Student loans are broken up into two payments, your tuition fee and your maintenance loan. One is paid directly to the university to fund your education; the other is paid directly to you, the student, to cover accommodation and living expenses while you study.

What is student loan debt?

Student loan debt is the amount you must repay once you’ve finished your studies and begun working. Student loan debt works differently from other forms of debt, and though there are many things to consider, it has safeguards and repayment requirements that make it more manageable than a standard loan for those who choose to take it out. 

Do I need to start repaying my student loan once I start working?

Student loan repayments require an earnings threshold before coming into action. In the UK, this is currently set at £27,295 (as of August 2023), meaning you won’t be required to start repaying your student loan until you are officially earning at least this amount annually.

Once you reach this threshold, you’ll be required to repay 9% of whatever you earn, this means that the less you earn the less you repay accordingly. The more you earn, the more you’re expected to repay each year.

In theory, this essentially means the amount you repay correlates with the value of your further education: if you’re earning more money due to your degree, you pay more towards it (though this might not always necessarily be the case). 

What type of plan do I have?

There are a few different student loan plans that affect how you’ll repay your student loan in the UK. These include:

Student Loan Plan 1:
Plan 1 student loans are the loan plan for any courses taken out before the 1st of September 2012. If you’re on a Plan 1 type student loan, you’ll be required to start repaying your student loan at a lower earnings threshold of £22,015 annually, or £423 a week.

Student Loan Plan 2:
Plan 2 is the current student loan plan that UK students will be enrolled on, this type of loan is for any student starting their studies after 1st September 2012 and this comes with the above-mentioned earnings threshold of £27,295 annually, or £524 weekly.

Student Loan Plan 3:
Plan 3 loan types are postgraduate master’s, doctoral, or postgraduate loans predominantly taken out in Wales before August 1st 2016. The repayment threshold for Plan 3 loans is £21,000 annually, or £1,750 a month (gross). You’ll be required to repay at 6%, meaning post-grads earning £25,000 a year will repay £1,500 a year.

Student Loan Plan 4:
Plan 4 student loans are loan plans for Scottish students who graduate in 2020/2021 onwards. Plan 4 repayment thresholds are set at £27,660 at a repayment rate of 9%, meaning a postgraduate who earns £28,000 a year will repay £340 a year or £30.60 per month.

Student Loan Plan 5:
Plan 5 is a recently introduced student loan plan that came into effect after 1st August 2023. On a Plan 5 repayment plan, you begin repaying your student loan once you earn over £25,000 a year, or £480 a week.

Postgraduate Loan:
A postgraduate loan, also known as a master’s or doctoral loan, is a loan taken out following an undergraduate degree or for further education. The repayment threshold for a postgraduate loan is £21,000 annually, or £1,750 a month (gross). This loan is repaid at 6% of your income over the threshold.

You can learn more about your student loan plan and the repayment requirements of your loan over on GOV.UK.

How much do I owe in student loans?

The amount you owe in student loans ultimately varies depending on several factors such as course, university, amount borrowed for your maintenance loan, etc. The average UK student loan debt is estimated to be about £45,000 based on data from the Office for National Statistics (ONS).

However, this statistic is based on currently enrolled students and doesn’t include graduates repaying their loans.

To see how much you owe in student loans and how much you’re currently expected to repay, you can manage your student loan balance on the student loan GOV.UK website.

Will it affect my credit score?

Unlike other forms of debt, a student loan won’t be recorded on your credit file, therefore it won’t have any negative effect on your credit score. This ensures that potential students looking to go into higher education can do so without any adverse risks to their financial health or to their ability to receive credit in the future.

So, if you choose to take out a student loan, you can be assured your credit score will remain the same once you graduate (unless you choose to take out any other lines of credit while studying, that is).

Does a student loan affect my mortgage?

Taking out a student loan can have a minor effect on your ability to get a mortgage. While a student loan isn’t recorded on your credit score and won’t affect your overall creditworthiness when applying for a mortgage, lenders will factor in your student loan repayments when determining your ability to repay your mortgage.

This is because your student loan repayments will ultimately have a bearing on your overall take home pay and will need to be factored in to your ability to keep up with your mortgage repayments each month.

