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Repayment of student loans

Student loans are part of the government’s financial support package for students in higher education in the UK. They are available to help students meet their expenses while they are studying and it is HMRC’s responsibility to collect repayments where the borrower is working in the UK. The Student Loans Company (SLC) is directly responsible for collecting the loans of borrowers outside the UK tax system.

The main finance package elements available to students include loans for tuition fees and maintenance loans (to help with living costs). The maximum loan amounts are capped, the maximum amount depends on the student's circumstances. Maintenance grants are also available under certain circumstances. The grants do not have to be repaid but do reduce the amount of maintenance loan a student is entitled to.

Students that have finished their studies and entered the workforce must begin to make loan repayments from the April after they have finished their studies or when their income begins to exceed the annual threshold. The annual threshold for 2017-18 is £17,775 for plan 1 and £21,000 for plan 2. The terms of loan repayment for courses of study started before 01 September 2012 are referred to as 'Plan 1', and those started after 01 September 2012, are referred to as 'Plan 2'. Repayments are deducted at a rate of 9% of income over the threshold.

The loans are also subject to varying levels of interest. The interest rates for some Plan 2 repayments will increase significantly from September 2017. The new interest rate is based on the March 2017 RPI figure plus a variable rate dependent on income. From September 2017, this interest rate could be as high as 6.1% compared to the current rate of 4.6%.