Student Loan Repayment Calculator
With the impending changes to student funding from 2012, we have developed this Student Loan Repayment Calculator to give you an idea of how much you might expect to pay back and over what period of time. However, you should bear in mind that any model like this is based on a number of assumptions and is looking some 30 years into the future, so the figures should only be seen as broad indicators of potential outcomes, and this page should not be considered as financial advice.
Remember, this Calculator is for use by those interested in going to universities in 2012, not for students starting this year for whom a very different funding system applies.
As always, we would welcome your comments on this prototype ahead of the introduction of the new student funding arrangements in 2012.
How we arrive at these results
A new student finance system based on increased tuition fees and interest-charged loans is to be introduced in parts of the UK for university entry in 2012 (read about 2012 tuition fees and financial support).
This calculator estimates the monthly repayments that would be due under the current proposals (July 2011) for the new regime, assuming the predicted earnings described below and shown on the page of detailed results.
The results are for illustrative purposes only, since the exact repayments will depend on the actual salary earned throughout the period.
An interest rate of 3% above inflation will be applied from the receipt of the first payment from the SLC until the end of the fiscal year (5th April) following the end of the course.
The interest rate applied after this will depend on the annual earnings of the recipient of the loan:
There will be a threshold below which the rate of interest will be the rate of inflation. This will be £21,000 in the first year.
There will also be a threshold above which the rate of interest will be 3% above the rate of inflation. This will be £41,000 in the first year.
Between these two thresholds, the calculator follows the Student Loan Repayment Ready Reckoner produced by the Department of Business, Innovation and Skills (the BIS): the rate will increase in proportion to the amount earned over the lower threshold. Therefore, annual earnings of £31,000, for example, would mean that a rate of 1.5% above inflation would be applied in the first year.
The thresholds will increase annually, at the same rate as the national average of earnings. The calculator uses a rate of 2% above inflation for this increase, which is the long-term average.
No repayments will be due until the start of the fiscal year (6th April) following the end of the course.
After this, the amount due will be 9% of the earnings which exceed a threshold. This threshold will be the same as the threshold below which the rate of interest is the rate of inflation — £21,000 in the first year (see above).
The calculator assumes continuous employment over 30 years.
The projected salaries used by the calculator are based on the careers of past graduates, and are derived from figures from a number of sources.
The Association of Graduate Recruiters (AGR) provided the current starting salaries for the careers which we list.
Current final salary figures were sourced from a variety of professional, industry-expert salary surveys and guides. These final salaries have then been adjusted to allow for an increase in the national average of earnings of 2% above inflation, over the subsequent 29 years. To do this, we have assumed that the salaries will remain unchanged in relation to each other and to the national average. We have therefore increased the final salaries by 2% for every year, which is a 78% increase over the whole period.
The growth in salary between the starting and final figures for each career follows the pattern of the salary predictions for all graduates in employment in the BIS's Ready Reckoner: higher increases in earnings are expected at the start and at the end of the 30 year period, and lower increases in between.
In addition to expected earnings for particular careers, we give three further options for low, medium and high earnings across the whole graduate population. The figures used are as follows:
|Option||Starting salary||Current final salary|
|All graduates, low||£19,000||£30,000|
|All graduates, medium||£25,000||£50,000|
|All graduates, high||£30,000||£80,000|
The level of inflation is difficult to predict, and will vary over the repayment period. Instead of trying to estimate it, we have taken a different approach:
Inflation will affect the fees, the outstanding loan, the interest due, earnings, and repayments to the same extent.
It is therefore not necessary to calculate the interest charges due to inflation. Instead, all monetary figures, including future earnings, are presented in today's money.