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- The student loan price tag can be £60,000, but that’s not what you pay. Students don't pay universities or other higher education institutions directly.
- There is an official amount parents are meant to contribute, but it's hidden. You are also eligible for a loan to help with living costs – known as the maintenance loan.
- The amount you borrow is mostly irrelevant – it works more like a tax. This bit is really important to understand, as frankly it turns the way you think about student loans on its head.
- Interest is added, the headline rate is 4.5%, but many won't pay it. Student loan interest is set based on the (RPI) rate of inflation – the measure of how quickly prices of all things are rising and it changes annually each September, as follows...
- The interest added depends on what you earn. Student loan interest rates are based on the RPI rate of inflation (the rate at which prices rise). While studying, until the April following graduation, you're charged RPI + 3%.
- The interest rate changes every September. This change is based on the RPI rate of inflation in the year to the previous March. The RPI rate was 2.6% in March 2020, so interest is currently charged at 2.6% to 5.6%, depending on whether you're still studying and how much you earn.
- Only when the rate is above RPI is there any 'real' cost. Inflation is the rate at which prices rise – there are arguments about measuring it – but in theory, if you're charged the rate of inflation on a loan, then the loan itself doesn't cost you anything.
- The interest doesn't change what you repay each year. You become eligible to repay your student loan in the April after you leave University. It's worth noting over 30,000 a year mistakenly repay before that (though if it's happened to you, you can claim the money back – see student loan reclaiming for how).
Nov 15, 2022 · How does the amount you earn affect the amount that you’ll pay off over the long run? And at what point, if ever, should you consider paying off your student loans early?
In 2023, the new ‘Plan 5’ student loans launch for higher education starters from England. This change will see many repaying far more, so some with savings are considering paying for university upfront. Get it wrong, though, and you could waste £10,000s.
- 5 min
- Overview
- 1. There are different rules for repaying based on when and where you took out your loan
- 2. Your repayments are based on your income, not how much you borrowed
- 3. You need to keep your contact and bank details up to date even after you finish studying
- 4. You can make voluntary repayments… but consider your circumstances carefully
- 5. Going abroad for more than 3 months? Let us know before you go
- 6. Your student loan doesn’t have any impact on your credit rating
- 7. Your loan will eventually get written off
- 8. You should switch to Direct Debit when you’re close to fully repaying to avoid over-repaying
8 things you might not know about your student loan, but definitely should.
Student loans and how they’re repaid works differently from other types of borrowing. For example, did you know you will only repay when your income is over a certain amount? Or that if you have an outstanding balance at the end of your loan term it will be written off?
It’s important to understand these differences, so you know what to expect when it comes to repaying your student loan.
To make things easier, we’ve put together a list of 8 things you might not know about your student loan, but definitely should.
The type of loan you have will depend on when and where you started studying. This is known as your plan type. Each plan type has a different set of rules for repaying so it’s important you understand which plan type you’re on so you can better manage your repayments.
Find out which plan type you’re on
Unlike other borrowing, what you repay depends on your income and not how much you owe. You repay 9% of your income above the repayment threshold for your plan type. If you’re not working or your income is below the threshold, you won’t make any repayments.
Check the current repayment thresholds
After you’ve finished your course, we’ll still be in touch, so it’s important that you keep your contact details up to date. Otherwise, you’ll miss out on important information about your student loan repayments.
You should also keep your bank details up to date in your online repayment account in case you’ve repaid more than you owe and are due a refund. It’s important you check we have the correct information for you so we can process your refund quickly when you contact us.
You’re free to make additional repayments towards your loan at any time. This is optional and before doing this, it’s important to think about your personal and financial circumstances and how these might change in the future. Don’t make voluntary repayments if you do not expect to fully repay your outstanding balance by the end of the loan term. If you’re not sure about making a voluntary repayment, you should get professional advice from a financial advisor – SLC can’t give financial advice. Remember, any voluntary repayments you make can’t be refunded.
Find out how you can make extra repayments
If you are leaving the UK for more than 3 months, you need to let us know so that we can continue to make sure you’re repaying the correct amount towards your student loan. It’s quick and easy to update us before you leave.
Let us know if you’re leaving the UK
Student loans are different from other types of borrowing because they do not appear on your credit file and your credit rating is not affected. However, if you apply for a mortgage, lenders may consider if you have a student loan when deciding how much you can borrow.
Even if you’ve never repaid, your student loan balance will be written off after a period of time. Depending on the repayment plan you’re on, this will either be 25 years after you become eligible to repay, 30 years, or once you turn 65.
Find out when your loan will be written off
When you’re within the final 2 years of loan repayment, you should take the opportunity to switch your repayments to Direct Debit so you don’t pay back more than you owe through your salary.
Learn more about switching to Direct Debit
You only repay if you earn over £24,990/year. Student loans are 'income contingent' loans. You repay 9% of everything earned above £24,990 a year (though more accurately it's 9% of anything over £2,082 per month). So earn £26,000 and you'll repay £90 a year; earn £30,000 and it's £541 a year.
People also ask
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Feb 16, 2023 · How much can I borrow? You can borrow money for your tuition fees and for living expenses. A tuition fee loan goes towards the cost of your course, up to a maximum of £9,250 per year – which is...
