If you’re looking to go to university and take out a student loan to cover your course and living costs, you might be worried or confused about how student loan repayments work. We’re here to answer all your questions.
Which plan am I on?
When and how much student loan you repay will depend on your repayment plan. If you started or are planning to start your undergraduate course on or after September 2023 then you are on plan 5. If that’s not you, then you can see which plan you’re on on the gov.uk website.
How much will I repay?
Plan 5 means that you won’t repay your student loan until you earn £25,000 a year (before tax), which is:
- £451 a week (before tax)
- £2,083 a month (before tax)
Once you earn that much, you’ll start repaying 9% of your earnings above the threshold. Confusing? We know, let’s break that down with an example:
You earn: £30,000 a year
Amount above the £25,000 threshold: £5,000
9% of £5,000 = £450
You repay: £450 a year or £37.50 a month
If you want to, you can choose to make extra repayments online.
When will I repay?
You will start repaying your student loan the April after you leave your course if you have a job and earn above £25,000 a year.
If you’re unemployed or earn £25,000 or below, then you won’t repay anything.
Your repayments automatically stop if:
- You stop working
- Your income drops to £25,000 or below
On a Plan 5 student loan, you will repay your loan for 40 years from the April after your course ends. For example, if you are 21 the April after your course ends, you will be 61 when your loan repayments stop.
How do I repay?
Your student loan repayments will automatically leave your bank account once you meet the repayment requirements, so you don’t have to worry about remembering to make a payment each month.
Will I be in debt?
Student loan is a debt but it’s not the traditional debt that affects your credit score. So, in simple terms, having student debt won’t affect your ability to have a mortgage or take out any loans.
Interest is added to your student loan. For plan 5 loans the interest rate is capped at the Retail Prices Index (RPI) rate of inflation, meaning that the current interest rate is 7.3%.