Ibrahim Gardner
The repayment of a student loan in Wales depends on the type of loan and the repayment plan. For instance, if you took out a loan before 1 September 2012, you will be on Repayment Plan 1; if you took out an undergraduate course on or after 1 September 2012, you will be on Repayment Plan 2. Postgraduate Loans apply to those who started a postgraduate master's or doctoral course on or after 1 August 2018. Repayments are typically collected by employers through the UK tax system via the Pay as You Earn (PAYE) system.
| Characteristics | Values |
|---|---|
| When do you start repaying your student loan? | The April after you finish or leave your course |
| How do you repay your loan? | Your employer will take repayments and pass them to HMRC, who will send this information to SLC. |
| How much do you repay? | The amount will depend on your income. |
| How often do you repay? | Repayments are taken and calculated each month. |
| What happens if you're self-employed? | Repayments will be collected through the UK tax system via the Pay as You Earn (PAYE) system. |
| What happens if you leave the UK for more than 3 months? | You must inform the Student Loans Company (SLC). If you don't, you could accrue debt on your account. |
| What happens if you took out a loan before September 1, 2006? | Your outstanding loan balance plus any interest will be cancelled when you reach 65 years old. |
| What happens if you took out a loan between September 1, 2006, and September 1, 2012? | Your outstanding loan balance plus any interest will be cancelled 25 years after the April when you first became due to start making repayments. |
| What happens if you die or become permanently disabled before paying off your loan? | Your loan will be cancelled, and you won't have to pay it back. |
| What happens if you receive a loan overpayment? | You will have to repay the overpayment. |
| What happens if you receive a maintenance loan? | The Welsh Government could cancel up to £1,500 from your full-time maintenance loan balance. |
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What You'll Learn
Repayment plans
Repayment of student loans in Wales depends on the type of loan and course undertaken. There are four repayment plans:
Plan 1
For students who started their course before 1 September 2012, repayment begins the April after finishing or leaving the course. However, repayments are only required if the income is over the threshold, which is currently £26,065 per year, £2,172 per month, or £501 per week in the UK.
Plan 2
For undergraduate students who started their course on or after 1 September 2012, the conditions are the same as Plan 1, with the same repayment threshold.
Postgraduate Loan plan
This plan is for students pursuing postgraduate master's or doctoral courses who started on or after 1 August 2018. Repayments begin the April after completing or leaving the course, or the April four years after the course start date, whichever comes first. Similar to the previous plans, repayments are income-dependent, with a threshold of £21,000 per year, £1,750 per month, or £403 per week.
Plan 4
This plan applies to both undergraduate and postgraduate students, with the specifics depending on the course start date.
The repayment threshold can change annually, and interest is charged on the loan. The interest rate is based on the Retail Price Index (RPI), a measure of inflation, and is adjusted each September based on the previous March's RPI. It is possible to voluntarily make additional repayments at any time.
It is worth noting that the Welsh Government may cancel up to £1,500 from a full-time Maintenance Loan balance when repayment commences.
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Cancelling your loan
The Welsh Government offers a partial cancellation scheme for students who have received a maintenance loan from Student Finance Wales since the 2010-2011 academic year to support them in studying a full-time undergraduate course. The scheme does not apply to students who have received loans for part-time undergraduate study or postgraduate study.
To be eligible for the scheme, students must not have any outstanding charges, costs, expenses or penalties in relation to their loan, or be in breach of their loan agreement. If a student has taken out loans in more than one academic year, the cancellation will be applied to the first maintenance loan they took out.
As long as a student is eligible for a cancellation, the deduction will be applied when they make their first repayment. This can be a statutory or voluntary repayment. A student will make a statutory repayment if their income, after the statutory repayment due date has passed, is above the relevant repayment threshold. If a student's income remains below the repayment threshold for several years, they will still be eligible for a cancellation if or when they make a statutory repayment in the future. A student can also make a voluntary repayment at any time, which will be counted as a repayment towards their loans. The cancellation will be applied shortly after the first repayment is made and will normally be shown on the next student loans statement.
Students are only entitled to receive the cancellation once, even if the amount of cancellation was £0 due to them paying their outstanding debt in full.
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Repaying from overseas
If you are moving overseas or out of the UK for more than three months, you must inform the Student Loans Company (SLC). You will be expected to keep repaying your loan unless you can provide proof (for example, a recent bank statement) that your overseas income is below the threshold. If you do not inform SLC, you may accrue debt ('accrue arrears') on your account, which you will need to pay back on top of your regular repayments.
The repayment threshold varies depending on the country you are living in. The threshold is based on the living costs in each country, including the costs of food, housing, and transport. This is known as the 'overseas repayment threshold'. Your gross annual salary will be converted to GBP using the exchange rate for the country you are living in. This amount will then be reduced by the 'repayment threshold (GBP)' for that country. You will then be expected to repay 9% of the amount left over, which will be split over 12 months to give you your monthly repayment amount.
If you are self-employed, you will repay through self-assessment when completing your tax returns. If you are employed, your employer will collect student loan repayments directly from your salary at the same time as tax and National Insurance.
If you are overseas, making additional voluntary repayments will not affect your required monthly repayment amount. You can also get a refund at the end of the tax year if you have made repayments and your annual income was less than the annual repayment threshold for your loan. However, this does not happen automatically, and you will need to contact SLC to request a refund.
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Repayments via your employer
Your repayment plan depends on when you started your course and what type of course you studied. You can check which plan you're on by signing in to your online account and downloading your 'active plan type letter'. You should then ask your employer which plan they have you on. If it's different from the plan in your letter, show this to your employer so they can update your payroll details. You can get a refund if you've paid back too much because you were on the wrong plan type.
If you're employed, your employer will deduct the repayments from your salary before you receive it. This means that no debt collectors will come chasing as it's automatically paid. You'll always repay your student loan in the same way as you pay income tax. You only have to pay back your student loan if you earn over the earnings threshold in a tax year. The amount you pay is calculated based on your pre-tax income above £28,470 per year, but the money is taken after you've paid tax. For example, if you earn a £34,000 gross annual salary, you will repay £497 per year (9% of the £5,530 above £28,470).
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Overpayments
If you have been overpaid student finance, you will need to repay the amount you have been overpaid. This can happen if you do not notify the relevant authorities that you have left or taken a break from your course, or if you do not provide sufficient evidence on time to prove your financial situation. Overpayments also need to be repaid even if you are earning under the repayment threshold.
If you have been overpaying your loan because you were on the wrong repayment plan, you can get a refund. This could be the case if, for example, you earned over £28,470 in a year, but due to irregular income, too much was taken from you.
If you've taken a full-time undergraduate Maintenance Loan and you start repaying your student loan, the Welsh Government could cancel up to £1,500 from any full-time Maintenance Loan balance. This applies to a student's first maintenance loan taken out for a full-time undergraduate course.
It is important to note that if you choose to repay your student loan early, you may be overpaying each month as the overpayment may not reduce the amount you need to pay back. This is because, under the Plan 2 system, many won't fully repay before the debt is wiped.
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Frequently asked questions
You'll start paying back your loan the April after you finish or leave your course.
For most people, repayments will be collected through the UK tax system by employers taking amounts from their salary through the Pay as You Earn (PAYE) system.
Repayments collected by your employer will be shown on your payslip. You should keep a record of these repayments so you know how much of your loan you’ve paid back.
You must tell the Student Loans Company (SLC) if you’re leaving the UK for more than three months. If you do not, you could build up debt on your account.
