When Do You Start Paying Back Student Loan?

In the UK, paying back a student loan depends on a few key factors, such as the type of loan you have, your income, and when you took out the loan. Student loans are structured in such a way that you only start making repayments once you are earning above a certain income threshold. This ensures that repayments are affordable and aligned with your financial situation.

This article will provide an in-depth look into when you start paying back your student loan, covering the different loan plans, repayment thresholds, and how to manage your loan repayments effectively.

When Do You Start Paying Back a Student Loan?

In general, you start repaying your student loan from the April after you finish or leave your course – but only if your income exceeds the repayment threshold for your specific loan plan. If your earnings are below the threshold, you won’t need to make any repayments.

There are several different student loan repayment plans in the UK, and the point at which you start paying back your loan depends on which plan you’re on. The plan you’re on is determined by when and where you took out your loan, and what type of course you were studying.

Understanding the Different Student Loan Repayment Plans

There are four main student loan repayment plans in the UK, each with different repayment thresholds and rules:

1. Plan 1: For students who took out loans before 1 September 2012 in England and Wales, or those from Northern Ireland and Scotland.

2. Plan 2: For students who took out loans on or after 1 September 2012 in England and Wales.

3. Plan 4: For Scottish students.

4. Postgraduate Loan: For students who took out a loan for a Master’s or Doctoral degree.

Plan 1: When You Start Paying Back

If you’re on Plan 1, you start repaying your loan when your income exceeds £22,015 per year, £1,834 per month, or £423 per week (2023/24). This threshold typically increases slightly each tax year.

Plan 1 applies to:

• Students from England and Wales who started their course before 1 September 2012.

• Students from Northern Ireland and Scotland (regardless of when they started).

Once you begin earning above the threshold, you’ll repay 9% of your income over the threshold.

Plan 2: When You Start Paying Back

If you’re on Plan 2, you start repaying your loan when your income exceeds £27,295 per year, £2,275 per month, or £524 per week (2023/24).

Plan 2 applies to:

• Students from England and Wales who started their course on or after 1 September 2012.

Like Plan 1, you’ll repay 9% of your income over the threshold once you start earning above the set amount.

Plan 4: When You Start Paying Back

For students on Plan 4, repayments begin once your income exceeds £27,660 per year, £2,305 per month, or £532 per week (2023/24). This plan applies to Scottish students.

As with Plans 1 and 2, you’ll repay 9% of your income over the threshold once your earnings exceed this amount.

Postgraduate Loan: When You Start Paying Back

For those who have taken out a Postgraduate Loan, repayments begin once your income exceeds £21,000 per year, £1,750 per month, or £403 per week (2023/24).

For postgraduate loans, you repay 6% of your income above the repayment threshold.

How Much Will You Repay?

Once your income exceeds the repayment threshold, you will begin repaying 9% of any earnings above the threshold (or 6% for postgraduate loans). Here’s an example:

For Plan 2:

• If you earn £30,000 a year, you will repay 9% of the difference between your salary and the threshold of £27,295.

• £30,000 - £27,295 = £2,705

• 9% of £2,705 = £243.45 per year (or around £20.29 per month).

How Are Repayments Made?

If you’re employed, your student loan repayments are automatically deducted from your salary through the Pay As You Earn (PAYE) system, similar to income tax and National Insurance. This means that your employer will calculate your repayments based on your income and deduct the correct amount before you receive your salary.

If you’re self-employed, you will make repayments via the Self Assessment process, where you declare your earnings and calculate how much you need to repay in your tax return.

What Happens If Your Income Drops?

If your income drops below the repayment threshold at any time, your repayments will stop. You will only begin repaying again when your earnings rise above the threshold.

For example, if you’re on Plan 2 and your income falls below £27,295, you won’t need to make any repayments until your income increases above the threshold again.

What If You Have Multiple Loans?

If you have more than one student loan plan (such as a Plan 2 loan for your undergraduate degree and a Postgraduate Loan for your Master’s degree), your repayments will be calculated separately for each loan. This means:

• You will repay 9% of your income above the Plan 2 threshold.

• You will repay 6% of your income above the Postgraduate Loan threshold.

Loan Write-Off

Student loans in the UK are designed to be affordable and are eventually written off if they haven’t been repaid after a certain period:

• Plan 1 loans are written off 25 years after the April you became eligible to repay or when you turn 65.

• Plan 2 loans are written off 30 years after the April you became eligible to repay.

• Plan 4 loans are written off 30 years after the April you became eligible to repay or when you turn 65.

• Postgraduate Loans are written off 30 years after the April you became eligible to repay.

If you never earn enough to reach the repayment threshold, or if your loan isn’t fully repaid by the time it’s written off, the outstanding balance will be cancelled, and you won’t owe anything more.

Conclusion

The timing of when you start repaying your student loan in the UK depends on which plan you’re on, and repayments only begin once your income exceeds the repayment threshold for your plan. Repayments are calculated as a percentage of your income above the threshold, ensuring they remain affordable based on your earnings.

Understanding your repayment plan and the conditions of your loan is essential for managing your finances effectively. If you are ever unsure about your loan repayments or need more information, you can check your loan status through the Student Loans Company (SLC) website or contact them directly.