Repaying your student loan

When will your student loan be written off, and how much debt will you actually be in? Here’s everything you need to know about paying yours back.
Grace WitherdenSenior writer

When will I start repaying my student loan?

The earliest you'll start repaying your student loan is the April after your course has ended, or the April four years after your course has started, if your course is longer than four years.

However, you won't repay anything until you're earning above a certain amount - this varies depending on which plan you're on.

For example, in the 2023-24 tax year, those on Plan 1 start repaying when they earn £22,015 a year before tax, whereas those on Plan 2 won't start repayments until they earn at least £27,295 a year. 

If you've paid too much, you may be eligible for a student loan refund.

How much will I have to pay back in student loans?

The student loan repayments you make each month will depend on how much you earn, where you live and which student plan you're on.

Plan 1

English and Welsh students who started an undergraduate course anywhere in the UK before 1 September 2012 are on Plan 1 and will pay 9% of everything earned over £22,015.

From 6 April 2024, the repayment threshold for pre-2012 (Plan 1) loans will rise to £24,990. 

Northern Irish students who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998 are also on Plan 1.

Plan 2

English and Welsh students who started an undergraduate course anywhere in the UK on or after 1 September 2012 are on Plan 2, and will pay 9% of everything earned over £27,295.

The income threshold for repayment of Plan 2 loans from April 2024 will remain at £27,295.

Plan 4

Scottish students who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998 are on Plan 4. Undergrads will repay 9% of everything earned above £27,660, while postgrads will repay 6%.

If your salary ever drops below the minimum threshold (for example, if you're between jobs or you go travelling), your repayments will stop until you're earning above it again.

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Will I ever pay off my student loan?

News flash! Most people won't actually ever clear their student loan.

Their repayments often won't be enough to pay off the interest (see next section) and the outstanding debt. And if you haven't paid off the loan between 25 and 30 years (depending on which plan you're on), then the remaining amount will be written off.

This means that student loans work more like a graduate tax for most students, which medium to higher earners will be paying for most of their careers.

Note that if you're a mature student, the same 30-year repayment window applies.

How much interest will I be charged on my student loan?

You might be surprised to know that you'll be charged interest on your student loan as soon you take it out.

Plan 1 interest

The interest rate charged is either the Retail Prices Index (RPI, a measure of inflation) or the Bank of England base rate plus 1%, whichever is lower.

The interest rate is usually set on 1 September each year, based on the RPI of the previous March; however, it can change during the year.

Plan 2 interest

While you're studying, interest will be charged at the March RPI figure + 3%.

However, with soaring inflation in recent years, this has meant students faced much higher interest.

In this case, when the average commercial interest rate is lower, the Government will apply a temporary interest rate cap, which is reviewed monthly.

Once you graduate, things get more complicated, as the amount of interest you're charged depends on how much you earn.

  • Under £27,295 per year: your interest will usually match RPI from the previous March
  • Over £49,130 per year: your interest will usually be RPI plus up to 3%

For those earning between £27,295 and £49,130, the extra interest rate you'll need to pay above RPI gradually rises the more you earn. So if you earn £38,213 (roughly halfway between £27,295 and £49,130), you'll be charged RPI +1.5%.

Postgraduate loan interest

For English or Welsh students who took out a postgraduate master's loan or doctoral loan on or after 1 August 2018, the interest is charged at RPI +3%.

Postgraduates from Northern Ireland will repay under Plan 1, while postgraduates from Scotland will pay under Plan 4.

Plan 4 interest

You're on plan 4 if you're a Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998.

The interest rate charged is either the RPI or the Bank of England base rate plus 1%, whichever is lower - the same way Plan 1 interest is calculated.

How do student loan repayments work?

Student loan repayments are handled by the Student Loans Company (SLC).

The earliest you'll start repaying is either:

  • April after you leave your course
  • April four years after the course started, if you're studying part-time or you're on a course that is longer than four years

Repayments will be calculated and deducted automatically by your employer; however, if you're self-employed you'll need to settle this in your self-assessment tax return.

Do I repay my student loan if I live abroad?

Student loan repayments are calculated in the same way if you live and work overseas, although the earnings may be higher or lower, depending on the country you work in. This is because some countries have a lower or higher cost of living than the UK.

However, the principle is the same. You can see 2023-24 repayment thresholds for countries around the world on the government website.

Overseas earnings thresholds for student loan repayments are based on:

  • the annual UK earnings threshold during the period
  • World Bank data, which measures the differences in general price levels between countries
  • exchange rates, calculated as an average rate in the UK for the previous calendar year

If you are thinking of working abroad, you'll want to factor in how much your income will be affected by student loan repayments.

If you do decide to work abroad, you'll need to let the SLC know where you are and what you're earning.

If they don't have information about your income, you'll be charged a fixed amount each month - this will also depend on the country you're in.

Will taking a student loan affect my credit rating?

Your student debt won't affect your credit rating, because student loans are not included on your credit reference file. The only exception to this is borrowers who took out their loans before 1998 and defaulted on a payment.

This is often something people wonder about when getting a mortgage, but the amount of student debt you have won't affect your chances of getting one. However, your repayments may be considered by lenders when they calculate how much you can afford to borrow.

