How Does Student Loan Repayment Work?

For the majority of students getting some assistance with tuition fees and other university expenses is the only way they can afford to continue to study and most undergraduate students are eligible for some form of financial help.

From 2016, postgraduate students who are under the age of 60 and study a taught Masters or research course will also be eligible for student loans.

In the UK most of the student loans and grants are provided by the government through the Student Loans Company (SLC). There are three types of financial help you can get from the SLC:

  • A tuition fee loan
  • A maintenance loan
  • A maintenance grant

There are also other types of grants and bursaries that are provided both by the SLC and universities and colleges.

Tuition fee loans

All full-time students are eligible to apply for a loan that covers the full cost of their tuition fees. With fess rising to a maximum of £9000 per year in 2012 this is an option that the majority of students take in order to be able to afford to attend university.

Tuition fees are paid by the SLC directly to your university, so once you’ve made the application and enrolled at the university, you don’t need to worry about paying the loan yourself.

Maintenance loans

All full-time students who are eligible to apply for a tuition fee loan are also eligible to apply for a maintenance loan to help cover all, or some of, their living costs whilst at university.

All students are entitled to a set amount, although you’ll get less if you live at home during term time and more if you live outside of home in London.

If you come from a low-income household you may also be entitled to a higher amount, as well as a maintenance grant. 

Maintenance grants

Students from a low-income household are entitled to a higher maintenance loan and they’re also entitled to a maintenance grant that does not have to be repaid.

These grants are means tested so if you come from a very poor background you’ll be entitled to a full maintenance grant and if you come from a less-poor background, you’ll be entitled to a partial grant.

Maintenance loans and grants are paid every term directly into your bank account and it’s your responsibility to manage that money and make it cover your costs until your next payment. If you spend your first instalment during Fresher’s Week, you’re not going to get anymore!

When do I have to start paying my student loan back?

You won’t need to start paying back your student loan until after you graduate, although if you leave your course early, you still have to repay your loan.

The earliest you’ll need to start repaying your loan is the April after you graduate.

When you start repaying your loan you’ll pay back 9% of your income on a monthly basis.

If you started university before September 2012 then you’ll start paying back your loan when you earn £17,335 per annum. This is known by the government as Plan 1.

As an example, if you earn £25,000 you’ll pay back £61 per month.

If you started university on, or after, September 2012 then you’ll start paying back your loan when you earn over £21,000 per annum. This is known by the government as Plan 2.

As an example, if you earn £25,000 you’ll pay back £30 per month.

In both cases, if your earnings drop under these amounts, you’ll stop paying back your loan until your earnings go back over the threshold.

You can use the Save the Student Loan Repayment Calculator to work out what your repayment amounts will be.

How do I pay my student loan back?

Repaying your student loan is easy as it’s paid directly by your employer when your tax and National Insurance is deducted from your salary.

Your monthly payslips will show how much you’re paying.

What if I’m self-employed?

If you decide to become self-employed after graduating then HMRC will calculate how much of your student loan you’ll repay at the same time as you do your Tax Return.

What if I work abroad?

If you choose to work abroad after you graduate then the rules for repayment still apply.

You can find out more about repaying your student loan if you work abroad on the government website.

Can I pay back my student loan early?

Of course! If you’re earning well above the threshold, or you come into some money and want to clear your debt, there’s no penalty for paying back your loan early.

Some part-time students also start paying their loan back whilst they’re still studying.