While there are some obvious advantages for your bank account to find the right opportunity and eventually start making some real money, there is one obvious disadvantage: you actually have to pay back your student loan. Student loans can get complicated, especially if you’re not on top of all the terms and conditions. This article will help you understand all the complicated jargons and repayment schemes associated with student loans in the UK. So, here are a few things you need to know about student loan repayment UK.
Repayments when you graduate
How do student loan repayments work UK? When you enter the workforce and start making more than a certain amount, student loan repayment UK begins. Through the tax scheme, they are repaid immediately and cease until you have paid them off.
It is important to know exactly what is involved with the restructuring of student loans and when you are prepared to begin making the student loan repayment UK. And it is never too soon to start budgeting for them.
What do you need to repay?
Your tuition fee loans, rehabilitation loans, as well as any postgraduate loans, will need to be repaid.
Loans for tuition fees (both post grad and undergrad)
For an undergrad degree in the UK, the tuition fees would be up to £9,250 a year. You will still have to repay these loans if you have taken out a postgraduate loan for a Master’s (currently up to £ 10,906) or Ph.D. course (currently up to £ 24,700).
It will depend on where you came from in the UK, your family household income, and whether you were staying at home or not, how much you were eligible to repay on your maintenance loan.
This is around £ 8,944 for students living outside of London in the new academic year (2019 to 2020) and up to £ 11,672 for students living away from home in London.
Any loans or bursaries would not have to be repaid. However, once you quit the course for whatever reason, you would still also have to repay your student loans and maintenance loans.
Which plan are you in?
There are three forms of installment plans that you may be on: Plan 1, Plan 2, and the secure student loan repayment UK for postgraduate loans. Read on to find out what plan you’re on and what it takes for UK student loan repayment overseas.
For students who began their undergraduate courses before September 2012, Plan 1 is the older plan. If you’re one of the following, you’ll be on schedule one:
- An English or Welsh student who began an undergraduate course before 1 September 2012 anywhere in the UK.
- A Scottish or Northern Irish student who on or after 1 September 1998 started an undergraduate or postgraduate course anywhere in the UK.
- An EU student who, on or after 1 September 1998 but before 1 September 2012, began an undergraduate course in England or Wales.
For students who began their undergraduate courses on or after 1 September 2012, Plan 2 is the new plan.
- An English or Welsh student who, on or after 1 September 2012, began an undergraduate course anywhere in the UK.
- An EU student who, on or after 1 September 2012, began an undergraduate course in England or Wales.
- Someone who on or after 1 August 2013 takes out an Advanced Learner Loan.
For students who are pursuing a postgraduate course, and took out a “Master’s Loan” or a “Doctoral Loan”, you will be categorised under the Postgraduate loan repayment plan. The following students will have to repay the education loan as per the rules of the Postgraduate loan repayment plan –
- An English or Welsh student who took out a Postgraduate Master’s Loan on or after 1 August 2016
- An English or Welsh student who took out a Postgraduate Doctoral Loan on or after 1 August 2018
- An EU student who started a postgraduate course on or after 1 August 2016
When do you repay student loan UK?
After you complete your course, you can start repaying your student loan on 6 April (provided you meet the income threshold). If you are a part-time student, four years after completing the course, you can only begin the UK student loan repayment threshold.
Student loan repayment UK happens automatically through the UK tax system. Once you start earning beyond the payment threshold, installments will automatically be deducted from your bank account. This could be as often as every week, fortnight, four weeks, or a calendar month, depending on when you get paid. The good thing about the student loan repayment UK process is that payments will automatically stop if you earn below the threshold for that pay period or once you’ve completely paid off your student loan. Do note that if you cross the UK student loan repayment threshold due to a bonus or overtime, a deduction will be made from your salary.
In case you earn under the yearly repayment threshold, you can call the Student Loan Company (SLC) and ask for a refund. Conversely, if you have earned over the yearly repayment threshold, no fund will be due.
Student loan repayment UK is applicable whether you’re –
- An employee.
If you are an employee, your employer is liable to cut 9% of your income above the threshold from your salary, along with tax and National Insurance.
If you are self-employed in the UK, then you are required to make repayments at the same time as you pay tax through self-assessment.
In case you decide to move overseas, perhaps to your home country, you will have to deposit your payments directly to the Student Loan Company (SLC). Do note that payments won’t automatically be dedicated from your bank account. In such a case, the repayment threshold could be different from the UK, which means the amount you repay could be different.
How much interest will I be expected to pay?
If you are on Plan 1, the interest rate on your debt will be the base rate of the Bank of England plus one percent, or the inflation rate, regardless of which one is lower.
The interest is the Retail Price Index (RPI) plus three percent if you’re on Plan 2 while planning. Your interest rate will then be the existing RPI if you receive less than £ 25,725. If you receive between £ 25,725 and £ 46,305, the RPI plus up to three percent would be the interest rate (the percentage will rise as your salary rises). You’ll have to pay an interest rate of RPI plus 3 percent if you gain above £ 46,305.
Take a look at this table to get an idea of how much you could repay –
|Yearly income before tax||Monthly income before tax||Monthly repayment|
How long to repay student loan UK?
Those in either Plan 1 or Plan 2 will currently pay nine percent of any amount you earn over the threshold. For Plan 1, this is when your income before tax is over £1,577 a month (or £364 a week). This threshold will rise to £1616 from 6 April 2020. For Plan 2, this is when your income before tax is over £2,143 a month (or £494 a week)
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Can my student loan be written off? If yes, then when?
For students who have to follow student loan repayment UK Plan 1 and are from England, Northern Ireland and Wales, your debt will be written off when you reach 65 years of age, but only if you took out the loan before or during the 2005 to 2006 academic year. If you’ve taken a student loan after the 2006 to 2007 academic year, your debt will be written off 25 years after the April you were first due to repay.
Students on Plan 1 and who are from Scotland, your debt will be written off when you’re 65 years old or 30 years after the April you were first due to repay. However, this is applicable only if you’ve taken out the loan before the 2006 to 2007 academic year. If you happen to take out the loan after the 2007 to 2008 academic year, your debt will be written off 30 years after the April you were first due to repay.
Students on Plan 2 will have their education loans written off 30 years after the April you were first due to repay. Similarly, students in the postgraduate loan category will also have their loans written off 30 years after the April you were first due to repay.