, may end up with two types of loan - and generally both loans have to be repaid at the same time.

However, this is not the case for PGCE students. Under the SLC rules, PGCE graduates are required to repay only one loan at a time. If your monthly earnings are above ?833 but below ?1,644, you will be liable to repay the income-contingent loan - but you should be allowed to defer the fixed-term loan until this is paid off or your income changes.

Where monthly earnings exceed ?1,644 - as is the case with you - you can apply to defer the fixed-term loan and begin repaying the income-contingent loan instead.

I don't know who at the SLC told you that you had to repay both loans at once as it clearly says in SLC's own guidelines that this isn't the case. It also says that if you take no action - ie, if you don't apply to defer one of the loans - you will be liable for both sets of repayments. But you seem to have been penalised despite querying the situation!

As you point out, the current arrangement, if correct, would be grossly unfair so it's gratifying to learn that this isn't the case and someone has simply given you inaccurate information.

Annoyingly, you will have to contact the SLC again - make sure you do it in writing, quoting the relevant section of the SLC website.

This is a much better option than looking for a new loan arrangement. Your existing loans carry an interest rate of just 2.3%, as student loans are charged at the rate of inflation. On a total debt of ?9,000, the cheapest rate available on the commercial market is currently 8.2% from Direct Line.