Janice Lozano
Repaying your student loan in the UK depends on several factors, including your repayment plan, income, and employment status. The repayment process is handled by the Student Loans Company (SLC), and there are different thresholds and interest rates for each plan. It's important to keep your contact details and employment information up to date with the SLC, especially if you're leaving the UK for an extended period. You can make repayments online, by card, bank transfer, or cheque, and one-off payments are also possible. Understanding the income thresholds for your specific plan is crucial, as you'll repay a percentage of your income above that threshold. Additionally, your repayment amount will depend on whether you have a single plan or multiple plans, and you may be eligible for a refund if your annual income falls below the yearly threshold.
| Characteristics | Values |
|---|---|
| When to start repaying the loan | Depends on the repayment plan |
| How much to pay | Depends on the repayment plan and income |
| Repayment methods | Online account, card, bank transfer, cheque, direct debit |
| Repayment frequency | Monthly |
| Interest rate | Set at the rate of inflation |
| Repayment threshold | Increases every year |
| Repayment when self-employed | Based on tax return |
| Repayment when having two jobs | Based on the income from the job with higher pay |
| Repayment when income drops | Not required |
| Repayment when moving abroad | Required, usually by direct debit |
| Repayment of other student finances | Not required, e.g. grants and bursaries |
| Repayment when leaving the course early | Required |
| Repayment of overpayments | Refund available |
| Repayment when having a Postgraduate Loan | 6% of income over the Postgraduate Loan threshold |
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What You'll Learn
How much you repay
The amount you repay on your student loan in the UK depends on your income and which repayment plan you're on. You'll repay a percentage of your income over the income threshold for your loan type, depending on how often you get paid. The income thresholds are different for each plan type.
For example, let's say you're on Plan 1 and have an income of £33,000 a year, meaning you get paid £2,750 each month. In this case, you'll repay 9% of your income over the Plan 1 threshold of £2,172 per month. This works out to a monthly repayment of £52.
If you're on multiple plans, such as Plan 1 and Plan 2, you'll repay 9% of your income over the lowest threshold out of the plan types you have. For example, if your income is £26,400 a year, or £2,200 per month, you'll repay 9% of your income over the Plan 1 threshold of £2,172, even though this income is also under the Plan 2 threshold of £2,372. This would result in a monthly repayment of £2.
It's important to note that if you have a Postgraduate Loan, the repayment percentage is different. For example, if you have a Postgraduate Loan and a Plan 2 loan, you'll repay 6% of your income over the Postgraduate Loan threshold (£21,000 a year) and 9% of your income over the Plan 2 threshold. Assuming an income of £28,800 a year, or £2,400 per month, this would result in a monthly repayment of £41.
Additionally, if you have multiple jobs, you'll only make repayments on income from jobs that pay you above the threshold for your plan type. For example, if you have a Plan 2 loan and two jobs that pay you £2,400 and £500 per month before tax and other deductions, you'll only make repayments on the income from the job that pays you £2,400, as it's above the Plan 2 threshold.
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When to start repaying
The time at which you start repaying your student loan depends on your income and the type of repayment plan you are on. The repayment threshold, or the amount you need to earn before you start paying, increases every year and is usually based on the RPI inflation rate in March of the previous year. If you are on Plan 1, for example, the threshold is £2,172 per month, or £33,000 per year. If you are on Plan 2, the threshold is £2,372 per month. If you are on Plan 4, the threshold is £36,000 per year. For a Postgraduate Loan, the threshold is £21,000 per year.
If you are on Plan 1 and Plan 2, you will repay 9% of your income over the Plan 1 threshold of £2,172. If you are on a Postgraduate Loan and a Plan 2 loan, you will repay 6% of your income over the Postgraduate Loan threshold and 9% of your income over the Plan 2 threshold.
If you have two jobs, you will only make repayments on the income from the job that pays you over the threshold for your plan type. HM Revenue and Customs (HMRC) will calculate your annual repayment amount based on your tax return. If you have already made repayments from a salary, HMRC will deduct them from the amount you owe.
You do not need to start repaying your student loan if your income drops below the threshold. If you leave the UK for more than three months, you must inform the Student Loans Company (SLC).
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Repaying with multiple jobs
Repaying your student loan with multiple jobs in the UK works in a similar way to having a single job. The amount you repay depends on your repayment plan and whether you have a Postgraduate Loan. You'll repay a percentage of your income over the threshold for your loan type, depending on how often you get paid.
If you have multiple jobs, you'll only make repayments on income from jobs that pay you over the threshold for your plan type. For example, if you have a Plan 2 loan and you're paid £2,400 a month from one job and £500 a month from another, you'll only make repayments on the income from the job that pays you £2,400 because it's above the £2,372 threshold.
