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Student debt

21st May 2022 · 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 Repayment - Everything you need to know

For those who decide to take the route of paid education, like university, you barely step onto the ladder of working life, and already you’re 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 £9,000.

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.

Not in the mood to read? We got you covered. Listen to the rest with the YouTube link at the bottom of the page.

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

What are the three Student Loan Company repayment plans?

You will fall into one of four different Student Loan Company repayment plans. Strangely, the payment plans are labelled Plan 1, Plan 2, Plan 4 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 into.

Student Loan: Payment Plan 1

If you fall into one of the below scenarios you are on repayment Plan 1:

  • You are English or Welsh, and started an undergraduate course anywhere in the UK, before 1 September 2012.
  • You are from the EU, and started an undergraduate course in England or Wales, on or after 1 September 1998 but before 1 September 2012.
  • You are Northern Irish and started an undergraduate or postgraduate course anywhere in the UK, on or after 1 September 1998.
  • You are from the EU and started an undergraduate or postgraduate course in Northern Ireland, on or after 1 September 1998.

Student Loan: Payment Plan 2

If you fall into one of the below scenarios you are on repayment Plan 2:

  • You are English or Welsh, and started an undergraduate course anywhere in the UK, on or after 1 September 2012.
  • You are someone who took out an "Advanced Learner Loan", on or after 1 August 2013.
  • You are from the EU, and started an undergraduate course in England or Wales, on or after 1 September 2012.
  • You are someone who took out a Higher Education Short Course Loan on or after 1 September 2022

Student Loan: Payment Plan 3

Error 404, there isn’t one (who knows why)...onto payment plan 4!

Student Loan: Payment Plan 4

If you fall into one of the below scenarios you are on repayment Plan 4:

  • You are Scottish and started an undergraduate or postgraduate course anywhere in the UK, on or after 1 September 1998.
  • You are from the EU, and started an undergraduate or postgraduate course in Scotland, on or after 1 September 1998.

Postgraduate Plan

Ah yes, there is one additional plan related to Postgraduate Student Loans! If you fall into one of the below scenarios you are on a Postgraduate Loan repayment:

  • You are English or Welsh, and took out a Postgraduate Masters Loan, on or after 1 August 2016.
  • You are English or Welsh, and took out a Postgraduate Doctoral Loan, on or after 1 August 2018.
  • You are from the EU, and started a postgraduate course, on or after 1 August 2016

Now you know which repayment plan your student loan debt falls under, let’s take a look at when you will be required to pay back the loan and how much the repayments will be.

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, either:

  • the month of April that follows your course completion
  • if you're studying part time, the April four years after the course started

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

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

Let's take a 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 £388 per week or £1682 per month. If your circumstances change during the year, and your total annual income ends up being less than £20,195. You can ask for a refund of the payments you have made.
  • PLAN 2 – You are only required to make loan repayments once your income is over £524 per week or £2274 per month. If your circumstances change during the year, and your total annual income ends up being less than £27,295. You can ask for a refund of the payments you have made.
  • PLAN 4 – You are only required to make loan repayments once your income is over £487 per week or £2114 per month. If your circumstances change during the year, and your total annual income ends up being less than £25,375. You can ask for a refund of the payments you have made.
  • POSTGRADUATE LOAN PLAN - If you have taken out a Master's Loan or a Doctoral Loan, you only have to make loan repayments when once your income is over £403 per week or £1750 per month. If your circumstances change during the year, and your total annual income ends up being less than £21,000. You can ask for a refund of the payments you have made.

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 £30,000 per year and he is on repayment Plan 1. Each month he receives £2,500, taking him over the threshold of £1,682. The amount Ben earns over the threshold is calculated by subtracting the threshold amount from his monthly salary: £2500 - £1682 = £818.

This means the total amount Ben will have to repay each month is 9% of £818 = £73.62.

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, you’re expected to calculate what you should be paying and make the payment directly to HMRC through your Self-Assessment.

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 in order to work out when, the amount and how you should be paying. Without this they may not know your status i.e. whether you should be paying or not.

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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