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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

In this article
How much will I have to pay back in student loans? Will I ever pay off my student loan? How much interest will I be charged on my student loan? How do student loan repayments work?  Examples of student loan repayments Do I repay my student loan if I live abroad? Will taking a student loan affect my credit rating?
How do part-time students repay a student loan? I’m a postgraduate student, what will I owe? Are repayments likely to change in the future?  Can I make voluntary student loan payments?  How do I avoid overpaying my student loan? How do I complain about my student loan?

Note: the below mainly applies to those on Plan 2 student loans (English and Welsh students who have taken out a loan after 2012). 

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

It depends how much you earn and where you live.

If you live in the UK, you’ll pay 9% of everything you earn (before tax) over the repayment threshold (now £27,295) for 30 years after you graduate.

The principle is the same if you live abroad (or plan to live abroad), which we’ll tackle separately.

The table below shows how much you'll repay at different pay bands. 

Income Monthly student loan repayment* Annual student loan repayment*
Up to £27,295 £0 £0
£27,295 - £30,000 £0 - £20 £0 - £243
£30,000 - £35,000 £20 - £58 £243 - £693
£35,000 - £40,000 £58 - £95 £693 - £1,143
£40,000 - £45,000 £95 - £133 £1,143 - £1,593
£45,000 - £50,000 £133 - £170 £1,593 - £2,043
£50,000 - £55,000 £170 - £208 £2,043 - £2,493
£55,000 - £60,000 £208 - £245 £2,493 - £2,943
£60,000 - £65,000 £245 - £283 £2,943 - £3,393
£65,000 - £70,000 £283 - £320 £3,393 - £3,843
£70,000 - £75,000 £320 - £358 £3,843 - £4,293
£75,000 - £80,000 £358 - £395 £4,293 - £4,743
£80,000+ £395+ £4,743+

*Figures have been rounded

Beware, however, that the repayment threshold can change each year.

For the past few years, the threshold has risen in line with inflation. However, in January, the universities minister Michelle Donelan confirmed the threshold for repayments would remain at £27,295 per year for 2022-23. This means graduates earning £30,000 will pay £113 more in real terms, according to the Institute for Fiscal Studies, which described the move as a ‘tax rise by stealth’. 

Will I ever pay off my student loan?

News flash, most people won’t actually clear their student loan.

Their repayments won’t be enough to pay off the interest (see next section) and the outstanding debt. But if you haven’t paid off the loan after 30 years, 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’ll be charged interest on your student loan as soon you take it out, which might surprise you, but changes once you graduate.

Plan 2 interest while you're studying

While you’re studying, interest will be charged at 3% above the Retail Price Index (RPI – a measure of inflation).

The RPI rate is usually set every September using the rate from March of the same year. 

However, this meant student loan borrowers faced a 12% interest rate next year as inflation has soared. 

Instead the government has announced it will cap interest rates to a maximum of 7.3%. 

Plan 2 interest once you graduate

Once you graduate, things get more complicated. The amount of interest you’re charged will depend on the amount you earn.

  • Under £27,295 per year: your interest will match RPI
  • Over £49,130 per year: your interest will be RPI + 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%. 

How do student loan repayments work? 

Student loan repayments are handled by the Student Loan Company.

The earliest you’ll start repaying is either:

  • The April after you leave your course
  • The April  four years after the course started, if you’re studying part-time.

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

 

Examples of student loan repayments

To help make sense of all this, we’ve imagined three examples of graduate earners and what they would pay.

All these calculations have been made using the Student Loan Calculator and are based on these assumptions:

  • RPI is an average of 3% (student loan interest is dependent on this measure, but to simplify the calculations we assume an average rate over the entire period)
  • UK average earnings growth is 4% (this sets the earnings thresholds for making student loan repayments each year).

 

Example 1: £27,000 starting salary

 

Tom borrows a total of £53,850 (£9,250 per year for tuition fees, plus around £8,700 each year for maintenance) over three years.

He graduates in 2021 and starts earning £27,000 a year, receiving average pay rises of 2% a year.  

Despite borrowing £53,850, Tom’s student loan debt ballooned to around £148,946 after 30 years because of the interest added to the loan. 

This may sound scary, but assuming the repayment thresholds rose in line with or above his salary increases, he would never have had to repay any of his loan (since he never earns more than the repayment threshold). 

This means Tom’s entire loan gets written off and he pays nothing back. 

  • Total borrowed: £53,850
  • Total repaid: £0
  • Amount written off after 30 years: £148,946

 

Example 2: £38,300 starting salary

 

Megan also started university in 2017 and borrowed £53,850 to fund her three-year course, but started her career in 2021 earning £38,300.

