What and when you repay depends on what plan you’re on.
If you’re Plan 1 – you will pay 9% of anything you earn over £18,330 before tax per year.
If you’re Plan 2 – you will pay 9% of anything you earn over £25,000 before tax per year.
It doesn’t matter if you’re self-employed or employed, both of the thresholds are the same. If you are self-employed, HMRC will calculate how much student loan you should be repaying. Student loan repayments will come out with tax and National Insurance for employees.
If you want to make extra repayments on top of the mandatory ones, you won’t be charged extra. But, if you pay extra amounts to your loan, you aren’t able to get that money back at a later date.
The student loans company will write off your loan after 30 years. That means if you haven’t paid it all back by then, your repayments will stop. If you take a full tuition fee and maintenance loan, even if you have a very good job, you are unlikely to pay it all off.
If you’ve almost paid off your loan you will need to tell the Student Loans Company. They will arrange a separate direct debit payment to help you pay off the remaining balance. They will then close your account so you won’t overpay. If you don’t tell them, HMRC may continue to charge you repayments.
If you are self-employed, you should state this on your tax return to make sure you don’t overpay.
How much will I repay?
How much you repay depends on your income and what plan you’re on. But here is a rough guide to how much you can expect to repay each month:
- You earn less than £18,330 a year – £0 a month.
- You earn around £20,000 a year – £12 a month.
- You earn around £25,000 a year – £50 a month.
- You earn around £30,000 a year – £87 a month.
- You earn around £50,000 a year – £237 a month.
- You earn less than £25,000 a year – £0 a month.
- You earn around £30,000 a year – £37 a month.
- You earn around £50,000 a year – £187 a month.
If you go abroad
If you decide to leave the UK and work or live abroad, you must tell the Student Loans Company.
There is a myth that if you leave the UK you do not have to repay your loan – this is false. If you leave the UK and do not tell the company, they will contact the relative that supported your loan.
Each country has a set threshold of loan repayments based on their standard of living. You will pay 9% of whatever income you have over this threshold.
Your credit score
Student loans won’t affect your credit score if you want to apply for loans in the future. It will affect any mortgage applications because student loan payments count as outgoings. This will affect how the bank structures your mortgage repayments and interest.