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My British wife went to university in the UK from 2001 to 2005. She got a student loan with SLC and was never charged anything because her income was too low. She left the UK in 2011, never earning a salary higher than £25,000 per year.

We reside in the US and started a family here. Our lives moved on. We were never contacted about paying it back. Now, in the end of 2018, SLC got in touch with her asking to repay a balance of £20,000 with an interest rate of 1.79% p.a. My wife's salary alone is approximately $20,000 (£16,000) but our joint salaries are well over £25,000.

With this situation, I have a few doubts:

  • I read somewhere about loan cancellation. Is that still a thing? Couldn't her loan be cancelled because she didn't make enough money up until 2011?

  • Does the repayment take into consideration our joint salaries or just hers? (considering the debt was acquired prior to our marriage in 2013)

  • What are the consequences for her and our children of her not paying off her debt?

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    Loan cancellation doesn’t happen until 30 years after the loan was taken out, and doesn’t affect liability for repayments that were due but weren’t actually paid before the 30 years were up. – Mike Scott Nov 23 '18 at 17:15
  • @MikeScott Can you please elaborate? If the loan is cancelled after 30 years, what do you mean by "[the cancellation] doesn’t affect liability for repayments that were due but weren’t actually paid before the 30 years were up."? – Phil Nov 23 '18 at 17:31
  • @Phil I mean that if you haven’t made all the repayments that were due before the 30 years were up, they will keep chasing you for that money. They only write off the amount that you weren’t supposed to have paid yet. – Mike Scott Nov 23 '18 at 17:33
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    @MikeScott - I think your exact details are inaccurate because of the time the loan was taken out - see my answer for what I think are the correct repayment thresholds and cancellation periods. It's easy to get these mixed up though! – Ganesh Sittampalam Nov 23 '18 at 17:37
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    @GaneshSittampalam is correct. Because the rules were different in 2001, the loan won’t be cancelled until she is 65. – Mike Scott Nov 23 '18 at 17:47
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Neither your marriage nor your joint salary is relevant to her student loans - she's only liable to repay if she earns over the threshold on her own. As you're abroad you'll need to declare her salary directly to the SLC rather than relying on the PAYE system to manage her (lack of) repayments.

There's some information about what to do here.

Given the time it was taken out, this is probably a "Plan 1" loan, which means the repayment threshold is £18,330, so she's not that far off having to repay it - the thresholds do go up with UK inflation though.

The loan itself will only be cancelled after a significant period of time (I think when she becomes 65 in your case - see here), but no repayments will be due whilst she earns under the threshold.

If your wife doesn't repay when she does owe repayments, the UK government has said it'll try to pursue debtors overseas (see e.g. here), which could presumably lead to civil action being taken for the debt or in extremis an attempt to prosecute her for fraud. This won't have any direct effect on your children, though.

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