Repaying your student loan

Let's look at the five different Student Loan Company repayment plans and what they mean when it comes to repaying your student loan debt.

You will fall into one of five different Student Loan Company repayment plans. The payment plans are labelled Plan 1, Plan 2, Plan 4, Plan 5 and Postgraduate Loan (who knows why there's no Plan 3).

So, first things first, you can use the information below to figure out which repayment plan you are on or will enter.

If you applied to Student Finance England, and your course commenced before 1 September 2012. You're on Plan 1.

If you applied to Student Finance Wales, and your course commenced before 1 September 2012. You're also on Plan 1.

If you applied to Student Finance England, and your course commenced between 1 September 2012 and 31 July 2023, and you fall into any of the scenarios below. You're on Plan 2:

• You decide to take out a "Higher Education Short Course Loan."
  
• You decide to take out an "Advanced Learner Loan."
  
• You are studying an "Undergraduate Course."
• You are studying for a "Post Graduate Certificate of Education."

You are also on Payment Plan 2 if you fall into all three scenarios below:

1. You applied to Student Finance Wales.
2. You studied for a "Post Graduate Certificate of Education" or an undergraduate course.
3. You began your course on or after 1 September 2012.

If you applied to Student Finance England, and your course commenced on or after 1 August 2023, and you fall into any of the scenarios below. You're on Plan 5:

• You decide to take out an "Advanced Learner Loan."
  
• You are studying an "Undergraduate Course."
• You are studying for a "Post Graduate Certificate of Education."

We're not quite done yet; we can't forget our Scotland and Northern Ireland readers.

If you applied to Student Awards Agency Scotland and whether you studied a Postgraduate or an Undergraduate Course. You are on Plan 4.

If you applied to Student Finance Nothern Ireland and whether you studied a postgraduate or an undergraduate course. You are on Plan 1.

When it comes to paying off your student loan debt, it's not just a question of "when" but also "if". The Student Loan Company recognises that to pay back your loan, you must have some form of income, so there is a threshold. If you never meet this threshold, you might not have to make any repayments.

There is also a little bit of room after your course ends before the loan repayments begin:

• Most of the time, it will be the month of April that follows your course completion.
  
• If you're studying part-time or your course is a Postgraduate Doctoral course lasting more than four years, your loan repayments will commence in April, four years after your course starts.
• If you're on Plan 5, your repayments will commence in April 2026.

For many students, this could give you 6 – 9 months breathing room before the repayments start (if you already meet the repayment threshold).

Now, onto the subject of repaying your student loan. The amount you repay varies depending on the plan you fall into and the amount you earn.

For plans 1, 2, 4 and 5, you will pay 9% of the amount you earn over the threshold, whereas for the Postgraduate Loan plan, you will pay 6% of the amount you earn over the threshold.

Let's look at the repayment income thresholds for each plan, including your monthly payments. This part might seem complicated, but don’t worry; we’ve included an example.

• Plan 1 – You are only required to make loan repayments once your income is over £480 per week, £2,082 per month or £24,990 per year.
  
• Plan 2 – You are only required to make loan repayments once your income is over £524 per week, £2,274 per month or £27,295 per year.
  
• Plan 4 – You are only required to make loan repayments once your income is over £603 per week, £2,616 per month or £31,395 per year.
  
• Plan 5 – You are only required to make loan repayments once your income is over £480 per week, £2,083 per month or £25,000 per year.
• Postgraduate Loan plan- You only have to make loan repayments once your income is over £403 per week, £1,750 per month or £21,000 per year.

However, note that each of the above is calculated before tax and other deductions like National Insurance. It’s also important to note that the threshold amount may change on April 6th every year.

Yay, interest!

This part is not so fun, but it's still important for you to know. Unfortunately, for many of you, this will be your entry into the reality of the financial world.

How much interest you’re charged depends on which plan you are on:

• If you're on Plan 1, you're charged 6.25%
• If you're on Plan 2, you're charged 7.9%
• If you're on Plan 4, you're charged 6.25%
• If you're on Plan 5, you're charged 7.9%
• If you’re on a Postgraduate Loan plan, you're charged 7.9%

So, now that you know your repayment plan and the repayments you will be expected to pay, let’s take a look at how to make student loan repayments.

Your repayments are made automatically, and the payments will be taken from you when you are paid. The Student Loan Company expects you to inform your employer of your student loan so they can set up the necessary processes to make the payments to the Student Loan Company on your behalf.

If you are self-employed, HMRC will work out what you owe from your Self-Assessment. You’re expected to make the payment directly to HMRC at the same time you pay your taxes.

The Student Loan Company will likely contact you via email or letter to ask you to update your employment details. They will want to know if you've:

• Started a new job, or if you are self-employed.
• Stopped or are not working.
• Left the UK for more than three months.

They need this information to know whether you should be making payments or not. Without this, they may find it difficult to understand your status.

The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.