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UK Student loan - Overpay or risk paying back more if exchange rate $ to £ increases..

jdad84

By jdad84
in Money & Finance

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jdad84 Senior Member

jdad84

Posted
Posted

We are migrating soon (90% sure of a visa for my wife, awaiting contracts) and previously to some musings last night we had never thought of repaying our loans past what is taken by PAYE anyway.

 

For information:

 

I have a UK student loan of £24000

My wife has a student loan of £9000

 

£33000 = $56000 ($1.69 to £1)

 

If the exchange rate were to increase to $2 to £1 or even greater $3 to £1 the actual repayment we'd make would be substantially more -

 

$66000 ($2 to £1)

 

$99000 ($3 to £1)

 

 

We of course don't know how the exchange rate will fluctuate, but using 10 years of historic data from xe.com the lowest exchange rate has sat just below 1.5 and the highest just above 2.5.

 

It seems like we would be foolish to not overpay whilst it is relatively 'cheap' to do so...how have others approached their student loans?

 

Apologies if this topic has been talked to death before.

 

J

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jdad84 Senior Member

jdad84

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Posted
My friend had to send her oz contract and they read it that she was getting paid loads, $55k only...so they made her re payments massive...I'm mentioning this so u can work around this to avoid that happening.

 

Similar situation, but I overpaid my mortgage loan to take advantage of the strong AUD. Makes perfect sense.

 

Well I thought it made sense too. I suspect wed benefit from clearing my wife's Loan and deferring my loan (as Ill be without a job for 3 months).

 

I did the calculation for mine (assuming I start on 60k AUD and it works out at £180 per month) which is around £100 more than I pay currently.

 

On the plus side since I qualified recently as a pharmacist my wage has gone entirely towards saving for oz so I think we'll still be better off!

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jac2011 PIO Chatter Box

jac2011

Posted
Posted

Have you been on the student loan repayment from abroad website:

 

Just copied this:

 

The repayment threshold for the UK for the period April 13 to March 14 is £16,365. So anyone with an annual salary of over £16,365 is required to repay their loan and they pay 9% of their earnings over this threshold.

 

If you are living overseas we work out your monthly repayment schedule using the same principles as for those who live in the UK. So, you will repay 9% of your earnings over the repayment threshold for the country you are living in.

 

To take account of differences in living costs, the repayment threshold in a foreign country will not necessarily be the same as in the UK. We will update thresholds each year to take account of price changes.

 

The repayment thresholds are set at an affordable level which reflects the conditions in the relevant country.

 

Overseas thresholds are calculated using information from externally published World Bank data. This data provides a measure of the differences in the general price levels of countries and therefore represents the relative cost of living between countries and enables fair thresholds to be set. Where the relevant economic information is not available to set a threshold the lowest threshold is used (£3,275 for the period April 13 to March 14).

 

For example, if you were living in Poland the repayment threshold is the equivalent of £9,825 so your repayments would be calculated as 9% of anything you earn over the equivalent of £9,825.

 

The following table shows the repayment thresholds that apply for different countries. It also shows a monthly default repayment amount - this is how much you would be liable to repay each month if you did not inform us of your actual income while overseas.

 

The applicable currency for each country and the exchange rate that SLC use when calculating an overseas repayment schedule is also listed in the below table.

 

These exchange rates are the average rates for the previous UK calendar year.

 

These overseas thresholds also apply to the period April 13 to March 14

 

 

[TABLE=class: overseas-table, width: 100%]

[TR]

[TH]Country of residence

[/TH]

[TH]Currency

[/TH]

[TH]Exchange Rate

[/TH]

[TH=width: 10%]Earnings threshold (£GBP)

[/TH]

[TH=width: 10%]Monthly default repayment (£GBP)

[/TH]

[/TR]

[TR]

[TD]Afghanistan, Islamic State of

[/TD]

[TD]Afghanis

[/TD]

[TD]0.013026

[/TD]

[TD]6,550

[/TD]

[TD]98.40

[/TD]

[/TR]

[TR]

[TD]Albania

[/TD]

[TD]Leke (ALL)

[/TD]

[TD]0.005830

[/TD]

[TD]6,550

[/TD]

[TD]98.40

[/TD]

[/TR]

[TR]

[TD]Algeria

[/TD]

[TD]Algerian Dinar

[/TD]

[TD]0.008124

[/TD]

[TD]9,825

[/TD]

[TD]147.60

[/TD]

[/TR]

[TR]

[TD]American Samoa

[/TD]

[TD]U.S. Dollar

[/TD]

[TD]0.631762

[/TD]

[TD]3,275

[/TD]

[TD]49.20

[/TD]

[/TR]

[TR]

[TD]Andorra

[/TD]

[TD]Euro

[/TD]

[TD]0.810719

[/TD]

[TD]3,275

[/TD]

[TD]49.20

[/TD]

[/TR]

[TR]

[TD]Angola, Republic of

[/TD]

[TD]Kwanza (AON)

[/TD]

[TD]0.006631

[/TD]

[TD]13,100

[/TD]

[TD]196.80

[/TD]

[/TR]

[TR]

[TD]Anguilla

[/TD]

[TD]East Caribbean Dollar(XCD)

[/TD]

[TD]0.234103

[/TD]

[TD]3,275

[/TD]

[TD]49.20

[/TD]

[/TR]