However, if you submit a tax return, you'll have to pay repayments based on your combined income. This means that if you have multiple jobs, each paying you below the threshold, you may still have to make repayments if your combined income is over the threshold.
It's important to keep your employment details up to date and inform the Student Loans Company (SLC) if you're leaving the UK for more than three months. You can make extra repayments online or by card, bank transfer, or cheque.
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Repaying if self-employed
Repaying your student loan when self-employed in the UK requires a bit more work than when paid through a company payroll. The type of loan plan you are on will determine when and how much you have to pay back. There are currently four types of student loan plans in operation in the UK: Plan 1, Plan 2, Plan 4, and Postgraduate Loans. The plan you are on depends on when and where you took out the loan.
If you took out your student loan in England or Wales before 1 September 2012, you will repay your loan under HMRC's Plan 1. Loans taken out after 1 September 2012 are Plan 2 Loans. Northern Ireland loans are all Plan 1. Loans taken out in Scotland up to 5 April 2021 are Plan 1 Loans, but from 6 April 2021, all existing Plan 1 Loans and any new loans are being moved to the new Plan 4 Loan rules. For Plan 1 Loans, regardless of the part of the UK the loan relates to, you’ll start repaying your student loan the April after you leave your course.
If you are on Plan 1, you will start to pay back your loan when your annual salary exceeds £19,390. From 6 April 2021, this threshold increased to £19,895. The amount you'll pay is 9% of anything over that earnings threshold. If you are on Plan 2, you will start to pay off your loan once your annual earnings exceed £26,575, increasing to £27,295 for 21/22. As with Plan 1, the amount you'll pay is calculated as 9% of anything over your earnings threshold. For Plan 4, the threshold is £31,395.
If you are paying off a postgraduate Master's or Doctoral loan, the numbers are a little different. In England and Wales, you'll need to start repaying once your earnings exceed £21,000 per year. In Scotland and Northern Ireland, the repayment threshold is £18,330 per year.
Self-employed people pay student loans through the tax system, just like income tax and National Insurance. It comes out automatically, so there's no separate assessment system to go through. However, you will need to submit a Self-Assessment tax return (SATR) by 31 January each year to avoid penalties and interest on late payment. You can do this yourself or have an accountant do it for you. You can also use accounting software to complete your Self-Assessment and upload it directly to HMRC. You will need to calculate your annual gross income and then subtract the threshold that applies to you. The balance is your annual payment.
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Repaying from abroad
If you are planning to live outside the UK for more than three months, you must inform the Student Loans Company (SLC) before you leave. You will be asked to complete an 'Overseas Income Assessment Form' and provide details of your income and employment status. The SLC will then send you a letter outlining the next steps.
If you secure employment abroad and are paid by a foreign employer, the SLC will ask for the name of your employer and evidence of your salary. You will likely be asked to set up a direct debit repayment arrangement. The level of your repayment will depend on your overseas earnings. The repayment threshold relevant to the country you are going to may not be the same as the corresponding threshold in the UK. Overseas thresholds vary according to cost-of-living comparisons between the UK and the other country.
If you do not update the SLC about your circumstances, you may incur penalties. If you move outside the UK for less than three months, you will continue to be treated as a UK taxpayer, and you do not need to inform the SLC before you go.
If you have been abroad and then return to the UK, it is important to understand whether you have made overpayments on your loan. This situation can arise when you have been paying your loan repayments directly to the SLC and are then asked by HMRC to complete a self-assessment tax return. Your tax return will usually include all your worldwide income, and your student loan repayments will be calculated using UK repayment thresholds, meaning your overseas repayments may not be taken into account. If you do not want to make overpayments, you must contact the SLC to transfer the direct overseas repayments to HMRC and then apply to HMRC to ensure overpayments are not deducted.
You can also make one-off repayments towards your student loan without signing in. You can update your employment details if you are leaving the UK for more than three months.
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Frequently asked questions
The amount you pay back depends on your income and the type of repayment plan you are on. You will pay back a percentage of your income over the threshold for your loan type. For example, if you are on Plan 1, you will pay back 9% of your income over £2,172 a month.
If you are employed, your repayments will be taken automatically from your salary. If you are self-employed, HM Revenue and Customs (HMRC) will work out how much you repay each year from your tax return. You can also make one-off payments through your online account, by card, bank transfer or cheque.
Yes, you must inform the Student Loans Company (SLC) if you are leaving the UK for more than 3 months. You should also keep your contact details up to date in your online account.