Though this effect is likely negligible, the presence of your student loan repayments will indicate to your mortgage lenders that you are more likely to enter a graduate career, which will show good repayment potential in the long term.

How long does it take to repay your student loan?

As we highlighted above, your repayment amount will ultimately depend on how much you earn. As repayments are a percentage of your overall wage, higher earners will likely pay off their loans faster as their percentage contributes more to the overall debt.

This means that the rate a student loan is repaid can vary greatly from person to person.

For example, if you’re on Plan 1 and you earn £24,000 per year, you’ll repay £178 per year (just under £15 a month) towards your student loan. However, if you earn £33,000 per year, you’ll repay £988 a year (just over £82 per month) towards your student loan, therefore contributing more towards your loan each year, meaning you’ll pay it off quicker.

Can student loan debt be written off?

Student loan debts are officially written off after 30 years (25 years for Plan 1) from the April of your first repayment date, or when you turn 65. At this point, regardless of your contribution towards your student loan debt, the remaining amount is forgiven.

This means that if you never earn above the repayment threshold, you won’t need to repay your student loan.

How do I see my current student loan balance?

You can view the terms and loan balance of your student loan on the GOV.UK website. To check your balance, you’ll need to log in using your customer reference number or the email address you signed up to student finance with, as well as enter your password and answer your security questions. 

From the GOV.UK website, you’ll be able to review your current student loan, any payments you’ve made towards your debt, and the interest applied to your loan.

You can also make direct payments towards your loan if you wish to contribute.

Can I pay off my student loan early?

Unlike other loans, such as a mortgage, that can cap or even penalise the amount you overpay towards your debt, there are no such restrictions in repaying your student loan. If you want to make further contributions towards your loan, you can either make a direct payment through GOV.UK or set up a direct debit to make further payments monthly.

Can interest be added to my student loan debt?

Yes, like most loan plans, each loan comes with interest, though the interest rate that you’ll repay can vary depending on your student loan plan (Below figures recorded 09/10/2023).

If you’re on Plan 1 you’ll repay at 6.25% 

If you’re on Plan 2 you’ll repay at 7.3%

If you’re on Plan 3 you’ll repay at 7.3%

If you’re on Plan 4 you’ll repay at 6.25%

If you’re on Plan 5 you’ll repay at 7.3%

If you’re on a Post Graduate plan you’ll repay at 7.3%

While Plan 1 and 2 loans are capped at 6.25% and 7.3%, Plan 5 student loans are capped at 13.5%, meaning they could rise higher depending on current markets and interest rates.

For the latest updates on student loan interest rates, you can check the GOV.UK website for the latest figures.

What happens if I don’t pay my student loans?

Unlike other forms of debt, repayments are based on an income threshold; this is to ensure that the loan is only repaid when the graduate can comfortably afford repayments.

Student loan repayments are collected through the UK tax system or self-assessments if you’re self-employed.

If for whatever reason you’re either unable or unwilling to repay, The Student Loan Company will likely take legal action against you in line with standard debt collection methods. They’ll seek a County Court Judgement (CCJ) to court order the repayment of the loan. This will require you to repay the total debt plus any interest or penalties, including legal costs.

Can I have my student loan deferred?

Student loans can be deferred for 12 months. To defer your student loans, you’ll need to have a gross annual income of £38,255 (equal to £3,187.91 a month) or lower (amount based on rates as of 1st September 2023).

To apply for deferment, you’ll need to complete and return an application form to be sent to your loan provider. Your student loan will be handled by one of the three following companies:

• Erudio Student Loans
• Honours Student Loans
• Thesis Servicing

Your application should include details of your employment, income, or any evidence of your living expenses if you’re unemployed/receiving benefits. This should only include personal income and does not include any spouses, family, or others.

To evidence this, you’ll need to provide evidence, such as wage slips, benefit cheques, and anything else that confirms your current financial situation.

Note that you should continue to make payments until you receive official correspondence that your deferment has been accepted. If your student loans are automatically taken out, this will also be suspended automatically.

Once your deferment has been accepted, you’ll have a 12-month payment haven from your student loan debts. Interest will continue to be charged during this time. You’ll be contacted ahead of the end of your deferment period to let you know when repayments will start up again.