[TR]

[TD]Antarctica

[/TD]

[TD]No official currency

[/TD]

[TD]N/A

[/TD]

[TD]3,275

[/TD]

[TD]49

[/TD]

[/TR]

[TR]

[TD]Antigua and Barbuda

[/TD]

[TD]East Caribbean Dollar(XCD)

[/TD]

[TD]0.234103

[/TD]

[TD]9,825

[/TD]

[TD]147.60

[/TD]

[/TR]

[TR]

[TD]Argentina

[/TD]

[TD]Argentine Peso

[/TD]

[TD]0.139241

[/TD]

[TD]9,825

[/TD]

[TD]147.60

[/TD]

[/TR]

[TR]

[TD]Armenia

[/TD]

[TD]Dram (AMD)

[/TD]

[TD]0.001574

[/TD]

[TD]9,825

[/TD]

[TD]147.60

[/TD]

[/TR]

[TR]

[TD][/TD]

[TD][/TD]

[TD][/TD]

[TD][/TD]

[TD][/TD]

[/TR]

[TR]

[TD]Australia

[/TD]

[TD]Australian Dollar (AUD)

[/TD]

[TD]0.653432

[/TD]

[TD]22,915

[/TD]

[TD]344.40

[/TD]

[/TR]

[/TABLE]

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Raj Patel Member

Raj Patel

Posted
Posted

Hi,

 

Interesting topic. I graduated in 2006 and I would say only since 2010 have I made a real effort to pay it off (I was doing a PhD from 2006-2010 so not earning a taxable salary). In 2010 due to interest my loan went from £16K up to £18k it's down to around 4K now and I'm moving to Oz at the end of November. I just received my P45 for my new employer (which will be in Oz). instead of making monthly payments I'm hoping to just save up until April and pay the remainder off before the start of the UK tax year. Once the tax year begins I imagine I'll be prompted by HMRC to make payments out of my salary which is why I want to pay it off before then... And I hate paying interest on top so I just want to rid my self of the debt. I've also read around and it seems like the Oz economy (which is heavily dependent on China) is likely to improve in the near future so now may be the best time to pay it off.

 

Consider that the interest is added cumulatively and estimate which loan would be better to pay off first...

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nicolac34 Platinum Member

nicolac34

Posted
Posted

I would overpay, because it is a right royal pain when the exchange rate shifts in the other direction and it goes up every month.

 

I've just (last month) made my final student loan payment, at the beginning of the year I was paying $298 a month over, by the end it had gone up to $345 a month. Not massive in the grand scheme of things, but enough to annoy me.

 

Like another poster says they charge you way more than you would be paying back in the UK, they use an exchange rate that has been set at a particular point in the year, which may bare no resemblance to the current exchange rate. They did this with me last year, I dutifully sent off my contract and received a letter back informing me I was to pay £364 a month for the next 12 months....which equated to over $550 a month at the time. My jaw hit the floor! I argued with them about the amount (as I would have cleared my loan in 4 months at that rate) as I couldn't afford it, and renegotiated it down to £200 a month - so they are flexible if you ask.

 

I actually calculate your monthly payment out as less, I get £122 a month based on a starting salary of $60k. You have to use the exchange rate stated above.

 

$60,000 x 0.653432 = £39,205.92

£39,205.92 - £22,915 = £16,290.92 (amount you'll pay the loan on)

9% of £16,290 = £1,466 divided by 12 = £122 a month

But they do change this exchange rate once a year, so it is subject to change which can impact you a lot!

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jdad84 Senior Member

jdad84

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I have no intention of trying to dodge the debt and do think that it would be a good idea to pay back while the exchange rate is favourable.

 

Deferring for the first year seems like the best plan as we can then make a 'one off' payment at some point during the year when the exchange rate favours us.

 

Even if they 'set' the exchange rate for one off payments...surely I could transfer from AUD to GBP myself and pay from a UK account.

 

If it comes down to it and I don't get employment straight away then I'll have a year without the SLC breathing down my neck.

 

Thanks for the contributions.

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  • 4 weeks later...
Raj Patel Member

Raj Patel

Posted
Posted

Just to update I have been watching the AUD/GBP rate plummet over the last week or so and from what I've read the trend is only going to continue which will only make it more difficult to pay off while in Oz. So I have just made a payment to clear my balance (had about 4.5K left).

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Raj Patel Member

Raj Patel

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That's great! We aren't in a position to do that so we are seeing our monthly repayments rise by the day!

 

Yeah, I fly to Brisbane on Monday... Paying off early was tough it does mean I have to hold back on a couple things I wanted to get but it's probably worth it given the exchange rate heading south.

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  • 4 weeks later...
GiveAGirlShoes Senior Member

GiveAGirlShoes

Posted
Posted

Oh dear this has got me thinking...

 

I'm in my 1st year now (thank god it's an NHS funded course) and my Student Loan is 2300 a year.

 

I think for me, after reading all your comments, it may be best for me to look at it as a bank loan once I'm qualified.

So that would be a £6900 loan over 36 months (I need to work for 2 yrs before putting in my EOI and can't imagine the whole process will be complete in less than than 12 months!).

 

So around £191 a month (whilst saving to emigrate lol) sounds like it could be a clever(ish) move.

It's that or hold my breath until they find me ha!!

 

This has certainly planted a seed!!

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