How do part-time students repay a student loan?

The same requirements and repayment thresholds apply if you're a part-time student.

Repayments for part-time students work the same way as they do for full-time students from the same country.

You'll start repaying in April the first year after you complete your course, or in April four years after you begin your course if it's longer than four years.

However, this will only happen if you're earning above the minimum repayment threshold, according to which plan you're on.

Are repayments likely to change in the future?

There are no guarantees that these repayment rules will remain the same for the next 30 years.

However, major overhauls to how the system works are usually more likely to affect new students than those already in the system.

That said, it's worth keeping an eye on changes or new rules as they're announced, so you can work out if these will affect you and how much you're paying.

Can I make voluntary student loan payments?

If you want to, you can also make voluntary additional payments, either on a one-off basis or by direct debit. In theory, this will mean you'll clear your debts earlier.

If you receive a windfall, such as an inheritance or company bonus, paying down your student debt could increase the chance of clearing your debt, meaning you'll stop having to pay it off each month.

However, these optional repayments only really make sense if they let you clear your loan in full, or put you within touching distance of doing so. Unlike other types of loans, an overpayment won't reduce the amount you repay each month.

If you still have any outstanding debt, whether that's £2,000 or £20,000, you'll pay 9% of everything over the repayment threshold.

How do I avoid overpaying my student loan?

Student loan repayments are processed by both the Student Loans Company (SLC) and HMRC, and for technical reasons, they won't stop automatically if you reach the point of paying off your loan in full.

More than 833,000 graduates could be due a refund on their student loan repayments  for 2022-23, according to the latest figures from the SLC. 

HMRC will tell your employer to stop taking repayments from your salary when you have repaid your loan in full. But it can take around four weeks for salary deductions to stop, which may mean that you pay back more than you owe.

You can ask for a refund if:

  • you've paid more than the total amount you owe
  • your annual income was below the repayment threshold
  • you started making repayments before you needed to
  • you've repaid more than you need to because your employer had you on the wrong repayment plan

You can avoid paying more than you owe by changing your payments to direct debit in the final year of your repayments.

If you have paid too much, the SLC will try to contact you to give you a refund, or will refund you automatically.

This money should be reimbursed, but if you're close to clearing your debt, it's better to contact the SLC in advance so you don't end up paying more than you need to.

How do I complain about my student loan?

With hundreds of thousands of people going to university each year, inevitably, things sometimes go wrong.

Errors can range from being paid the wrong amount, being overcharged on your interest or problems with payments not getting recognised properly.

You can complain to the SLC, but because it is not regulated as a financial services company as other loan lenders are, you won't be able to complain to the Financial Ombudsman Service if there's a problem.

However, you can take action. Here, we look at what can go wrong and what you can do about it.

Student Loans Company - what can go wrong?

The SLC received 10,771 complaints in 2021, with an average of 42% (4,534) being upheld, according to a Freedom of Information request we submitted.

Top complaints to SLC revealed

The most common complaints in 2021 were:

  • SLC checks on the amount people can borrow: 1,480 complaints; 491 upheld (around 33%)
  • Poor advice given from SLC: 1,073 complaints; 872 upheld (around 81%)
  • Customer service from SLC: 895 complaints; 684 upheld (around 76%)
  • The amount of time it took for SLC to process an application or review evidence submitted by applicants: 808 complaints; 581 upheld (around 71%)
  • Problems with repayments for people working overseas: 415 complaints; 1 upheld (less than 1%)

Issues tend to peak in October and November, shortly after students arrive at university when funds are short, though January 2021 was also a popular month for complaints, after the second term began.

The SLC receives around 500 more complaints in these months compared with the rest of the year.

A spokesman from SLC said: 'We work hard to ensure we process student-finance applications and any supporting evidence required as quickly as possible.

'It is always regrettable when a customer complains about our service, and we aim to resolve complaints to a satisfactory level whenever possible.

'We continue to make improvements to our complaints procedure by using insight from previous cases to make ongoing improvements to our business and application processes.'

What if I drop out of university?

As tuition fees are paid in each academic year, the amount you have to repay if you drop out will depend on when you make the decision:

  • Term one: 25% of annual tuition fees paid
  • Term two: 50% of fees paid
  • Term three: 100% of fees paid

The moment you leave your course (ie when you've agreed on an official leaving date with your university department and have completed the necessary paperwork), you'll no longer be entitled to any student loans.

Dropping out earlier in the year can be slightly in your favour. If you leave part-way through a term, you still have to pay the whole fee for that term. However, we understand that this won't necessarily be within your control.

The soonest you'll start paying back your tuition fee loan is in the April after you withdraw from your course. As with all student loans, you'll only start paying this back once you're earning over a certain threshold.

So, if your tuition fees are the maximum £9,250 in England, and you drop out midway through term two, you'll still have to repay two full terms of tuition fees - that's roughly £4,600 to pay back.

Elsewhere in the UK, the fees for the year are a little different. If you're from Wales you'll pay up to £9,000 a year if you stay there to study, and up to £4,160 a year if you're from Northern Ireland and studying there, too.

Once you've officially left your university, you won't pay any tuition fees for further terms.