Everything you need to know about your student loan

Congrats, you’ve done it, you’ve graduated from university. Nobody can ever take that shiny new degree away from you. It’s going to be your first-class ticket to the job of your dreams, eventually, hopefully.

After all the celebrating is out of the way and you’ve started plotting the opportune entry-point into your chosen career (unless you’re one of the lucky one that has been promised a job upon graduation), you may consider a few moments’ thought to how you’re meant to repay your student loan.

Luckily, time is on your side. Unless you’ve gone straight into full-time employment, there’s no need for any prompt action because you only start repaying once you earn more than £17,495 a year before tax (£1,457 a month or £336 a week if that’s how you’re paid).

Payments can be suspended if your income drops below that amount. This is labelled plan one and applies to English and Welsh students who started their studies before September 2012, as well as all Scottish and Northern Irish students.

Plan two sees the pay threshold rise to £21,000 for English and Welsh students who started on or after the 1st of September 2012. You only start repaying when your annual income is more than the minimum amount.

Employment status

How you repay partly depends on how you’re employed.

If you join a company, nine per cent of your earnings will be deducted to repay your student loan. Your payslip should outline exactly how much has been taken and it’s also worth making sure your employer is aware of which plan you should be on.

If you’re self-employed, HM Revenue and Customs (HMRC) will work out how much you should pay from your tax return, and repayments are made at the same time as you pay your tax and National Insurance.

Interest

Again, time is your friend here. No interest will be applied to your student loan until you make the first payment.

Rates on income based loans have varied over the years but they sat at 1.5 per cent APR between academic year 2009/10 to 2014/15 for plan one loans, before dropping to 0.9 per cent for 2015/16.

Where are you up to?

Although your payslip will show much you have repaid, you can go online to check how much you have left to pay. Register here if you haven’t already.

You won’t be penalised for paying early and getting ahead with repayments, however any voluntary payments can’t be refunded so don’t cause yourself any avoidable hardship.

Overpaying doesn’t have any effect on how much you’ll pay next time either, however you will obviously pay off your loan quicker.

Working aboard

What if your employment future takes you overseas? For those who find work outside of the UK, the rules are the same.

Your foreign employer should work out repayments based on the minimum amount for either plan in the relevant country and if you’re working abroad for more than three months, you’ll need to complete an overseas income assessment form to estimate your income for the next 12 months and to provide your bank details so you can pay by direct debit.

As the form is only valid for 12 months, you’ll have to complete it for every year you’re abroad.

Cancellation

Students in England, Wales and Northern Ireland who took out their loan before September 2012 will have it written off when they turn 65, as long as they took out their first student loan in or before academic year 2005/06. This switches to 2007/08 for students in Scotland.

If you took out your first student loan in or after academic year 2006/07, then it will be written off 25 years after you became eligible to repay. Again, this is stretched to 35 years for Scottish students.

All information correct as of August 25, 2016.

Written by Joe White