Paying back student loans

The student loan is a form of low interest borrowing that most students need in order to carry out their studies. Whether you need the cash or not, because it’s such a great deal students often take the loans out anyway. The only issue with that is having to pay it back of course. Paying back student loans is done automatically but there are some rules you should be aware of.


There are two plans that students find themselves on when they attend a university in England or Wales. Plan 1 is the name given to those who took out a loan before 1 September 2012. As you’d expect, those who took out a loan after this date are on Plan 2. If you’re studying in Northern Ireland or Scotland, you’re repayments are made using Plan 1’s interest amounts and wages threshold.

Plan 1

Students on Plan 1 only begin to make their repayments when they earn £17,335 per year. The amount they repay is calculated using the Retail Prices Index and the base rate of a number of nominated banks. Before you reach for a calculator or pick up the phone to an accountant, the basics that you need to know for now is that the interest rate sits at 1.5%.

Plan 2

This plan only needs repaying when you start earning £21,000 per annum. This one’s calculated a little differently. We go into more detail here if you’re interested in that sort of thing. The current rate for repayments stands at 5.5%.

How you repay

Aside from the low interest rate, the best thing about the Student Loan is that it’s repaid automatically through your wages. You won’t even notice it as it’s taken when your NI and Income Tax contributions are made. If you’re self-employed, HMRC use your tax return to calculate your repayment amount and you make the payment when you pay your income tax.

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