Student loans can easily be one of the biggest debts of your lifetime.
And understanding how they work can be overwhelming. You might have lots of questions about repaying student loans, such as:
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How does student loan repayment work?
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When do you start repaying student loans?
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What is the student finance repayment threshold?
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How are student loan repayments calculated?
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Can you repay a student loan early? (And is this a good idea?)
We’ll answer these questions and more in this student loan repayment guide.
About student loans in the UK
First, let’s look at how student loans work in the UK.
With most loans, you’ll usually start making repayments pretty much straight away, usually a month after you first take out the loan.
But luckily, student loans in the UK don’t work like this. In fact, they work more like a tax than a loan.
And after you start your degree, you won’t have to start making any repayments for a while. 🙏
When applying for UK student loans, most students will apply for a tuition fee loan and a maintenance loan: one to pay for the cost of your course, the other to pay for living costs. But when it comes to student loan repayment, these are bundled together and any repayments will be made on the sum of the loans you’ve taken out, plus any interest added over time.
This total will include any student finance loans you took out for studying abroad and any postgraduate loans. But it won’t include any scholarships, bursaries or grants - these are all free money that doesn’t have to be paid back (so, as we always say, make the most of these while you’re studying!).
Repayment plans 101
Your repayment plan will determine several different things about your student loan repayments.
You don’t choose which plan you’re on. It’s based on:
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Which UK country you’re from (these plans cover students from all four UK countries)
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When your course started
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The type of degree you’re studying
We’ll reference these plans throughout this blog, so here’s a quick run-through of the different repayment plans for student loans:
Repayment Plan 5
You’ll be on Repayment Plan 5 if you:
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Started your course after 31 July 2023
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Applied for student finance from Student Finance England (i.e. you’re an English student)
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Are studying or have studied an undergraduate degree or PGCE or
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Have taken out an Advanced Learner Loan
You can get more details about Repayment Plan 5 here.
Repayment Plan 4 (Scotland)
If you applied for student loans through the Student Awards Agency Scotland as an undergraduate or postgraduate Scottish student, you’ll be on Repayment Plan 4.
Repayment Plan 3 (Postgraduate Loan plan)
If you’re from England or Wales and your course is a postgraduate Master’s or Doctoral course, this is your repayment plan.
Repayment Plan 2
You’re on Repayment Plan 2 if you:
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Got your student loans from Student Finance England
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Applied before 1 August 2023
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Are studying/studied an undergraduate degree or PGCE or
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Have taken out an Advanced Learner Loan or
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Have taken out a Higher Education Short Course Loan
But you’ll also be on this plan if you:
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Got your student finance from Student Finance Wales
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Applied after 31 August 2012
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Are studying/studied an undergraduate degree or PGCE
Repayment Plan 1
Two groups fall into the Repayment Plan 1 bucket:
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All students who applied for their student finance from Student Finance Northern Ireland, whether for an undergraduate or postgraduate degree
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Students who started their course before 1 September 2012 for students who applied to Student Finance England or Wales
Interest on student loans
You’ll be charged interest on your student loans from the day you receive your first maintenance loan instalment, or the day the government makes your first tuition fee loan payment to your university or college.
The amount of interest you’re charged depends on your repayment plan and the rate can fluctuate a lot.
To keep things simple, across the five plans the current interest rate ranges between 6% and 8%.
If you want more information about student loan interest rates, check out the GOV.UK website.
When do you start repaying student loans?
As mentioned before, you won’t start making repayments as soon as you take out a student loan, nor as soon as you graduate.
For most students, the earliest you’ll start making repayments is the April after you graduate from university or college. So if you graduate in July 2024, the earliest you’ll make any repayments will be April 2025.
If you’re a part-time or Postgraduate Doctoral student, you’ll be due to start making repayments from the April four years after you start your degree, if this date comes before the April after you graduate.
This means there’s less pressure to start earning money straight away after you graduate, creating a much better repayment situation than in some other countries.
The student loan repayment threshold
A second factor that determines when you start making repayments is the student loan repayment threshold.
This is the minimum amount you have to be earning before you start making any repayments. You won’t repay anything until you're earning at least this amount, regardless of how long ago you started your course or graduated.
