Student loan repayments can sound daunting, but with our useful guide, you’ll see that it’s actually quite manageable and straightforward. Whether you’re a sixth form student looking ahead to university, or halfway through writing your dissertation and already applying for graduate jobs, having a clear understanding of how and when you'll repay your loan is key.
Updated: 22 Jan 2025
Importantly, your student loan repayment isn’t based on the total amount you borrowed. Instead, it’s based on how much you earn once you leave university and secure graduate employment. The good news is that you’ll only begin making repayments once you start earning above a specific income threshold, and the amount you pay will only comprise a percentage of your earnings above this limit.
This ensures that you’ll be in a position of financial stability before paying off your loan, and your repayments increase in proportion to your salary, ensuring that they remain a manageable part of your future finances.
The best way to know which plan you’re on is simply to log into your online student finance account, which will provide details of your loan and repayment type. Your plan depends on when you took out the loan and where you’re studying.
If you are an English or Welsh student:
Plan 1: Loans taken before 1 September 2012.
Plan 2: Loans taken from 1 September 2012 to 31 July 2023.
Plan 5: Loans taken from 1 August 2023 onwards.
If you are a Scottish student:
Plan 4: Loans taken from 1 September 1998.
If you are a Northern Irish student:
Plan 1: Loans taken from 1 September 1998.
Great, so now you know which plan you’re on, what is the threshold for student loan repayment?
Plan 1: £22,015 per year
Plan 2: £27,295 per year
Plan 4: £31,395 per year
Plan 5: £25,000 per year
Typically, you’ll repay 9% of your income above this threshold. Postgraduate students pay a little less, at 6%, and if your income is below the threshold, you won’t make any repayments at all.
Repayments usually begin the April after you leave your course. For instance, if you graduate in June 2025, repayments would start in April 2026.
To calculate your repayments, follow these three steps:
Identify your annual income.
Subtract your plan's threshold.
Multiply the remaining amount by 9% (or 6% for postgraduate loans).
Let’s do an example:
Imagine you have recently started your first graduate job after taking out an undergraduate loan for your degree. You earn £30,000 per year under Plan 2. How much do you have to repay?
Step 1: Identify your annual income
Easy, it’s £30,000 per year.
Step 2: Subtract your plan’s threshold
The threshold for Plan 2 is £27,295 per year, so £30,000 - £27,295 = £2,705
Step 3: Multiply the remaining amount by 9%
£2,705 × 9% = £243.45
Your annual repayment is £243.45, which works out at around £20 per month. Not bad, right? That’s less than most gym memberships.
Student loan repayments are calculated from your gross income, but they’re deducted after tax and National Insurance.
This means repayments don’t reduce the amount of tax you pay. Your employer will deduct student loan repayments directly from your monthly pay, so you won’t need to make separate payments unless you’re self-employed.
Similarly, your student loan repayments don’t directly reduce your Universal Credit, since Universal Credit entitlement is calculated after tax and National Insurance deductions, but before student loan repayments.
If your earnings fall below your plan’s threshold, then your repayments stop automatically. This makes sure your repayments are manageable and appropriate to your financial situation.
The length of time before your loan is written off depends on your plan:
Plan 1: 25 years after the April of your first repayment or when you turn 65, whichever comes first.
Plan 2: 30 years after the April of your first repayment.
Plan 4: 30 years after the April of your first repayment.
Plan 5: 40 years after the April of your first repayment.
If you’ve not repaid the full loan by this time, the remaining balance is cancelled.
So there you have it; student loan repayments might just be more manageable that you think!