Student loan repayments
The Student Loans Company manages all UK student loans, no matter where in the UK you attend university. For undergraduates, student loans may look like a worrying amount of debt – but you'll only pay back 9% of your earnings above a certain income. Read our quick guide to find out what you should know about student loan repayments.
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The student loan system • When do student loan repayments start? • How you repay your student loan • How does student loan interest work? • Student loan cancellation • Why might I have to repay some money sooner? • Useful links for student loans information
When you take out a UK student loan, you deal with the student finance body for the nation where you originally live – England, Northern Ireland, Scotland or Wales. The loan itself is administered by the Student Loans Company. Unlike a commercial loan, what you repay is based on your earnings, not how much you borrowed.
Current undergraduates are likely to fall under one of two student loan repayment systems – Plan 1 or Plan 2 – which have different thresholds and rates for repayment. You don't get to choose the plan you are on, it's done on the basis of which nation your student finance came from. Plan 1 is applicable to those with student finance from Northern Ireland and Scotland. Undergraduates from England or Wales who started their course after 2012 come under Plan 2.
You will be eligible to start student loan repayments in the April after you have finished or left your course. Whether you pay or not will depend on your income.
There is a minimum income 'repayment threshold' that you will have to earn before you begin to repay your student loan. The repayment threshold is set by the government and is subject to change. From 6th April 2019, students will need to earn more than the following:
|Nation/Plan||England and Wales
|Northern Ireland and Scotland
The Scottish Government has committed to raising the repayment threshold for students from Scotland to £25,000 from April 2021.
If you started your course before 1 September 2012, and are from England or Wales, see the Student Loans Company website for information about loan repayments.
Above the repayment threshold, you will pay 9% of your income. 'Income' includes earnings from employment, self-employment or rental income. Also, if you get more than £2,000 from savings interest, pensions or from investments, this would count as part of your income.
If you are:
- Employed in the UK: your student loan repayment will be collected through PAYE. It will be deducted from your gross pay with your income tax. HM Revenue and Customs makes the calculations. You must inform your employer that you are due to repay a student loan. Check (and keep) your payslips!
- Self-employed: repayments will be collected through the tax self-assessment system. The Student Loan Company cannot accept payments by credit card, so you will have to budget for your student loan repayment. Set money aside, as you do for your tax bill, perhaps with a direct debit to a savings account.
- Both employed and self-employed: you may have to make some loan repayments with your tax return for self-employment.
- Going to leave the country (for more than three months): you must inform the Student Loan Company. They will arrange to collect student loan repayments directly from you. The earnings threshold differs for overseas countries, but is equivalent to the income threshold in the UK.
What happens if your income changes during the year?
If you are below the repayment threshold annual salary, but go over the weekly or monthly income threshold, student loan repayments may be taken. This could happen if you have been working overtime, or been paid a bonus. If your income drops below the threshold, repayments will stop automatically.
At the end of the financial year, if your overall annual income was below the income threshold, you can apply for a refund of these 'over' repayments. This won't happen automatically – you will need to contact the Student Loans Company.
Check your payslips, and keep them safely for future reference. Note, you cannot get a refund on any voluntary repayments.
What else should you check payslips for?
Sometimes, in error, repayments have been taken before students are due to start paying their student loan back. Remember, you are not meant to pay anything until the April after you graduate. You can reclaim these over-repayments by contacting the Student Loans Company.
If your salary goes above the repayment threshold, and your payslips don't show any sign of contributions being made, ensure your employer knows you are meant to be repaying a student loan – otherwise you may be liable for a fine.
The Student Loans Company will send you an annual statement of how much you have repaid in the tax year. You can find out how much you have paid by logging on to your student loan account.
Use our Student Loan Repayment Calculator for an idea of how much you might expect to pay back and over what period of time.
Interest is charged on your student loan, to reflect the cost of living. The measure used for this is the Retail Price Index. It means in real terms, you are paying back a similar amount to that borrowed. Interest is charged from the first date you receive your loan, until it is fully repaid – or the loan is cancelled.
How the interest is worked out depends on what Plan type you are on: Plan 1, or Plan 2.
- Those with student finance from Northern Ireland or Scotland (Plan 1): your interest is linked to RPI or the Bank of England interest rate plus 1%, whichever is lower.
For Plan 2, it's a bit more complicated as it also depends on your income. Below shows the repayment thresholds that will be used from April 2019.
- Those with student finance from England or Wales after 2012 (Plan 2): while you are studying – or if you don't keep your details up to date later – the interest is set at RPI plus 3%. Once you finish or leave your course, the rate of interest depends on your income. For those earning up to £25,725, interest is the same as the RPI. Above £25,725, an additional amount of interest is added to the RPI, capped for incomes over £46,305 at RPI plus 3%.
What are the current interest rates for student loans?
You can check interest rates for your Plan on the Student Loans Company repayment portal.
- Plan 1: interest rates were increased in September 2018 to 1.75%. There is no set date for Plan 1 interest updates.
- Plan 2: interest rates are updated each September, in line with the Retail Price Index from March of that year. In September 2018, the RPI was 3.3%, meaning Plan 2 students accrue between 3.3% and 6.3% interest, depending on their income.
So – your loan gains interest, but in equivalent terms it is the same value as when you took out the loan, unless the interest rate is higher than the RPI. More importantly, what you repay is linked to what you earn, not how much you owe.
You may wonder how on earth you are going to pay off your student loan, particularly when you get a statement through from the Student Loans Company.
The truth is, only high earners are likely to actually pay the loan off. The balance of the student loan is cancelled after a certain time. This means student loan cancellation is likely for the majority of students – so long as they've kept up with any repayments due.
Also, having a student loan doesn't appear on your credit record (the information that banks and other lenders use to decide whether you can get credit from them). If you later apply for a mortgage or credit card, you may be asked whether you have a student loan but this will be to assess your income, and what you need to spend money on.
How long do I have to wait until my student loan is cancelled?
- For those with student finance from England and Wales, Plan 2 loans will be cancelled after 30 years.
- For those with student finance from Northern Ireland (Plan 1), loan cancellation comes after 25 years.
- In Scotland (Plan 1), student loan cancellation will be reduced to 30 years by the end of 2018.
In addition, Welsh students are able to apply for a single, partial cancellation of £1,500 off the balance of their maintenance loan. This is subject to the ongoing agreement of the National Assembly of Wales.
The loan will also be cancelled if you become disabled and permanently unable to work, or if you die.
While you are studying, some changes may result in an overpayment – for example if your household income increases, or you leave your course. Loan overpayments are treated separately from the main student loan. You'll need to pay back any overpayments earlier. To avoid this happening, it is important that you contact your university or college and inform your student finance body (Student Finance England or Wales, Student Finance NI or SAAS). You can contact the Student Loans Company about overpayments; check the repayment portal to find the correct phone number for the type of overpayment. You can find a link to the student loans repayment portal at the end of this guide.
You must keep your details up to date!
You are responsible for updating the Student Loans Company about any changes to your details. This includes your contact details, bank account, details regarding your course. Also let them know if you plan to leave the country, or change from being employed to self-employed.
- To check the details on student loan repayments for your plan, check the Student Loans Repayment portal.