Student loan repayments confuse a lot of people. They come off your pay automatically, but nobody really explains the mechanics when you graduate. The good news: it's not like a mortgage or a credit card. You only repay when you earn above a threshold, and any remaining balance gets wiped after a set period.
Your plan type depends on when and where you studied:
Not sure which plan you're on? Check your payslip. It'll say something like "SL1" or "SL2" in the deductions. You can also log in to your Student Loans Company account at repayment.slc.co.uk.
You only start repaying once your income passes these annual thresholds:
If you earn below your threshold, you pay nothing. Your balance might grow because of interest, but no money leaves your account.
For Plan 1, 2, 4, and 5 loans, you repay 9% of everything you earn above the threshold. Not 9% of your total salary. Just 9% of the amount over the line.
Postgraduate Loans work slightly differently: 6% of income above the £21,000 threshold.
And if you have both an undergraduate loan and a postgraduate loan? You pay both. 9% for the undergraduate plus 6% for the postgraduate. On a £40,000 salary with Plan 2 and a Postgrad loan, that's:
Let's walk through a typical scenario. You graduated in 2018, you're on Plan 2, and you now earn £35,000.
Your threshold is £29,385. Your income above that threshold is £5,615. You pay 9% of £5,615 = £505.35 per year. That's £42.11 per month taken from your pay.
On a £35,000 salary, your total monthly deductions might look like this:
The student loan isn't a huge hit at this salary. But it adds up over years, and at higher salaries the percentage stays the same while the absolute amount grows.
This is where it gets interesting. Each plan has a different write-off period:
For most Plan 2 graduates who started uni in 2012, the write-off date falls around 2046. The average Plan 2 borrower owes around £45,000 at graduation (tuition plus maintenance). Most won't repay the full amount before it's written off. Government figures suggest around 73% of Plan 2 borrowers will have some debt cancelled.
Plan 5 is the harshest, with 40 years before write-off. But the threshold is lower and interest rates are capped at RPI only (no extra percentage on top), so the overall deal is different.
This depends entirely on whether you'll repay the full balance before write-off. If you won't, then every extra voluntary payment is money you didn't need to spend, because the remaining balance would have been cancelled anyway.
The maths works roughly like this: if you're earning under £50,000 on a Plan 2 loan with a £40,000+ balance, you're almost certainly not going to repay it all in 30 years. Voluntary payments don't make financial sense for you.
But if you're a high earner (say £70,000+) with a relatively small balance (under £20,000), you'll probably repay it all naturally. In that case, extra payments save you interest. Martin Lewis at MoneySavingExpert has a useful calculator for working out which camp you fall into.
If you're employed, your employer deducts student loan repayments through PAYE. It shows as a separate line on your payslip. HMRC tells your employer which plan you're on via your tax code notification.
If you're self-employed, you pay through your self-assessment tax return, in the same way you pay income tax and Class 4 NI.
If you move abroad, you deal directly with the Student Loans Company. They set fixed repayment amounts based on the country's cost of living. And yes, they do chase you. The SLC can find you through HMRC records, passport data, and credit reference agencies.
Log in at repayment.slc.co.uk to see your current balance, interest applied, and payments received. It takes about 4 weeks for PAYE payments to appear on your account, so don't panic if last month's deduction isn't showing yet.
If you think you've overpaid (your balance hit zero but deductions continued), contact the SLC. They'll refund the overpayment, though it can take 6 to 8 weeks.
Want to see your exact take-home pay?
Use our salary calculator