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How Does Repaying Your UK Student Loan Actually Work?

How Does Repaying Your UK Student Loan Actually Work? main image

Student loans can be very confusing. You’re aware that you owe a lot of debt, but you’re not sure exactly how much, and how on earth do they work out how much you have to pay back each month?!

Read on as we help you navigate through the mysterious workings of student loan repayments…

What will you need to repay?

You will need to repay your tuition fee loans, maintenance loans, as well as any postgraduate loans.

Tuition fee loans (both postgrad and undergrad)

Your tuition fees will be up to £9,250 per year for an undergraduate degree in the UK. If you have taken out a postgraduate loan for a master’s (currently up to £10,906) or PhD course (currently up to £24,700) you will also have to repay these loans.

Maintenance loans

How much you were eligible to borrow in your maintenance loan would’ve depended on where in the UK you’re from, your family household income, and whether you were living at home or not. 

In the current academic year (2019 to 2020) this is up to £8,944 for students living away from home outside London, and up to £11,672 for students living away from home in London.

Other

You will not have to repay any grants or bursaries. However, you’ll also still have to repay your student loans and maintenance loans if you left your course for any reason. Find out here how much of your student loan you will have to repay if you switch courses or leave your course. 

What student loan plan am I on?

There are three types of repayment plans you might be on: Plan 1, Plan 2 and the Postgraduate Loan repayment plan – but what do they mean? Read on to find out which plan you’re in, and what this means for your student loan repayments.

Plan 1:

Plan 1 is the older plan, for students who started their undergraduate course before September 2012. If you are any of the below, you will be in plan one:

  • An English or Welsh student who started an undergraduate course anywhere in the UK before 1 September 2012
  • A Scottish or Northern Irish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998
  • An EU student who started an undergraduate course in England or Wales on or after 1 September 1998, but before 1 September 2012

Plan 2:

Plan 2 is the current plan, for students who started their undergraduate course on or after 1st September 2012.

  • An English or Welsh student who started an undergraduate course anywhere in the UK on or after 1 September 2012
  • An EU student who started an undergraduate course in England or Wales on or after 1 September 2012
  • Someone who took out an Advanced Learner Loan on or after 1 August 2013

Postgraduate loan:

If you are on a postgraduate course and took out a Master’s Loan or a Doctoral Loan, you will be on the Postgraduate Loan repayment plan. The Postgraduate loan repayment is for the following:

  • An English or Welsh student who took out a Postgraduate Master’s Loan on or after 1 August 2016
  • An English or Welsh student who took out a Postgraduate Doctoral Loan on or after 1 August 2018
  • An EU student who started a postgraduate course on or after 1 August 2016

When will I have to start repaying my student loan?

You will start repaying your student loan on the 6th April after you finish your course (provided you meet the income threshold, see below). If you are a part time student, you will only begin paying back your student loan four years after you started the course.  

How much interest will I have to pay?

If you’re on Plan 1, the interest rate on your loan will be the Bank of England base rate plus one percent, or the rate on inflation – whichever one is lower.

If you’re on Plan 2, while studying, the interest rate on your loan is the Retail Price Index (RPI) plus three percent. If you earn less than £25,725, your interest rate will then be the current RPI. If you earn between £25,725 and £46,305, your interest rate will be the RPI plus up to three percent (the percentage will rise as your salary rises). If you earn over £46,305, you’ll pay an interest rate of RPI plus 3 percent.

How much will I have to pay each month?

Plan 1 and Plan 2:

Those in either Plan 1 or Plan 2 will currently pay nine percent of any amount you earn over the threshold.

For Plan 1 this is when your income before tax is over £1,577 a month (or £364 a week). This threshold will rise to £1616 from 6th April 2020. 

For Plan 2 this is when your income before tax is over £2,143 a month (or £494 a week)

Postgraduate Loan:

Those with a Postgraduate Loan will pay six percent of any amount you earn over the threshold.

If you’re on a Postgraduate Loan, you’ll repay when your income before tax is over £1,750 a month (or £404 a week)

Both Plan 1/2 and Postgraduate Loan:

If you have both an undergraduate Plan 1 or Plan 2, as well as a Postgraduate Loan, you will repay 15 percent of whatever you earn over the threshold.

What does this mean?

If, for example, you’re earning £30,000 per year – i.e. £2,500 per month before tax.

Under Plan 1, you will pay nine percent of the amount over the threshold, which is £1,577.

£2,500 - £1,577 = £923 * 9% = £83.07 per month

With a Postgraduate loan, you will have to repay six percent of the amount over the threshold, which is £1,750 per month. Using the example above:

£2,500 - £1,750 = £750 * 6% = £45 per month

What if I want to repay my student loan more quickly?

You can repay your student loan in single payments of £5 or more at any time to the Student Loans Company. Find out more about making extra repayments here.

When will my student loans be written off?

Plan 1

If you’re on Plan 1 and from England, Northern Ireland and Wales, your debt will be written off when you are 65 years old if you took out the loan before or during the 2005 to 2006 academic year. If you took out the loan in the 2006 to 2007 academic year, or later, your debt will be written off 25 years after the April you were first due to repay.

If you’re on Plan 1 and from Scotland and took out your loan in the 2006 to 2007 academic year or earlier, your debt will be written off when you’re 65 or 30 years after the April you were first due to repay. If you took out your loan in the 2007 to 2008 academic year or later, your debt gets written off 30 years after the April you were first due to repay.

This also applies to postgraduate students from Northern Ireland or Scotland.

Plan 2

If you are on a Plan 2 loan, your loan will be written off 30 years after the April you were first due to repay.

Postgraduate loans

Postgraduate Loans will get written off 30 years after the April you were first due to repay.

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Written by Chloe Lane
A Content Writer for TopUniversities.com, Chloe has a bachelor’s degree in Economics from the University of Reading and grew up in Leicestershire, UK. 

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