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Student debt

22nd May 2024 · 7 minute read

Published by The Real Debt Guy

  • Student loan
  • Student debt
  • Student loan debt
  • Student loan repayment
  • Student loan repayment plans
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Repaying your student loan

Student Loan Repayments - Everything you need to know

For most who decide to opt for paid education (e.g. university), you barely step onto the ladder of working life, and you’re already dealing with loans and debt.

The sheer size of that initial student loan debt, and the strain from the weight of it, only seems to be growing in size as the years go by, with each year of university costing around a staggering £9,250.

Taking out a student loan isn’t a decision to be taken lightly (though it often is), it’s a significant life decision. That’s why it is important to understand the terms of the Student Loan Repayment - ideally before you take the loan out. If you have already taken out a student loan, it’s important you have a clear understanding of what exactly you have taken on.

Let's look at the five different Student Loan Company repayment plans, and what they mean when it comes to repaying your student loan debt.

What are the five Student Loan Company repayment plans?

You will fall into one of five different Student Loan Company repayment plans. The payment plans are labelled Plan 1, Plan 2, Plan 4, Plan 5 and Postgraduate Loan (who knows why there's no Plan 3).

So, first things first, use the information below to determine which repayment plan you are on or will enter.

Student Loan: Payment Plan 1

If you applied to Student Finance England, and your course commenced before 1 September 2012. You're on Plan 1.

Student Loan: Payment Plan 1 - Wales

If you applied to Student Finance Wales, and your course commenced before 1 September 2012. You're also on Plan 1.

Student Loan: Payment Plan 2

If you applied to Student Finance England, and your course commenced between 1 September 2012 - 31 July 2023, and you fall into any of the scenarios below. You're on Plan 2:

  • You decide to take out a "Higher Education Short Course Loan"
  • You decide to take out an "Advanced Learner Loan"
  • You are studying an "Undergraduate Course"
  • You are studying a "Post Graduate Certificate of Education"

Student Loan: Payment Plan 2 - Wales

You are also on Payment Plan 2 if you fall into all three scenarios below:

  1. You applied to Student Finance Wales
  2. You studied a "Post Graduate Certificate of Education" or an undergraduate course
  3. You began your course on or after 1 September 2012

Student Loan: Payment Plan 5

If you applied to Student Finance England, and your course commenced on or after 1 August 2023, and you fall into any of the scenarios below. You're on Plan 5:

  • You decide to take out an "Advanced Learner Loan"
  • You are studying an "Undergraduate Course"
  • You are studying a "Post Graduate Certificate of Education"

Postgraduate Loan plan

If you are studying a doctoral course or a Postgraduate Masters. You'll be on the Postgraduate Loan plan.

We're not quite done yet; we can't forget our readers from Scotland and Northern Ireland.

Student Awards Agency Scotland

If you applied to Student Awards Agency Scotland and whether you studied a Postgraduate or an Undergraduate Course. You are on Plan 4.

Student Finance Nothern Ireland

If you applied to Student Finance Nothern Ireland and whether you studied a postgraduate or an undergraduate course. You are on Plan 1.

When do I have to pay the loan back and how much are the repayments?

When it comes to paying off your student loan debt, it's not just a question of "when" but also "if". The Student Loan Company recognises that to pay back your loan, you need to have some form of income, and so there is a threshold. If you never ever meet this threshold, you might not have to make any repayments.

There is also a little bit of room after your course ends before the loan repayments begin:

  • The majority of the time it will be the month of April that follows your course completion.
  • If you're studying part-time, or your course is a Postgraduate Doctoral course which lasts for more than four years. Your loan repayments will commence the April four years after your course started.
  • if you're on Plan 5, your repayments will commence in April 2026.

For many students, this could give you 6 – 9 months breathing room before the repayments start (if you already meet the repayment threshold).

Student Loan repayments by plan

Now onto the subject of repaying your student loan. The amount you repay varies depending on the plan you fall into and the amount you earn.

For plans 1, 2, 4 and 5, you will pay 9% of the amount you earn over the threshold, whereas for the Postgraduate Loan plan, you will pay 6% of the amount you earn over the threshold.

Let's look at the repayment income thresholds for each plan, including your monthly payments. This part might feel a bit complicated but don’t worry, we’ve included an example.

  • Plan 1 – You are only required to make loan repayments once your income is over £480 per week, £2,082 per month or £24,990 per year.
  • Plan 2 – You are only required to make loan repayments once your income is over £524 per week, £2,274 per month or £27,295 per year.
  • Plan 4 – You are only required to make loan repayments once your income is over £603 per week, £2,616 per month or £31,395 per year.
  • Plan 5 – You are only required to make loan repayments once your income is over £480 per week, £2,083 per month or £25,000 per year.
  • Postgraduate Loan plan- You only have to make loan repayments once your income is over £403 per week, £1,750 per month or £21,000 per year.

However, do note each of the above are calculated before tax and other deductions like National Insurance. It’s also important to note that every year, on April 6th, the threshold amount may change.

Here’s an example, to show you how the repayments work.

Ben’s income is £36,000 per year and he is on repayment Plan 1. Each month he receives £3,000, taking him over the threshold of £2,082. The amount Ben earns over the threshold is calculated by subtracting the threshold amount from his monthly salary: £3,000 - £2,082 = £918.

This means the total amount Ben will have to repay each month is 9% of 918 = £82.62

What about the interest?

Yay, interest!

This part is not so fun, but it's still important for you to know. Unfortunately, for many of you, this will be your entry into the reality of the financial world.

How much interest you’re charged depends on which plan you are on:

  • If you're on Plan 1 you're charged 6.25%
  • If you're on Plan 2 you're charged 7.8%
  • If you're on Plan 4 you're charged 6.25%
  • If you're on Plan 5 you're charged 7.8%
  • If you’re on a Postgraduate Loan plan you're charged 7.8%

So, now you know the repayment plan you fall into, and the repayments you will be expected to pay, let’s take a look at how to make student loan repayments.

How do I make my Student Loan repayments?

When it comes to your repayments, this is done automatically, the payments will be taken from you when you are paid. The Student Loan Company expects you to inform your employer of your student loan, so that they can set up the necessary processes to make the payments to the Student Loan Company on your behalf.

Now if you are self-employed, HMRC will work out what you owe from your Self-Assessment. You’re expected to make the payment directly to HMRC at the same time you pay your taxes.

The Student Loan Company will likely contact you via email or letter, to ask you to update your employment details. They will want to know if you've:

  • Started a new job or if you are self-employed.
  • Stopped or are not working.
  • Left the UK for more than 3 months.

They need this information to know whether you should be making payments or not. Without this, they may find it difficult to understand your status.

Don't forget to read The Real Debt Guy's final thoughts below!

The information in this article is considered to be true and correct at the date of publication.

The Real Debt Guy's final thoughts.

If you’ve recently graduated with a student loan, or you’re reaching the threshold for repayments, you might be feeling a little uncertain, or even worried about making these payments.

Don’t worry, you can find out more on this subject by reading our articles ‘3 steps to handle your Student Loan Company debt’ and ‘When will your student loan debt be written off?'.

You will also find them at the bottom of this article.

This is also a very good time to learn how to budget correctly. You can use our Budget Planner to help you.

Simplifying complicated matters.

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