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How Much Do You Have to Earn to Pay Back Student Loan?

May 19, 2025

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Student loans are a crucial part of higher education for many students in the UK, enabling them to fund their studies and achieve their academic goals. However, understanding when and how much you need to repay can be confusing.

The amount you have to earn before you start repaying your student loan depends on your loan plan, whether it’s Plan 1, Plan 2, Plan 4, Plan 5, or a Postgraduate Loan.

Each plan has its own repayment threshold and conditions, and knowing these details can help you prepare financially for the future. This guide will help you understand the essentials of student loan repayments in the UK.

What Are the Different Types of Student Loan Plans in the UK?

What Are the Different Types of Student Loan Plans in the UK

In the UK, there are several student loan repayment plans designed to reflect when and where a student began their higher education. Each plan comes with different repayment rules, income thresholds, and terms.

Understanding which plan you’re on is important, as it determines how much and when you begin to repay your student loan.

Types of Student Loan Plans

Plan 1 is typically for students who started university before 2012 in England or Wales.
Plan 2 applies to those who began their courses in or after 2012.
Plan 4 is specific to Scottish students and has different thresholds tailored to Scotland’s education system.
Plan 5 is a newer plan introduced for students who started courses after 2023.
Postgraduate Loans cover those pursuing Master’s degrees or PhDs and come with separate repayment terms.

Each of these plans has its own income threshold, meaning repayments only begin once your earnings exceed a set amount.

The repayment rate also varies slightly depending on the type of loan. It’s important to check your loan statement or contact Student Finance to confirm your plan type.

When Do You Start Repaying Your Student Loan?

Repayments on your student loan do not begin immediately after graduation. The earliest you start repaying is the April after you finish your course or leave your studies.

However, you only begin repayments if your income exceeds the repayment threshold for your specific loan plan.

Repayment Start Dates

Plan 1: Repayments start when your income exceeds £26,065 per year.
Plan 2: You begin repaying when you earn over £28,470 annually.
Plan 4: Repayments start at an income of £32,745 per year.
Plan 5: Repayment starts at £25,000 per year.
Postgraduate Loans: Begin at an income of £21,000 annually.

Automatic Deductions

If you are employed, repayments are automatically taken from your salary through the PAYE (Pay As You Earn) system. If you are self-employed, your repayments are calculated annually through your self-assessment tax return.

Examples:

If you are on Plan 2 and earn £30,000 per year, your monthly income is £2,500. Since the threshold for Plan 2 is £2,372, you would repay 9% of the difference (£2,500 – £2,372 = £128). Your monthly repayment would be £11.52.
For a Plan 4 loan with an income of £35,000, your monthly earnings are £2,916. Subtracting the threshold of £2,728 leaves £188, resulting in a repayment of £16.92 per month.

Understanding when and how you start repaying your student loan helps you stay prepared and avoid surprises. Always check which plan you’re on to ensure you’re meeting your repayment obligations correctly.

How to Repay Your Student Loan?

How to Repay Your Student Loan

Repaying your student loan is managed directly through the tax system, ensuring it is a seamless process for most borrowers. Here’s how it works depending on your employment status:

For Employed Individuals

Repayments are automatically deducted from your salary if your income is above the repayment threshold.
The amount is calculated based on the percentage of your income over the threshold.
It will appear on your payslip as Student Loan Repayment, showing exactly what has been deducted.

For Self-Employed Individuals

Repayments are calculated as part of your annual tax return.
HMRC (HM Revenue and Customs) collects the repayments alongside your regular income tax.

How to Make Voluntary Extra Payments?

If you wish to repay your loan quicker, you can make additional payments without any penalties. Options include:

Direct Debit: Regular overpayments from your bank account.
Online Payments: Log into your Student Loans Company (SLC) account to manage repayments.
Bank Transfer: You can send extra payments directly to SLC.

Voluntary overpayments help to reduce the interest accrued and shorten the time needed to clear the loan.

How Much Do You Have to Earn to Pay Back Student Loan?

The amount you need to earn before you begin repaying your student loan depends entirely on the plan you are on. Each plan has a specific threshold, and only the income above that threshold is used to calculate your repayment amount.

