Once you leave the study and start earning more than a certain amount, the repayments of your student loan will begin. Here’s how your monthly repayments are calculated and made.
Student loan repayment thresholds
If your course started before September 1, 2012 or if you have a student loan loan from Northern Ireland or Scotland, you will have a Plan 1 loan that you will pay back when you earn more than £ 18,935 per year. year, £ 1,533. a month or £ 354 a week.
If you started your courses after September 1, 2012 in England or Wales, you will have a Plan 2 loan. You will start paying off your student loan when you earn more than £ 25,725 a year, £ 2,144 a month or £ 495 a week.
Refunds after your departure
Refunds are made automatically via the tax system. Payments will depend on how much you earn above the threshold in a given pay period. By pay period, we mean every time you receive your salary. It could be every week, two weeks, four weeks or a calendar month. Payments will stop if you earn less than the threshold for this pay period and once you have fully repaid your student loan. It is important to note that if, for example, you are paid on a monthly basis and earn above the repayment threshold for this month, perhaps because of a bonus or overtime, a deduction will be paid at your salary.
If, at the end of the year, you have earned less than the annual repayment threshold, you can call SLC to request a refund. However, if you have earned more than the annual repayment threshold, no funds will be due.
You will repay your loan, whether you are:
- an employee
- self employed
It is important to understand exactly what the repayment of a student loan is in order to properly manage your monthly budget.
Types of student loan
There are different types of student loans: conditional loans and mortgages (also called term loans).
Conditional income loans:
- If you started studying from September 1998, you took out a loan subordinated to income.
- This type of loan does not result in fixed monthly payments, but is reimbursed through the tax system in varying amounts depending on your income.
Conditional income loans have two types of repayment plans:
Student Loan Plan 1 – These apply wherever you studied in the UK, unless you are contracting a Plan 2 loan.
Student Loan Plan 2 – You have a Plan 2 loan if you are studying in England or Wales and have started your studies on or after September 1, 2012.
- If you started studying before September 1998, you will receive a mortgage.
When do student loan repayments begin?
At the earliest, you will have to start repaying your student loan on April 6, the year following the end of your university or college studies.
Learn more about when you should start repaying your loan on GOV.UK
Refunds only begin when you start earning a salary above a certain salary. It depends on what loan you have.
Plan 1 loans will begin to be repaid as soon as your annual income exceeds the annual threshold of £ 18,935, or £ 1,533 per month or £ 354 per week.
The Plan 2 Loan repayment starts from when you earn more than £ 25,725 a year, or £ 2,144 a month or £ 495 a week.
You may have to make Plan 1 and Plan 2 repayments, depending on when you started your education. More information about this on the website of the student loan company.
How does the student loan company know how much you earn
The student loan company uses your national insurance number to track your income.
They will ask HM Revenue & Customs (HMRC) to notify your employer when you start work and payments will be deducted from your taxable income.
If your income falls below the starting point in a given pay period, no refund deduction will be made for that pay period. By pay period, we mean every time you receive your salary. It could be every week, two weeks, four weeks or a calendar month.
Once the loan is repaid, HMRC notifies your employer and refunds will stop.
However, if payments fail before your employer takes action, you will be reimbursed.
You must follow payroll deductions and contact the student loan company if you think you have overpaid.
If you are independent
If you are self-employed, HMRC will calculate what you owe each year in refunds once you file your income tax return.
Just be sure to check the box on your tax return, which indicates that you currently have a student loan.
If you are abroad
If you are abroad for three months or more and your repayments have already begun, you must submit a foreign income assessment form indicating the amount to be reimbursed abroad.
What you need to repay
The amount you reimburse is 9% of the income you earned above the repayment thresholds:
- £ 18,935 per annum, £ 1,533 per month or £ 354 per week for Plan 1
- £ 25,725 a year, £ 2,144 a month or £ 495 a week for Plan 2.
Interest is added to your loan from the date of your first payment.
For example, earning £ 27,000 a year would mean that you will receive £ 8,605 above the threshold. 9% of £ 8,605 is £ 774.45 a year, or £ 64.53 a month.
Interest on Student Loans Plan 1
The interest rate is fixed on September 1 of each year, although it may change during the year. Currently, the interest rate on Plan 1 loans is 1.75%
Under Plan 2, you will repay 9% of your income over the earnings threshold of the equivalent pay period. So, if you earned £ 2,250 a month (or £ 27,000 a year), they would pay £ 9.54 a month (9% of the £ 106 above the £ 2,144 monthly threshold).
If you earned £ 2,500 a month (or £ 30,000 a year), you have to pay back 9% of the £ 456 above the threshold of the relevant monthly pay period (just over £ 32 per month).
We have assumed that you receive 12 equal monthly payments in the examples above.
Interest on Plan 2 Student Loans
When you study, the interest on your loan is equal to the UK RPI, plus 3%. Once you have left your course, the rate depends on your salary and varies between PPIs for those earning £ 25,725 or less. It is increased by 3% for those whose earnings exceed £ 46,305.
When you have a loan Plan 1 and a loan Plan 2
You will start repaying your Plan 1 loan when you make gains above the annual threshold of £ 18,935 and below £ 25,725 a year.
You will pay off your Plan 1 and Plan 2 loans when you earn £ 25,725 or more.
The amount to be refunded is 9% of the amount you earn and exceeds the repayment threshold for the corresponding pay period. By pay period, we mean every time you receive your salary. This could be every week, four weeks, one calendar month.
Pay off your student loan faster
You have the right to pay off your student loan faster by making one-time payments of £ 5 or more directly to the Student Loan Corporation whenever you want.
You can do this even if your salary does not reach the starting level for repayments yet.
You also have the right to repay your entire student loan at any time.
If you make voluntary repayments, this will not prevent your employer from deducting your salary from the usual student loan deductions. But that means the repayments will stop sooner.
Before making additional payments, you must first determine if you can make better use of this money to meet your budget needs now.
Welsh Loan Cancellation
If you took out a loan from Student Finance Wales under Plan 1 during the academic years 2010/11, 2011/12, 2012/13 and 2013/14 or under Plan 2 from the academic year 2012 / 13, the Welsh Government can provide with a partial cancellation of up to £ 1,500.
The discount will be applied to the balance of your student loan by the student loan company when you start paying back.
When will my student loan be written off?
Exactly when loans are canceled varies depending on the loan you have and where you have studied.
Plan 1 loans and style mortgages vary a lot more in terms of when they are written off. Find out what would apply in your case.
Plan 2 loans you will have if you studied in England or Wales and you started your course on or after September 1, 2012, are normally amortized 30 years after the start of repayment.
Visit the Student Loan Repayment website for more information on when Plan 2 Loans are written off.
Your loan is written off if you become disabled or die.
If you can prove that you are permanently unfit for work, the student loan company will also write off your student loan. The Student Loan Reimbursement site contains all the details on how to prove it.
Learn more about when other student loans are written off on the student loan repayment website.
Budget now to manage your student loan repayments
Whether you have to start your university studies or prepare to finish your studies in the near future, the time will come when you will start paying off your student loans.