Janice Lozano
In the UK, student loans are almost entirely government-run, and there is no penalty for making early repayments. If you want to pay off your loan early, you can make extra repayments through your online account, card, bank transfer, or cheque. You can also pay off the whole debt at once by contacting the Student Loans Company (SLC) to find out the settlement amount and date. It's important to keep your contact details up to date with the SLC, especially if you're leaving the UK for more than three months. Before making extra repayments, it's recommended to check when your loan will be written off and consult a financial advisor to see if it's the right decision for you.
| Characteristics | Values |
|---|---|
| Penalty for making early repayments | There is no penalty for making extra repayments to pay off your loan early |
| Repayment methods | Card, bank transfer, Direct Debit, cheque, debit card over the phone |
| Repayment amount | The Student Loans Company (SLC) will tell you the settlement amount and date |
| Repayment plan | Your repayment plan determines when you start repaying your loan and how much you pay |
| Repayment threshold | Plan 2 loans: £27,295/year (£2,274/month or £524/week) before tax; you pay 9% on the amount over £27,295 |
| Loan write-off | Your loan will be written off at the end of the loan term (30 years after first becoming eligible to repay for Plan 2 loans) |
| Self-employment | Repayment methods differ for the self-employed |
| Leaving the UK | You must inform the SLC if you're leaving the UK for more than 3 months |
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What You'll Learn
No penalty for early repayment
There is no penalty for early repayment of your student loan in the UK. You can make extra repayments to pay off some or all of your loan early. These extra payments are in addition to the mandatory repayments you make when your income is over the threshold amount for your repayment plan.
If you want to clear the whole debt at once, you can pay off your loan in full. You will need to contact the Student Loans Company (SLC) to find out the settlement amount and the settlement date. You can then pay this by bank transfer, with your debit card over the phone, or by cheque.
If you do not pay the settlement amount by the settlement date, you will need to contact SLC again as the amount you owe may have changed. You can make extra repayments in your online account and by card, bank transfer, or cheque. You can also set up a standing order from a UK bank account.
If you have nearly repaid your loan, you may be able to make your final repayments by Direct Debit instead of from your salary. This ensures that your employer will not accidentally take more than you owe. The SLC will contact you in the final year of your loan repayments to let you know how to set up a Direct Debit.
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Repayment methods
There are several ways to pay off your UK student loan. The first step is to contact the Student Loans Company (SLC) to find out the total amount you owe (the settlement amount) and the date by which you need to pay it (the settlement date). You will need your customer reference number (CRN) and your latest payslip (if you are employed).
Once you know the total amount you owe, you can pay it off in full by bank transfer, with your debit card over the phone, or by cheque. You can also make extra repayments through your online account by card, bank transfer, or cheque. If you want to set up a standing order, you must use the following bank details:
- Account name: Student Loans Company
- Sort code: 60 70 80
- Account number: 10027254
To pay by cheque, make it payable to the Student Loans Company Ltd and send it to:
> Finance Department
> Student Loans Company Ltd
> 10 Clyde Place
> Glasgow
> G5 8DF
Remember to write your customer reference number (CRN) on the back of your cheque. If you do not use your reference number, your payment will not be applied to your student loan account.
If you are employed, your repayments will be automatically deducted from your salary by your employer. This is the minimum amount you need to pay back. You can also make extra repayments alongside these payments to clear your debt faster.
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Repaying while self-employed
Repaying a UK student loan while self-employed requires a bit more work than being paid through a company payroll. When you take out a student loan, you're automatically enrolled in a plan that determines when you have to start paying it back and the different thresholds you'll be charged against.
If you're a UK resident and studied in the UK, you're likely to have been assigned one of the following student loan plans:
- Plan 1: Scottish and Northern Irish students who took out loans from 1 September 1998 onwards and English and Welsh students who took out loans from 1 September 1998 to 31 August 2012. Students on this plan start paying back their loan when their annual salary exceeds £24,990.
- Plan 2: For students who took out loans from 1 September 2012 onwards in England and Wales, and from 1 September 2017 in Scotland and Northern Ireland. The repayment threshold for this plan is £27,295 per year.
- Plan 4: For students in England and Wales who took out loans from September 2023 onwards. The repayment threshold for this plan is £31,395 per year.
