Repaying student loans
This fact sheet covers England & Wales. We also have a version for Scotland if you need it.
Use this fact sheet to:
- work out when you might have to make payments to your student loan;
- understand what happens if you have student loan arrears; and
- work out whether your student loan may be written off.
Student loans help to pay for the cost of your university tuition fees and living costs. The type of help, and how much you can get, depends on when you started your university course. The rules around when they need to be repaid and your options if you can’t afford to pay are different depending on whether you took out your student loan before September 1998, or from September 1998 onwards.
New-style student loans
Student loans taken out after 1 September 1998 are sometimes called ‘new-style’, or ‘income contingent’ student loans. What type of help and how much you can get depends on:
- when you started your university course;
- whether you are a full or part-time student;
- whether you live in England or Wales;
- the type of course you are studying; and
- your personal circumstances.
For more information about the type of help you can get and how to apply, see the student finance section of www.gov.uk. You can also contact your university or college for information about further financial help that you may be able to get from them.
In England, you may be able to get a loan to pay your tuition fees. These loans are not means-tested. This means that the amount you get is not based on your income, or your parents’ or partner’s income. However, you have to pay these loans back. This type of loan is often called a ‘tuition fee loan’. If your loan does not cover all of the fees, you are responsible for paying the rest.
If you are a full time UK student, you may also be able to get a loan to help you with your living costs. These loans are called ‘maintenance loans’. You have to pay them back. In Wales, you may also be able to get a grant to help with your living costs. You do not have to pay this type of grant back.
Apply as soon as possible
Don't wait until you have confirmed your place or started your studies before applying for funding. The earlier you apply the more likely it is that you will receive your first loan or grant payment in time for the start of term. Remember you will need to reapply for each year of study.
Repaying your new-style student loan
You are not expected to make repayments on a new-style student loan until the April after you graduate. Even then, you will only begin repayments if you earn over a certain amount (your ‘income threshold’).
If you started your course on or after 1 September 2012
For students starting their course on or after 1 September 2012, the income threshold is:
- £27,295 per year; or
- £2,275 per month; or
- £525 per week.
The amount you pay towards your loan is 9% of the difference between your actual income and the income threshold.
How to work out repayments
- Robert earns £31,575 per year.
- This is £4,280 more than the £27,295 threshold.
- 9% of £4,280 is £385.20.
- Robert will repay £385.20 per year, as long as he stays on that salary.
Your repayments will usually be collected by HM Revenue & Customs (HMRC) through your employer. This means the money will be taken from your wages before you get them.
If you leave university before the end of your course, you may still have to pay back the full loan you took out for the year. If this has happened to you contact us for advice.
The rate of interest that is added to your loan depends on whether you are still studying or have graduated. If you have graduated, interest will depend on your earnings.
If you are not part of Pay As You Earn (PAYE)
- If you are self-employed, you will repay your loan through your self-assessment tax returns.
- If you are outside the UK tax system, you will have to repay the Student Loans Company directly.
Can my loan be written off?
Any loan you still owe 30 years after your repayments were due will be written off. Also, if you can prove you are permanently unfit to work, your loan may be written off. Contact us for advice if you think your loan should have been written off but has not been.
If you started your course between 1 September 1998 and 1 September 2012
The system for those who started before 1 September 2012 but after 1 September 1998 is similar to the system for those that started on or after 1 September 2012, but there are important differences.
If your course was full time, repayments still only begin in the April following graduation, but the gross income threshold is:
- £20,195 per year; or
- £1,682.92 per month; or
- £388 per week.
The amount you repay is 9% of the difference between your actual income and the income threshold.
How to work out repayments
- Refat earns £26,000 per year.
- This is £5,805 more than the £20,195 threshold.
- 9% of £5,805 is £522.45.
- Refat will repay £522.45 per year, as long as she stays on that salary.
Interest is linked to the rate of inflation and is added daily from the date you get your first loan instalment. Your repayments are not over a fixed period. The level of your repayments will rise or fall directly in line with your income. The length of time it takes to repay your loan will depend on:
- your income after graduation;
- the total amount you borrowed; and
- the interest rate.
You can choose to make extra repayments to pay your loan off quicker.
If you took out your first loan during or before the 2005–2006 academic year, any remaining loan will be written off when you reach 65. If you took out your first loan during or after the 2006–2007 academic year, any loan not repaid will be written off 25 years after you started repayment. Your loan may also be written off if you can prove that you are permanently unfit for work. Contact us for advice if you think your loan should have been written off but has not been.
Student loans taken out before 1 September 1998
What is a fixed-term student loan?
Fixed-term student loans were introduced by the Student Loans Company (SLC) in 1990. They were replaced by the new-style ‘income contingent’ student loan system in 1998. They are sometimes known as ‘old-style’ or mortgage-style’ student loans. Although they were originally looked after by the SLC, these pre-September 1998 loans were later sold to three private sector companies: Erudio Student Loans, Honours Student Loans and Thesis Servicing.
If you were a student and took out a loan to study between 1990 and 1997, it is likely you have this type of loan. It is important to understand which type of loan you have, as the rules about interest and repayments are different.
The interest charged on your loan is linked to the rate of inflation and adjusted in line with the retail price index (RPI).
Interest is calculated daily from the date your loan started and is added to your account at the end of each month. You can find the latest information on the interest rate you need to pay on GOV.UK.
Repayments would usually have been due in the April following your graduation.
