Everything You Need to Know About Student Loan Repayments
We’ve given you guides about how to live on a student budget, but one thing that you must be fully aware of for the benefit of your post-university finances and career is the impact of student loan repayments. Your student loan will probably be the largest amount of money you’ve borrowed so far, and it can seem a quite daunting number. Of course, you won’t start paying it back right away, so it is also easy to forget about it until you start seeing payments going out of your pay packet after you’ve finished university and started in a new job.
This student loan repayments guide will provide you with the basic information you need to understand how much you’ll pay back, when you’ll start, and for how long.
Let’s get crackin’
What does a student loan cover?
Your student loan can include a tuition fee loan to cover the cost of your education and a maintenance loan that will help cover your living costs.
- Tuition fee student loans – This will cover the cost of your university course and is paid directly to the course provider. You don’t have to begin student loan repayments until after your course has completed and you are earning above a certain amount. Tuition fees can cost over £9,000 per year.
- Maintenance loan – You can apply for this type of loan at the same time as borrowing to cover your tuition fees. Money is borrowed at the beginning of each term (or at the beginning of each month in Scotland) and the amount you can borrow depends on your household income, the location of your study, where you live, and other factors.
- Student grants – Student finance might be available to you depending on your personal circumstances. You could be eligible for some student benefits, disability assistance, or help with childcare costs to name just a few.
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Which student loan plan am I on?
You can find out how much your student loan repayments will be and when you will start repaying it by finding out which repayment plan you are on. If you think you are on the wrong plan, do not worry, you can do something about it. There are 4 plans available for student loan repayments: 1, 2, 4, and Postgraduate Loan. You do not choose which plan you are on and if you have multiple loans they might be on different plans.
The following conditions apply to those who are on Plan 1 student loan repayments:
- You are an English or Welsh student who started an undergraduate course anywhere in the UK prior to 1st September 2012
- You are a Northern Irish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1st September 1998
- You are an EU student who started an undergraduate course on or after 1st September 1998, but before 1st September 2012, on a course anywhere in England or Wales
- You are an EU student who started an undergraduate or postgraduate course in Northern Ireland on or after 1st September 1998
The following conditions apply to those who are on Plan 2 student loan repayments:
- English or Welsh students who started an undergraduate course on or after 1st September 2012 anywhere in the UK
- A student from the EU who started an undergraduate course in England or Wales on or after 1st September 2012
- A person who took out an Advanced Learner Loan on or after 1st August 2013
- A person who took out a Higher Education Short Course Loan on or after 1st September 2022
The following conditions apply to those who are on Plan 4 student loan repayments:
- Scottish students who began an undergraduate or postgraduate course on or after 1st September 1998 anywhere in the UK
- EU students who started an undergraduate or postgraduate course in Scotland on or after 1st September 1998
The following conditions apply to those who are on postgraduate loan repayments:
- Welsh or English students who took out a Postgraduate Master’s Loan on or after 1st August 2016
- Welsh or English students who took out a Postgraduate Doctoral Loan on or after 1st August 2018
- An EU student who began a postgraduate course on or after 1st August 2016
What should I do if I think I’m on the wrong plan?
Don’t worry if you think you are not on the right plan once you are in full-time employment post university. You can sign into your account to manage student loan repayments to download the ‘active plan type letter’.
From there, you can ask your employer which plan they have down for you. If it is different to what your account says, prove this to your employer so your details are changed in payroll, and you will pay the correct amount in repayments from that date. You can also apply for a refund if you have overpaid due to being on the wrong plan number.
How do student loans differ to other types of debt?
The first thing you should be aware of is that taking out a student loan is not like taking out any other type of loan. The total repayment amount for your student loan includes your tuition fee loan and/or maintenance loan. Any grants or bursaries do not need to be repaid.
Your student loan repayments won’t begin until:
- The April after you have graduated or left your course
- You are earning above a certain amount in your employment
The interest matters
Your student loan does not have any fees attached to it, BUT it is important to understand that interest is constantly being added. Your monthly repayments will increase the more money you earn.
What about my credit score?
Unlike almost any other type of loan, your student loan repayments will not have an impact on your credit score. If you are applying for a mortgage in future, or a large personal loan of any kind, your student loan will play no part in the decision made by the lender.
Another unique aspect to your student loan repayments is that it is automatically deducted from your salary before you get paid, like tax. What this means is you can never miss a payment.
Your student loan will be cancelled after a certain amount of time, depending on the plan type your loan is:
- Plan 1 – written off when the person is 65 (if the loan was taken out 2005-2006 or earlier); or 25 years after the first April you were due to pay (2006-2007 and later)
- Plan 2 – written off 30 years after the April of first loan repayment
- Plan 4 – written off when the person reaches 65 or 30 years after the first repayment date in April, whichever comes first (2006-2007 or earlier); or 30 years after the first repayment (2007-2008 and later)
- Postgraduate loan – written off 30 years after the first April you were due to repay (for students in England and Wales); postgraduate students from Northern Ireland are on Plan 1, postgraduate students from Scotland are on Plan 4.
Because your student debt is eventually cancelled, whether you have repaid it in full or not, it might never make sense to make extra repayments to clear your student loan faster. If you have other debt, we will always recommend you focus on paying that off first before you look at your student loan. You often find that many people don’t pay much attention to their student loan repayments, it just happens automatically in the background, and they have no idea how much is left on it to repay.
What is the student loan statement?
Every year you’ll be sent a Student Loan statement that breaks down your loan, the total balance, the interest applied, and the student loan repayments you have made in that period.
What happens if I move abroad?
Student Finance will always find you, even if you move abroad and think you can get away with not making your repayments (not that you would). Your student loan repayments are pretty flexible, and as you can see, different to normal debt. If you are earning enough, you’ll pay it back if you’re not, you won’t pay. This is the same whether you are living in Manchester or Melbourne, it doesn’t matter where you are living and working – we know which place we’d rather live though!
It is important to come to terms with your debt. The student loan repayments you make after you leave university will be determined by how much you borrowed, how much you are earning and the type of student loan plan you are on. Make sure you are prepared for the amount once you leave university, and that you understand what is expected of you.
Lastly, don’t be daunted by your debt and finances. Moving through university and living on a student budget is a great grounding for life in general and learning how to budget and living within your means. Your student loan repayments will become a part of your finances in the future, so become comfortable with what it means for you now, whilst you are still studying. Don’t worry, there is nothing to fear with student debt!
Ahh that’s it, we hope you’re feeling well educated on everything there is to know about student loan repayments!
You should read our blog on Tips To Beat The Summer Heat In The UK next.
If you’re still needing student accommodation for the next academic year, then look at the properties we have in locations across the country. Get in touch with us today to book!