Guide to deferring a mortgage-style student loan repayment

Types of student loans

If you took out a student loan while taking a university or college course that began before September 1998, you will have been given a loan known as a ‘mortgage style’ or ‘fixed-term’ loan. (Loans taken out after this point are known as ‘income-contingent loans’.)

Mortgage-style loans are paid directly to the Student Loans Company (SLC), the public-sector body that provides student loans, unlike income-contingent loans – for which HMRC collects repayments.

Interest rates on mortgage-style loans are typically higher than those for income-contingent loans because they are linked to retail price index (RPI) inflation. Interest on mortgate-style loans stood at 3.6% in January 2013, whereas interest on income-contingent loans in the same month was 1.5%.

Deferring repayments

You’ll usually have to repay mortgage-style loans through monthly instalments by direct debit. However, you may be able to defer repayments for one year at a time if you earn £27,813 or less per year, before tax or National Insurance are deducted from your pay. Repayments on income-contingent loans are deducted automatically from your wages and can’t be deferred.

If you’re eligible, you can defer payments by completing a form issued by the SLC and returning it by post. The SLC sends deferment forms directly to customers by post. If you have deferred another repayment at an earlier date, the SLC states that it will send you a form about two months before your next payment falls due.

What do you need to complete the deferment form?

The SLC requires you to complete, sign and date the form and post it directly to them with evidence of your ‘current means of subsistence.’ If you are claiming benefits, the SLC says that it will accept any one of the following pieces of evidence:

  • A Benefits Agency/Jobcentre stamp on the deferment application form.
  • A copy of a current benefit agency book confirming the customer’s name, address, date and the amount of benefit received.
  • A Benefits Agency letter confirming the customer’s name, date, type and amount received.
  • A recent bank statement showing benefits payments being made to the customer’s account.

The evidence needed if you are employed, self-employed, travelling, a student or living on unearned income is listed here.  According to the SLC, you’ll automatically be sent a new deferment form if your application has an obvious mistake – alternatively, you can contact the SLC to request a new form on 0141 243 3902.

At the time of publishing the DWP had declined to comment.

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