Repaying your loan

The following guidance refers to ‘Plan 1’ income-contingent loans. The first repayments on ‘Plan 2’ loans will not be made until April 2016.

The Student Loans Company (SLC) website has a tool to help you find out which kind of loan you have.

How much

In very basic terms, student loan repayments are due at a rate of 9%:

• on your earnings over £16,365 a year (from 6 April 2013, for 2012/3 the threshold was £15,795), whether from employment or self-employment
• on other income over £2,000 a year if you are required to fill in a tax return under Self Assessment.

How repayments are made

There are basically three ways of repaying an income-contingent student loan:

• through your wages, under Pay As You Earn (PAYE)
• through HMRC’s Self Assessment system
• direct to the SLC.

Which of these applies to you (or more than one, in some cases) depends on your circumstances. For example you might:

• be employed in the UK, in which case deductions are made under PAYE
• be self-employed or have other income which means you have to fill in tax returns each year so the Self Assessment system will be used to collect repayments
• be both employed and self-employed and therefore have some repayment deducted through your wages under PAYE. The total repayments might then be adjusted, after the tax year end, under the Self Assessment system
• wish to make extra payments direct to the SLC at any time. If so, please note that this does not reduce any amount that you might owe under the normal PAYE or Self Assessment processes but it does mean that you pay off the balance more quickly
• have to pay direct to the SLC if you move abroad
• have nearly repaid your loan in full, in which case you may be able to opt out of PAYE deductions and switch to a direct debit to the SLC instead.

When to start repayments

The tax year runs from 6 April one year to 5 April the following year. You will usually start repaying your loan at the start of the tax year after you finish or leave your course but only if you earn at a rate of more than £16,365 a year. Your earnings are calculated before deducting tax or National Insurance contributions (NICs).

Note that the threshold above which repayments began was £15,795 for the tax year 2012/13.

In the subsequent pages, we cover the various ways of collecting repayments and how they are calculated.