If you're self-employed, you'll need to submit a Self Assessment tax return to HM Revenue and Customs (HMRC) each year. On this tax return, you'll need to include any student loan repayments you've made during the tax year. The tax year runs from 6 April to 5 April the following year. You can also indicate which student loan plan you're on and any deductions you've had from employers during the tax year.
If you don't submit your Self Assessment to HMRC by 31 October, you (or your accountant) will need to calculate your repayment amount. To do this, you'll need to calculate 9% of your annual gross income that falls above the threshold for your plan. For example, if you're on Plan 1 and your annual gross income is £25,500, you'll pay back 9% of £510 (£25,500 - £24,990), which is £45.90.
There's no penalty for making extra repayments or paying off your loan early. You can choose to make voluntary payments even before you meet your plan's threshold. However, Martin Lewis, author of MoneySavingExpert.com, argues against this approach. He points out that student loans don't affect your credit rating, are low-interest, and are automatically written off after 30 years, so there's no incentive to pay them off early.
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Getting a refund
There are several scenarios in which you may be eligible for a student loan refund. Here are the most common ways to get a refund:
- Overpayment due to annual income being below the repayment threshold: If your annual income for a previous tax year was below the repayment threshold, you can request a refund for overpayment. You can check your loan balance and repayment history through your online account. If you have overpaid and have not heard from the Student Loans Company (SLC), you can contact them to request a refund.
- Repaying on the wrong plan type: If you are on the wrong payment plan, you can request a refund for any overpayments. Download an active plan letter, and contact the SLC if the plan differs from what your employer has on record.
- Starting repayments too early: If you started making repayments before you were supposed to, you can request a refund for those early payments. Inform the SLC of the situation and request a refund.
- Making repayments after loan payoff: If you have made repayments after already paying off your loan in full, you may be eligible for a refund. The SLC may contact you directly and refund the overpayment.
To request a refund, you can use the Student Loan Company's refund request form or log in to the government portal to access the online refund form. You will typically receive your refund within 28 days of the SLC receiving your request. It is recommended to have your PAYE reference number, payroll number, and old payslips ready when making your request.
Additionally, if you are within a year of paying off your loan, the SLC may recommend switching to Direct Debit payments to avoid overpayment. This ensures that your employer does not continue deducting payments from your salary once your loan is paid off.
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Repaying with multiple jobs
Repaying a UK student loan with multiple jobs depends on the income from each job and the type of repayment plan. There are two types of plans: Plan 1 and Plan 2, each with different income thresholds. If you have multiple jobs, you will only make repayments on the income from the job that pays above the threshold. For example, if you have two jobs, one paying £2,400 per month and the other paying £500 per month, you will only make repayments on the income from the first job, as it is above the Plan 2 threshold of £2,372.
It is important to update your employment details with the Student Loans Company (SLC) to ensure you are on the correct repayment plan. Your repayments will be taken out of your salary at the same time as tax and National Insurance. You can check your payslips or P60 to see how much of your loan you have paid off and if you are on the correct plan. If you have multiple jobs, your repayments will be based on your total income for the whole year, and HM Revenue and Customs (HMRC) will determine the amount you repay annually.
If you are on multiple repayment plans, such as Plan 1 and Plan 2, you will repay 9% of your income over the lowest threshold. For example, if your income is £26,400 per year, or £2,200 per month, you will repay 9% of your income over the Plan 1 threshold of £2,172. Even if your income exceeds the Plan 2 threshold, you will not need to make separate repayments towards your Plan 2 loan.
You can make extra repayments to pay off your loan early, either through your employer or directly to the SLC. There is no penalty for making extra repayments, and it can help clear your debt faster. If you want to pay off the entire debt at once, you can contact the SLC to obtain a settlement amount and date. You can then make the payment by bank transfer, debit card, or cheque. However, it is important to consider any other debts you may have and prioritize clearing them first.
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Frequently asked questions
You can make extra repayments towards your student loan by contacting the Student Loans Company (SLC) to find out the total amount you owe and the date you need to pay by. You can then pay by debit card over the phone, bank transfer, Direct Debit or cheque.
No, there are no penalties for making extra repayments. However, you cannot get a refund for any extra repayments you make.
You can check your payslips or P60 to see how much of your loan you've paid off during the tax year.