Income Thresholds by Plan Type

The following table provides a clear breakdown of the earnings required to trigger repayments for each student loan plan:

Loan Plan	Yearly Income Threshold	Monthly Income Threshold	Weekly Income Threshold
Plan 1	£26,065	£2,172	£501
Plan 2	£28,470	£2,372	£547
Plan 4 (Scotland)	£32,745	£2,728	£629
Plan 5	£25,000	£2,083	£480
Postgraduate Loan	£21,000	£1,750	£403

How Repayments Are Triggered?

If your salary is above the income threshold, you start making repayments. For example:

If you are on Plan 1 and earn £30,000 annually, your monthly income is approximately £2,500. The threshold for Plan 1 is £2,172, so the difference of £328 is used to calculate your repayment.
You pay 9% of that difference: £328 × 9% = £29.52 each month.

This calculation applies to all plans except Postgraduate Loans, which are charged at 6% of the income over the threshold.

Multiple Loan Plans

If you have more than one type of loan, repayments are calculated based on the lowest threshold. For instance, if you have Plan 1 and a Postgraduate Loan, repayments for Plan 1 start at £26,065, while Postgraduate repayments begin at £21,000. You will make separate deductions for each plan based on their individual thresholds.

How Are Student Loan Repayments Calculated in the UK?

How Are Student Loan Repayments Calculated in the UK

Student loan repayments in the UK are calculated as a percentage of your income above the specified threshold for your plan. The calculation is straightforward but varies slightly depending on the plan you are on.

Calculation Process

Determine your gross income (before tax and other deductions).
Subtract the income threshold for your plan from your total income.
Apply the repayment percentage (9% for Plan 1, 2, 4, and 5; 6% for Postgraduate Loans) to the difference.

Example Calculations

Plan 2 Example: If you earn £32,000 annually, the repayment threshold is £28,470.
- Difference: £32,000 – £28,470 = £3,530
- Repayment: 9% of £3,530 = £317.70 annually, or approximately £26.48 per month.
Postgraduate Loan Example: If you earn £25,000, the repayment threshold is £21,000.
- Difference: £25,000 – £21,000 = £4,000
- Repayment: 6% of £4,000 = £240 annually, or £20 per month.

Multiple Job Scenarios

If you work multiple jobs, repayments are only deducted from the income of each job that exceeds the repayment threshold independently, not combined. For example:

Job 1: £1,500/month (Below Plan 2 threshold): No repayments
Job 2: £1,000/month (Below Plan 2 threshold): No repayments
Combined: £2,500 (Above threshold), but repayments are not triggered as each job individually is under the limit.

What Happens If Your Income Changes?

Changes in your income, whether through bonuses, pay rises, or switching jobs, will affect your student loan repayments. Your repayments are adjusted automatically if you are on PAYE, or recalculated annually if you are self-employed.

Increases in Income

When your salary increases, so does the amount you repay. For example:

If your salary rises from £30,000 to £35,000 under Plan 2, your monthly repayment amount will increase accordingly, as you are earning more above the repayment threshold.

Bonuses and Overtime

Any additional income, such as bonuses or overtime, also counts towards your earnings for that period. This means if you receive a £2,000 bonus, your repayment for that month will temporarily increase since your total income is higher.

Decreases in Income or Job Loss

If your income drops below the repayment threshold, your repayments will pause automatically. For example, if you switch from a full-time job to part-time and your income falls under the threshold, deductions will stop until your income increases again.

Temporary Changes

If your income fluctuates, such as during seasonal work, repayments adjust in real-time. For instance, if you work overtime during December and earn more, your student loan repayment for that month will increase, but it will return to normal the following month if your income goes back to its usual level.

How Are Student Loan Repayments Taken from Your Pay?

How Are Student Loan Repayments Taken from Your Pay

Repayments are automatically deducted from your pay if your income exceeds the threshold for your plan. This is done through the Pay As You Earn (PAYE) system, making it seamless for most employees.

How PAYE Works?

Your employer calculates your earnings and deducts the necessary amount each pay cycle.
The deduction is taken before you receive your salary, similar to tax and National Insurance.
On your payslip, you will see the amount deducted as Student Loan Repayment.