Because she earned above £27,295, she was charged a higher interest rate on her loan of around RPI + 1.5%, rather than just RPI.

Assuming Megan’s salary rises by an above-average 5% each year, and inflation carries on at its current pace, over the 30-year repayment period she would end up paying back £91,237.

However, because Megan was charged higher rates of interest, her debt ended up increasing. This means her repayments were not even enough to cover the interest charged on her student loan, so a large amount still gets written off after 30 years.

  • Total borrowed: £53,850
  • Total repaid: £91,237
  • Amount written off after 30 years: £115,278

 

Example 3:  £50,000 starting salary

 

Olivia borrowed the same £53,850 to fund her three-year course and landed a job paying £50,000 a year, but even with these earnings, she still didn't pay off her student loan.

She initially repaid £2,043 a year (9% of everything over the £27,295 threshold), but those payments didn’t even cover the £3,681 she was charged in interest after leaving university. 

Olivia’s earnings increased by 5% a year, which bumped up her repayments. But after 30 years, Olivia had repaid £161,197.

But by this point, because of the high interest rate on her loan (3% above RPI), her outstanding debt will have grown far beyond the initial amount borrowed.

Despite repaying £161,197, around £19,836 of outstanding student loan debt will still be written off. 

  • Total borrowed: £53,850
  • Total repaid: £161,197
  • Amount written off after 30 years: £19,836

 

Do I repay my student loan if I live abroad?

Student loan repayments are calculated the same way if you work overseas, but the earnings may be higher or lower, depending on the country you work in. That’s because some countries have a lower or higher cost of living than the UK.

The principle is the same. You’ll repay 9% of everything over the local threshold. You can see 2021-22 repayment thresholds for countries around the world on the government's website.

Overseas earnings thresholds for student loan repayment are based on:

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

So 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 Student Loan Company 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, which also depends 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 your student loans won’t affect your likelihood of getting one. However, your repayments may be considered by lenders when they calculate how much you can afford to borrow for a mortgage.

How do part-time students repay a student loan?

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

Learn more about part-time student finance.

I’m a postgraduate student, what will I owe?

Like undergraduate students, you'll be charged interest from the day of your first payment.

The interest rate is currently 4.4% and is usually set at RPI + 3%. You'll only pay back 6% of your income that's over the repayment threshold (currently £21,000).

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 rather 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, but if you’re one of the majority who can expect to make repayments for 30 years, this won’t save you any money in the long run. 

That said, for some people, this might be worthwhile. If you receive a windfall, such as an inheritance or company bonus, paying down your student debt could increase your chance of clearing your debt, meaning you’ll stop being charged 9% of everything over the threshold. 

These optional repayments will 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 £2,000 or £20,000, you’ll pay 9% of everything over the repayment threshold. 

If you want to make voluntary payments, you can do so by logging in to your account at SLC.co.uk.

How do I avoid overpaying my student loan?

Student loan payments are processed by both the Student Loan Company and HMRC, and for technical reasons, they won’t stop automatically if you reach the point of paying off your loan in full. 

In 2020-21, 45,264 graduates overpaid their student loan because their payments didn’t stop once the debt was settled.The average overpayment was £375 and in total over £16m was overpaid. 

This is most likely to affect people on the earlier student loan system, for those who started university before 2012 (Plan 1 student loans). 

Things have got better, though - the average overpayment has dropped 38% since 2015-16 when £53.35m was overpaid.

The number of graduates affected is down almost half (49%) from 88,000 after SLC changed its system.

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 so this 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 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 Student Loans Company (SLC) will try to contact you to give you a refund or 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, it’s inevitable that things will go wrong sometimes.

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 Student Loan Company but because the Student Loan Company is not regulated as a financial services company like other loan lenders, you won’t be able to complain to the Financial Ombudsman Service if there’s a problem.

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

Student Loan Company – what goes wrong?

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

Top complaints to SLC revealed

The most common pains, based on number of complaints were: 

  • SLC checks on the amount people can borrow: 1,480 complaints in 2021 - around 33% of these were upheld (491)
  • Poor advice given from SLC: 1,073 complaints in 2021 - around 81% of these were upheld (872)
  • Customer service from SLC: 895 complaints in 2021 - around 76% of these were upheld (684)
  • The amount of time it took for SLC to process an application or review evidence submitted by applicants:  808 complaints in 2021 - around 71% of these were upheld (581)
  • Problems with repayments for people working overseas: 415 complaints in 2021 - less than 1% of these complaints were upheld (1) 

Issues tend to peak in October and November, shortly after students arrive at university and funds are short, though last year January 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.’ 

Explore our full student finance and university area, including how much it costs to live at universitytips to budget at university and where to find the best student discounts.

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