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18 Jul 2020

Student loan repayments go online: five things you need to know about your student loan

From the new online repayment service to how much interest you're paying

It's easier than ever to track your student loan payments online, thanks to a new service the government launched earlier this month.

Previously, you only got an annual paper statement with details of your loan, but finally, students will be able to get more up-to-date information.

By logging into your account on the government's website, you can make payments, check your balance and change your contact details without having to make a single phone call.

Here, Which? explains how the new online system works and highlight five things you need to know about your student loan to make sure you make the most of your new account.

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How to use the new online account

You simply log in at gov.uk/slc/signin and login with your 11-digit Student Loans Company (SLC) customer reference number and password.

The number will be on any letters or emails you've had from SLC. Be aware that you might have to provide characters from a 'secret answer' you created many years ago.

Once you're in, you'll see an overview of your outstanding balance and a summary of any repayments you've made in the current tax year. These are broken down into 'salary repayment', automatically extracted from your earnings, and 'direct repayments' which you may have made outside of the automatic system.

Perhaps depressingly, there's also a record of how much interest has been added so far this year, which in many cases will outnumber the actual repayments made.

screenshot of the SLC online portal
What you'll see on the SLC online portal

There are also options to change your personal details, view any letters you've received from SLC and inform it if you're moving overseas.

It's worth at least logging in if you want to see what's going on with your student debt. But if you do, you need to keep the following things in mind. Especially if you're tempted to repay your loan early (which we don't recommend for most graduates).

1. Your student loan is not a (normal) loan

This is something every student and graduate knows on some level, but it's important to keep this in mind whenever you're thinking about it.

There are several things that differentiate student debt from regular debt, as points two and three will outline.

2. It's not on your credit report

Based on the official record of debt you've taken out and repaid, your student loan doesn't even exist.

If you check your credit report you won't find any record of it, even if you owe £50,000. This means having an outstanding student loan will not make you more likely to be turned down for a loan

In most cases - say, a credit card application or a mobile phone contract - lenders aren't likely to ask for your student loan details. The major exception, however, is a mortgage application, where a lender might ask for the details to understand how much income you're getting to help with its affordability assessment.

3. You might never need to repay all of it

Again, this is something everyone's told when they first take out the loan, but it really is worth remembering - especially as the new online repayment system allows you to easily make repayments outside of the PAYE system.

Without you having to do anything, 9% of your earnings over £26,575 will go to SLC each year. This doesn't mean you pay 9% of £26,575 - you just pay it on any portion above that.

For example, if you earn £27,000, you'll pay 9% of £425 (roughly £38).

It will go on like this until 30 years after your first repayment, at which point it will be written off and you won't have to pay whatever's leftover.

This is for 'Plan 2' loans taken post-2012. 'Plan 1' loans from before 2006 are written off when you turn 65. Plan 1 loans from 2006 or after are written off after 25 years.

If you never earn more than £26,575, you never have to pay any of it, so your education was effectively free.

Most people will not actually end up paying their entire student loan off, so there's really no advantage of making payments outside of what you'll pay automatically.

4. You might have a 5% interest rate

Even if you have started paying it off, you could find your student loan balance going up instead of down.

This can happen because of the relatively high interest rate your loan might have.

Interest is charged as soon as you take out your loan - so even before you finish your education and begin paying it off.

While you're studying, the rate is the Retail Price Index (RPI) from March, plus 3%. RPI was 2.4% in March 2019, making the total 5.4% currently.

After you graduate, your interest rate is based on your earnings.

  • If you earn under the £26,575 repayment threshold, your interest will match RPI (currently 2.4%).
  • If you earn more than £47,835, your interest rate will go back to RPI, plus 3%.
  • If you earn between £26,575 and £47,835, you'll have an interest rate somewhere in between the two of these.

While these rates don't compare with, say, payday lenders, the result can still be £100s added to your balance each month, which is more than you will be repaying in many cases.

You can find your exact interest rate on letters you've had from SLC. And you can find all the letters on the new online portal.

5. You still pay it if you move abroad

Moving abroad to escape post-Brexit Britain? You won't escape your student debt.

You have to let SLC know where you're living and how much you're earning while you're away. If you don't, you'll be charged a fixed monthly repayment, which differs by country.

Repayments from overseas work similarly, with 9% of your earning over a certain threshold going to SLC. But the thresholds are different depending on where in the world you're living.

Read the list of overseas earnings thresholds on the government website.