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How To: Student Loan Repayments

27 March 2019
Zara Woodcock
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Once you leave university, you could be leaving with a lot more than £30,000 of debt, which can feel like an impossible amount to pay back. On the bright side, you will need to earn more than £25,000 to even begin thinking about paying back your loans. This equates to £2,083 a month or £480 a week. You won’t immediately be getting e-mails and letters on your doorstep. Paying back your debt is an extremely long process and a lot easier than you think.

Here’s everything you need to know about student loan repayments.

How Do Student Loan Repayments Work?

Firstly, it is important to know that there are two types of student loans repayments. The first one is known as a Fixed Term Loan, which is for people who began studying before September 1998. The debt will be expected to be paid off in monthly instalments via Direct Debit.

The second type is known as an Income Contingent Loan and is for people who began studying after 1998. It doesn’t involve monthly payments as it is paid back through the tax system, in a way that is adjusted to your income.

The Income Contingent Loan has two forms of repayment plans, known as Plan 1 and Plan 2. Plan 2 only applies if you are studying in Wales or England and started your course on or after September 1 2012. If not, then Plan 1 applies, wherever you studied in the United Kingdom.

You don’t have to do anything, the Student Loans Company will tell HM Revenue & Customs (HMRC) to notify your employer when you start work. Payments will then be automatically deducted. Once the repayments are complete, HMRC will notify your employer


How Much Will I Pay?

This part is a lot simpler than some may think. The amount you repay will be based on how much you earn, not how much you borrow. You will be repaying 9 per cent of your income above the payment threshold. As mentioned before, the payment threshold is £25,000; earn less and you won’t be required to repay until you earn more.

Once leaving the course, payments don’t become valid until you have reached the payment threshold. So, if you don’t earn more than £25,000 for 10 years, then you don’t have to worry for a decade.

Now, what does the 9 per cent mean? If you earn £2,458 per month (before tax), you will need to pay £33 a month. Why?  £2,458 is £375 above the threshold, and 9 per cent of that is £33.


Can I Pay My Student Loans Before I Earn Enough?

You can definitely start paying off your loans before reaching the threshold. You do this by paying £5 or more to the Student Loans Company via debit card anytime you want. You are also allowed to pay off your loans in full at any time.


Will My Student Loans Ever Be Written Off?

If you started your course before 1st September 2006, any balance remaining is written off when you reach age 65.

However, if you started your course on/after 1st September, 2006, and have a Plan 1 loan, any balance of your loan is usually written off after 25 years. Scotland is different, as loans are written off after 35 years.

Plan 2 loans are written off after 30 years, and the loans are cancelled if you become permanently disabled or die.

Still worried about student loan repayments? Have a look at the endless vacancies we have and use MoneySavingExpert’s student loan calculator to figure out how much you will pay.