when is your student finance paid back

When do i need to pay back my student finance?

This is a topic that can make any student feel a little bit uneasy at times. For a few years, you enjoy studying, partying and your independent lifestyle away from mum and dad, all with the helping hand of the Student Loans Company. It’s great fun for a while, but eventually there will come a day when you must repay those handy loans. Here, we will break down the repayment process and clarify how and when your student finance is paid back.

What do I need to pay back?

For most people, a Tuition Fee Loan is the best option to pay for university fees, as you do not need to pay £9250 upfront each year. Additionally, many students take out a Maintenance Loan to contribute to living and accommodation costs. Both of these loans need to be repaid, unlike grants and bursaries.

Does everyone pay the same amount?

This depends on which Repayment Plan you are on; don’t worry, this is easy to work out. There are 3 plans: Plan 1, Plan 2 and Postgraduate Loans.

Plan 1 is for:

  • English or Welsh students who started an undergraduate course anywhere in the UK before 1 September 2012
  • Scottish or Northern Irish students who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998
  • EU students who started an undergraduate course in England or Wales on or after 1 September 1998, but before 1 September 2012
  • EU students who started an undergraduate or postgraduate course in Scotland or Northern Ireland on or after 1 September 1998

Plan 2 is for:

  • English or Welsh students who started an undergraduate course anywhere in the UK on or after 1 September 2012
  • EU students who started an undergraduate course in England or Wales on or after 1 September 2012
  • Someone who took out an Advanced Learner Loan on or after 1 August 2013

Postgraduate Loans:

  • English or Welsh students who took out a Postgraduate Master’s Loan on or after 1 August 2016
  • English or Welsh students who took out a Postgraduate Doctoral Loan on or after 1 August 2018
  • EU students who started a postgraduate course on or after 1 August 2016

How much do I pay back and when?

So, this is linked to your Repayment Plan. For Plan 1 Loans, you will only pay when you earn over £19,390 a year, £1,615 a month or £372 a week (before tax or other deductions). From 6 April 2021 will increase to £19,895.

For Plan 2 Loans, you will only pay when you earn over £26,575 a year, £2,214 a month or £511 a week (before tax or other deductions). From 6 April 2021 the threshold increases to £27,295.

For Postgraduate Loans in England and Wales, repayments will start when you earn over £21,000 a year, £1,750 a month or £404 a week (there is no annual increase). In Northern Ireland and Scotland, repayments are based on Plan 1.

However, a common misconception is that you pay a certain percentage of your salary each month. In fact, you only pay a percentage of what you earn above the threshold. You pay 9% of the amount you earn over the threshold for Plan 1 and 2, and 6% of the amount you earn over the threshold for the Postgraduate Loan. If you earn less than the threshold, you do not have to pay anything. Interest starts being added to your loan from when you get your first payment. It’s also important to note that the earliest you’ll have to start repaying your student loan is 6 April, the year after you finish your course (or the April 4 years after the course started if you are a part-time student). Oh, and for most students, the debt is wiped after 30 years, so don’t worry too much about how much you currently owe!

What if my circumstances change?

In such uncertain times, it is important to know what may happen if your financial situation changes. Firstly, your repayments will stop if you stop working or your income drops below the threshold. Plus, if your salary decreases, your repayments will automatically decrease too. If you leave the UK for more than 3 months, the repayments will need to be recalculated, depending on the country you move to. You will need to let the government know of this.

How do I make the payments?

If you are employed and earning over the threshold, the money is deducted automatically from your pay, just like tax. If you’re self-employed, HMRC will calculate what you owe each year in repayments, once you file your tax return. You just need to tick the box on your tax return which confirms that you have a student loan.

To conclude…

Student Finance doesn’t have to be a huge source of worry for graduates. Many people are quite pleasantly surprised at how manageable the repayments are once they are over the threshold! The government website has more specific examples just in case you are worried about any exceptions. In short, enjoy your studies and everything will slide into place when the time comes to repay.

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