If You Are Self-Employed

For those who are self-employed, repayments are managed through your annual Self-Assessment Tax Return. HMRC calculates how much you owe based on your declared income, and repayments are made alongside your regular tax payments.

Multiple Jobs: If you have more than one job, repayments are calculated separately for each job based on its individual earnings. If neither job exceeds the threshold, no repayments are made, even if the combined income surpasses the limit.

Do You Pay Interest on Your Student Loan?

Yes, interest is charged on your student loan from the day the money is released, and it continues to accrue until the loan is fully repaid or written off. The rate of interest depends on which repayment plan you are on. For Plans 1, 4, and 5, a flat interest rate of 4.3% is applied.

Plan 2 works differently, with income-based rates. While you’re still studying, the rate is set at 7.3%. After your course, if you earn under £28,470, the interest remains at 4.3%.

As your income rises, the interest increases gradually, up to a maximum of 7.3% for those earning over £51,245. Postgraduate loans have a fixed rate of 7.3%, regardless of income.

Interest on student loans is compounded, meaning it is calculated daily and added to your balance monthly. This can cause your loan to grow over time, particularly during periods when you’re not making repayments due to low income or study breaks.

Can You Overpay or Pay Off Your Student Loan Early?

Yes, you can overpay or pay off your student loan early without facing any penalties. Unlike many other types of loans, student loans in the UK do not charge early repayment fees, making it easier for borrowers to manage their debt on their own terms.

Overpaying can significantly reduce the amount of interest you pay over time, as interest is calculated daily based on the outstanding balance. By making additional payments, you reduce the principal, which in turn lowers the amount of interest accrued.

For example, if you owe £20,000 on Plan 2 with a 4.3% interest rate, you would pay £860 in interest per year. Reducing the balance through overpayments cuts down this amount.

Overpaying also shortens the overall repayment period, meaning you can clear your debt faster. This not only saves money but also gives you the freedom to redirect funds toward other financial goals, such as home ownership or investments.

What Happens If You Don’t Pay Back Your Student Loan?

What Happens If You Don’t Pay Back Your Student Loan

If you do not repay your student loan, specific measures are put in place to recover the debt. However, the consequences depend on the circumstances, such as whether you are under the income threshold or simply not meeting your obligations.

Automatic Adjustments if You Earn Less

If your income is below the repayment threshold for your loan plan, repayments automatically pause. You are not penalised during this time, and interest continues to accumulate. Once your income rises above the threshold, repayments resume seamlessly.

Falling Behind on Repayments

If you earn above the threshold and do not repay:

The Student Loans Company (SLC) will contact you to recover missed payments.
If you persistently fail to pay, the debt may be passed on to debt collection agencies.
Legal action could be taken to recover the money, and it could affect your credit rating.

Moving Abroad and Repayments

If you move abroad for more than three months, you are required to inform the SLC. Your repayment threshold will be adjusted based on the cost of living in the country you move to.

If you fail to notify the SLC, your account may go into arrears, and you could face legal action.
Payments must continue based on the international thresholds, which may be higher or lower than the UK amounts.

Loan Write-Off Periods

If you have not fully repaid your student loan within a certain time frame, the remaining debt is written off:

Plan 1: Written off 25 years after repayments begin or when you turn 65, whichever is sooner.
Plan 2: Written off 30 years after repayments start.
Plan 4: Written off 30 years after repayments begin.
Plan 5: Written off 40 years after repayments start.
Postgraduate Loan: Written off 30 years after repayments begin.

If you pass away before the loan is fully repaid, the debt is entirely cleared, and your family is not held responsible for any remaining amount.

Conclusion

Understanding how much you need to earn to start repaying your student loan is vital for effective financial planning. Each student loan plan, whether it’s Plan 1, Plan 2, Plan 4, Plan 5, or a Postgraduate Loan, has its own repayment thresholds and interest rates.

Repayments are automatically deducted from your pay if you are employed or collected through self-assessment if you are self-employed.

Making extra payments can help you save on interest and clear your debt sooner, while understanding how changes in income affect your payments allows you to avoid unexpected surprises.

Knowing your plan details and keeping track of your earnings are the best ways to stay in control of your student loan repayments.