Student Loan Repayment
In the UK, Student Loans are managed by the Student Loans Company (SLC), who keep a record of the amount you borrowed and how much has been repaid. The repayments are collected by HMRC, through the same Pay As You Earn (PAYE) mechanism that is used for income tax and National Insurance. The rate at which you repay your loan depends on how much you earn and when your course started. You can use our Student Loan Repayment tool to see how much those repayments are going to be:
Enter your details:
See your results below:
| Yearly | Monthly | Weekly | |
|---|---|---|---|
| Repayment Amount | £ 0.00 | £ 0.00 | £ 0.00 |
Without you providing the outstanding amount of your student loan, we are not able to provide an estimate of the time taken to repay the loan.
How Student Loan Information is Calculated
The student loan is repaid through PAYE, maintained by your employer, or by HMRC through Self Assessment, if you are self employed. For those who started their course before 1st September 2012, repayments are made at a rate of 9% of any income over £17,775 per year. If you are paid weekly or monthly, this amount is divided by 52 or 12 and rounded down to the nearest pound. This is called Plan 1.
If your course started after 1st September 2012, repayments are calculated in a similar way but you will pay only 9% of earnings over £21,000, again rounded down to the nearest pound - this is called Plan 2. This means that you will repay less each month (or week) than you would if you were on the previous repayment plan, but because of this it will take longer to repay your loan.
Paying Off Your Student Loan
If you enter your total outstanding loan amount into the box above, the student loan repayment tool will try to work out how long it will take for you to pay off your student loan. This is just an estimate which assumes that your salary remains the same for the repayment period, as do the payment thresholds, percentages and the interest rate being charged. It also assumes that you are paid monthly (and therefore are repaying the loan monthly). The interest rates are different for Plan 1 and Plan 2, which means that the time taken and the amount paid over that time will be different depending on which plan you are on.
Plan 1 loans have a reasonably low interest rate which is applied every year by the Student Loans Company. The latest interest rate from 1st September 2017 is 1.25%, which the tool will use to estimate the time taken to repay your loan. It is possible that your repayment amount is less than the monthly interest, in which case the tool will not be able to provide an estimated time to repay.
Plan 2 loans have an interest rate which is tied to the Retail Price Index (RPI), and also depends on the current date and how much you are earning. The current RPI used for Student Loans, applied from 1st September 2017, is 3.1%. While you are a student, the interest rate charged on your loan will be RPI + 3% (currently 6.1%). Once you have finished your course, the RPI (3.1%) is charged until 1st April 2018. After that date, the interest rate is increased if you earn more than £21,000, up to a maximum of RPI + 3% if you earn £41,000 or above.
The combination of the higher repayment threshold and the higher interest rate means that it will take longer for those on plan 2 to repay their loans than those on plan 1. In fact, plan 2 is being considered by some to be a "Graduate Tax" rather than a loan repayment.
Writing Off Your Student Loan
Once you have paid off the outstanding balance, plus any interest, of your student loan, you will no longer be asked to make payments. You can voluntarily make additional payments to reduce the balance of your loan, or even to pay off the whole balance. However, loans can be written off even if the repayment has not been completed - although this is normally only after a long period of time.
For loans under plan 1, where the first loan was taken out before September 2006, any remaining balance will be written off when you reach the age of 65. If your first loan was taken out during or after September 2006, the loan will be written off 25 years (35 years in Scotland) after it becomes eligible to be repaid (typically the April after you finish your course).
Loans under plan 2 are written off 30 years after they first become eligible to be repaid (the April after your course finishes).
In some circumstances, loans may be written off sooner - for example, if you become unable to work due to disability.
More Student Loan Information
For more information about repaying your student loan, including more details of the interest rates, repayment plans and voluntary contributions, visit the Student Loan Repayment website, the official loan repayment site of the Student Loans Company.
If you'd like to learn more about other deductions which are made from your pay by PAYE, such as income tax and National Insurance, visit our sister site The Salary Calculator.