The SLC should have written to you in the February after graduation to warn you that repayments would soon be due.
Repayments were usually made over five years by monthly direct debit, unless you deferred or fell behind with payments. The monthly repayment is worked out by dividing the total amount borrowed, plus interest (based on the rate of inflation), by the total number of months over which you will repay.
Old-style student loans are regulated by the Consumer Credit Act 1974. This means that you should expect to receive any letters that are required to be sent under the Act, as they would with other fixed-term loans.
This also means that if you default on a fixed-term student loan, enforcement would be carried out in the County Court, in the same way as any other CCA-regulated loan agreement. The collection company would need to obtain a county court judgment (CCJ), which they could then enforce if you don’t pay.
It is important to keep the SLC informed of your current address and tell them if you change bank account.
Deferring your loan
If you earn under a certain amount, you may be able to defer your student loan repayments. ‘Deferment’ means postponing your student loan repayments for a period of 12 months.
Am I eligible to defer?
Repayments can be deferred for a year at a time if your income is below the threshold, which is set at 85% of the national average earnings.
Under the rules in place from 1 September 2021 to 31 August 2022, this means that if your gross income is £3,023.66 or less per month (equivalent to £36,284 per year), you may be eligible to apply for deferment. Your gross income is the amount you earn before any deductions (such as Income Tax or National Insurance) are taken from your pay.
How to apply for deferment
You need to complete and return an application form to apply for deferment. The application form you complete and where you send this back to will depend on which company is dealing with your student loan.
Your student loan will be dealt with by one of the following companies:
- Erudio Student Loans;
- Thesis Servicing; or
- Honours Student Loans.
See Useful contacts at the end of this fact sheet for details of how to contact your company.
You will need to provide proof of your gross income, or evidence of how your living costs are covered if you aren’t employed or receiving benefits. Only your income is taken into account. You do not need to provide income details of your spouse, partner, parents or any other relatives.
If you are not sure which company is dealing with your student loan, contact us for advice.
Evidence required for deferment
Different forms of evidence will be required depending on your situation. For example, wage slips, a benefit letter or confirmation that are you are still a student. Check with the company dealing with your loan about what they require.
When to keep making payments
Until you get written confirmation that your deferment has been accepted, you should continue to make the repayments. If you pay by direct debit, this will be suspended automatically once your deferment has been accepted. If you can’t make the normal repayment, contact us for advice.
Once your repayments have been deferred
Your repayments will be deferred for a period of 12 months. During this time, you will continue to be charged interest on your outstanding balance.
You will receive a letter just before your deferment period is due to end to tell you when your repayments are due to start again and how much they will be. You will also be given the opportunity to apply for a further 12 month deferment at that time.
If you are behind on repayments
Your liability to repay your loan cannot be cancelled if you are behind on any repayments on your student loan. It may be worth seeing if a charity or trust fund will help you to clear your arrears if they are fairly small. Search for organisations at www.turn2us.org.uk
Can my loan be written off?
Under certain circumstances your liability to repay your loan may be cancelled. For example, providing you haven’t defaulted, your loan may be cancelled if:
- you were under the age of 40 when your last agreement for a student loan was made and you reach the age of 50;
- you were aged 40 when your last agreement for a student loan was made and you reach the age of 60; or
- your last agreement for a student loan has been outstanding for 25 years.
If you are permanently unfit for work and can provide evidence that you receive a disability related benefit, your liability to repay your loan may also be cancelled.
Student loan arrears
If you do not defer payments and a payment or payments are missed, the company dealing with your student loan will start recovery action. They may pass the debt to collection agents. Debt collectors are not bailiffs and have no power to enter your home.
They could also apply to recover the debt through the County Court. If they do this, your credit rating will be affected and you also risk further enforcement action, such as bailiffs or a charging order on your home. If you are being threatened with court action, contact us for advice.
Try to avoid court action by contacting the company dealing with your student loan as soon as possible if you have missed a payment, or you have forgotten to defer. See Useful contacts at the end of this fact sheet.
You can find more information on our Replying to a county court claim fact sheet.
Credit reference agencies
Unless you have deferred payments or are keeping to a repayment arrangement, after 28 days your account will be registered with a credit reference agency. The company dealing with your student loan can agree not to register your details if you have special circumstances.
You will find it harder to get credit, such as a mortgage, if there is information about arrears on your file. You can check what is on your file and, in some circumstances, ask the credit reference agency to add a note. See our Credit reference agencies fact sheet for more information.
Bankruptcy, debt relief orders and individual voluntary arrangements
Since 1 July 2004, fixed-term student loans have not been ‘provable’ in bankruptcy. This means your student loan debt is not written off with your other debts at the end of the bankruptcy.
Debt relief orders (DROs)
Student loans cannot be included in a debt relief order. This means your student loan debt is not written off with your other debts at the end of the 12-month period your DRO usually lasts for.
Individual voluntary arrangements (IVAs)
Student loans are also excluded from individual voluntary arrangements (IVAs), if approved on or after 6 April 2010. If the IVA was approved before this date, your student loan would be included in the IVA, if you got the loan before the IVA approval date.
Erudio Student Loans Phone: 0333 033 7188 www.erudiostudentloans.co.uk
Honours Student Loans Phone: 0333 033 7257 www.hsloans.co.uk
Thesis Servicing Phone: 0333 004 5045 www.thesisservicing.co.uk
National Association of Student Money Advisers (NASMA) For information, advice and signposting on student money matters. www.nasma.org.uk