I decided to write this post after learning that the interest rates on student loan repayments have been cut to 2.5%. The aim of this post is to inform all you confused students, former students and parents out there who are unsure about the terms involving student loan repayments. I have tried to make this mini-guide as simple and clear as possible broken down into short steps. Please don’t hesitate to get in touch if you have any questions or queries.
When will I have to repay my loan?
If you have received a student loan after 1998, you have to repay your student loan (unfortunately), but only if you earn over the allocated yearly income threshold which currently stands at £15,000 per annum, if you earn less than this, you don’t have to make any repayments. Therefore the repayments you make are calculated through your income, more on this below.
How the Student Loan Repayments are Calculated
The most common form of student loan repayment is through the PAYE system, which stands for Pay As You Earn. As mentioned above, the current repayment threshold is £15,000 per year, which equates to around £1,250 per month or £288 per week. Whatever you earn over that threshold, around 9% of that amount with be your student loan repayment. This applies for people who have a fixed annual income, varying income or people who have other sources of income such as savings and investments.
So let’s create an example, if you earn £1,500 per month, that’s £250 over the £1,250 monthly threshold, therefore you pay 9% of the £250 which equates to a student loan repayment of £22 per month. This system works in the same vain as income tax and national insurance payments. Even if your monthly income varies, you will still have to pay the 9% of the amount you earn over the repayment threshold.
You don’t have to pay via PAYE, you may also use the self assessments system, more information regarding self assessment student loan repayments can be found here.
Student Loan Interest Rates
As mentioned in my last post, the current rate of interest placed on student loan repayments is 2.5%.
How payments can be made
Direct Debit
Online
Directly from employer
Useful Links
The Student Loan Company - Repayment Page
More Detailed Student Loan Repayment Info
HM Revenues and Customs: Collection of Student Loan
MoneySavingExper.com: Student Loan Repayment
I hope you have found this article very useful, as I have already said, I am always here to answer your questions. Also, please remember to subscribe to our RSS feed.
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January 21st, 2009 at 9:15 pm
Hi, just a quick question, does this apply to loans for those of us who started uni before 1998, but took a loan out since then?
For example, I started uni in 1996, but had loans in ‘96,’97 and ‘99 I think, but I don’t think I have to repay them as you talk about above - I can defer them each year as long as I’m not earning above the average wage.
April 15th, 2009 at 6:39 pm
Honours Student Loans are now sending out letters to those with a student loan a/c (with SLC). My unemployed wife’s letter stated, and I quote ‘Your husband will not have to say what he is earning, but will need to state in writing that he does not support you to the gross threshold of the year in question’. This implies that unemployed wives are in fact employed by their husbands and that the HSL can claim a husband’s income where this used to support his wife. When was this agreed?
May 16th, 2009 at 2:56 pm
I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.
June 2nd, 2009 at 11:32 am
People,
I received a call from the SLC asking for money but I had sent throug deferment forms on 2 occasions!! Guess what!! They’ve lost them…now I have to pay £104 but I can reclaim it when I send my third-time-lucky deferment forms only this time by RECORDED DELIVERY.
PS. Don’t phone their 0870…use:
0113 207 3154 for Honours Loan Company
0141 243 3660 for Student loan company
PSS. Always use recorded delivery
hope this helps
for you graduate
Bob
June 10th, 2009 at 2:36 pm
does your student loan get wiped if you move away from the UK?
August 4th, 2009 at 2:41 pm
@Bobla - thanks for sharing your tips here and good luck with that third time around!
@John - The simple answer is NO, many people think this but it’s completely untrue, you would be tracked down. Check out the following link http://www.direct.gov.uk/en/EducationAndLearning/UniversityAndHigherEducation/StudentFinance/RepayingStudentLoansCoursesStartingFrom1998/DG_10034872