The annual income thresholds vary by repayment plan:
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Plan 5 - £25,000 (£2,083/month)
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Plan 4 - £31,395 (£2,616/month)
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Plan 3 - £21,000 (£1,750/month)
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Plan 2 - £27,295 (£2,274/month)
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Plan 1 - £24,990 (£2,082/month)
If you’re earning above the threshold and are making repayments, but your income then drops below the threshold, you’ll stop repayments until your income is again above the threshold.
These thresholds can be increased every year by the government on the 6 April and often are raised to account for inflation.
Are student loan repayments based on gross or net income?
Student loan repayments are always based on gross, or pre-tax, income.
What if I never earn above the repayment threshold?
Then you won’t ever pay anything back!
Also, if you’re unable to work, you won’t repay anything.
How are student loan repayments calculated?
Okay, you’re earning above the repayment threshold and enough time has passed that you’re now eligible to make repayments. So how much will you pay back? And how does the process work?
For most students, you’ll pay back 9% of everything you earn over the repayment threshold.
As an example, if you’re on Plan 2 (repayment threshold = £27,295) and you’re earning £29,295 a year, you’ll pay back 9% of £2,000 = £180 (since you’re earning £2,000 more than the repayment threshold) each year.
The exception is if you’re on Repayment Plan 3 - instead, you’ll pay back 6% of everything you earn above your repayment threshold.
Note: you’ll always be better off earning more money, even though you’ll pay more in tax, National Insurance and student loan repayments by doing so, because your take-home pay will always still be higher.
How does student loan repayment work?
If you’re working a job, student loan repayments will be taken directly from your salary.
You won’t have to do anything - your employer should do this for you, meaning you’ll see it as a deduction on your payslip but won’t have to take any action to make repayments happen.
Self-employed? Things work a little differently.
When you complete your yearly self-assessment tax return, HMRC will work out how much you owe for the year. You’ll then pay that amount in one lump sum.
Are student loan repayments taken before tax?
Student loan repayments are taken at the same time as income tax and National Insurance, meaning they don’t decrease the amount you pay in tax.
Repaying student loan from abroad
If you leave the UK for three months or longer, you’ll need to let the Student Loans Company (SLC) know. You can do this by updating the details in your online account.
Why do you have to do this? Repayment thresholds differ depending on which country you’re living in. Thresholds are based on living costs in each country - the lower living costs are, the lower the threshold is - meaning your repayment threshold could be a lot lower than if you were living in the UK.
So you might need to make much higher repayments if you’re living abroad.
Therefore it’s important to make sure your residency info is up to date, so you’re not paying more than you need to, or paying less and end up getting in trouble.
You can get more information about this here.
Can you repay a student loan early?
Yes - at any point, you can choose to make extra repayments towards your student loans.
You can do this through your online student finance account, by bank transfer or by cheque.
However, you should run the numbers first to see if it’s worth making extra repayments. If you’ll never end up paying off your student loans in full, it doesn’t make sense to make extra repayments.
And eventually, your student loans will be written off, which we’ll come to in a minute.
So you’ll only want to make extra repayments if it’ll lead to you having more money in the long run.
If you make extra repayments, you can’t ever get that money back.
Will student loan debt affect my credit score?
Many students think they should pay off their student loans early to prevent any negative effect on their credit score.
But student loans don’t appear on your credit report, meaning they won’t affect your credit score at all!
This is very different to other loans and debts, which we speak more about in this guide to student debt.
And if you’re looking for ways to improve your credit score, we’ve got you covered.
When do student loans get written off?
You probably won’t have to pay off your student loans forever.
Eventually, your student loans get written off and you’ll stop having to make repayments. It doesn’t matter if you’ve paid off 0% or 99.9% of your loans - after a certain time period, your student loans are forgotten about.
When this happens depends on your repayment plan:
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Plan 5 - 40 years
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Plan 4, 3 or 2 - 30 years
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Plan 1 - 25 years
As we talked about, bear this in mind if you’re considering making any extra repayments to your student loan sum.
Also, if you die, student loans are cancelled - they won’t be passed onto your family.
Partial loan cancellation for Welsh students
If you received a Maintenance Loan from Student Finance Wales from 2011 onwards, you could get £1,500 of that loan wiped out.
Here's more information about this partial loan cancellation.
Want to learn more about student funding in general? Check out our ultimate student funding guide.
