Around 429,000 workers start repaying student loans this April

Around 429,000 workers will start repaying their student loan for the first time since leaving university this April, according to Which?¹. Repayments are collected through the PAYE tax system, meaning they are deducted automatically and sent to HMRC before salary is received¹. Graduates become eligible to repay from the April after their course finishes¹.

For those on Plan 2, the earnings threshold is £27,295 before tax and deductions, with 9% of income above that level payable¹. Postgraduate loan holders, known as Plan 3, need to earn at least £21,000 and repay 6% of income above that threshold¹. The interest rate cap for Plan 2 currently stands at 7.8%, reviewed monthly, up 0.9 of a percentage point from 6.9% in March 2023¹. This cap also applies to Plan 5 and postgraduate Plan 3 loans¹.

Interest rates vary by earnings band for Plan 2 borrowers¹:

While studying, and until the April after a course finishes, the interest rate is usually RPI plus 3%¹. The government capped maximum interest for Plan 2 in July 2021 regardless of salary or working status¹.

Plan 2 loans are wiped after 30 years, as are Plan 4 and postgraduate loans, while Plan 1 loans are wiped after 25 years¹. The forecast average debt among Plan 2 students who started in 2022-23 is £45,600 on completion, and the government expects only 27% of these full-time undergraduates to repay in full¹. Plan 5, introduced for students starting university in 2023-24, has interest rising only by RPI once the cap is lifted, a lower repayment threshold, and a 40-year write-off period¹. The government anticipates Plan 5 students starting in 2023-24 will have £42,900 of debt on finishing, with around 61% able to repay in full¹.

Borrowers who move abroad for more than three months must update their employment details with the Student Loans Company and continue repaying unless they can provide evidence their income is below the threshold¹. Failure to update details may lead to arrears, payable even if income is below the threshold¹. Repayments can be made through an online account or by International Bank Transfer¹. If the SLC does not receive the information it needs, a fixed monthly amount applies¹.

Overpayment refunds totalled more than £23.4m in 2022-23, with nearly 58,000 people paying too much, around £21.9m refunded, and an average refund of £406¹. Refund scenarios include over-repayment, below-threshold payments, wrong plan type, and early repayment¹.

Why it matters for households

The 429,000 workers starting repayments this April will see deductions taken automatically from wages through PAYE, reducing take-home pay for those earning above their plan's threshold¹. For Plan 2 borrowers, the £27,295 threshold means anyone earning below that figure pays nothing, while those above pay 9% of income over it¹. Postgraduate borrowers face a lower £21,000 threshold and a 6% deduction rate¹. The 7.8% interest cap, reviewed monthly, applies to Plan 2, Plan 5 and postgraduate Plan 3 loans, and was up 0.9 of a percentage point from March 2023¹. Borrowers who move abroad for more than three months must inform the SLC and continue repaying unless they can show income below the threshold, or risk arrears¹. Those who have overpaid may be able to claim a refund; the average refund in 2022-23 was £406¹.

What happens next

Repayments begin from April 2024 for eligible graduates¹. The 7.8% interest rate cap is reviewed monthly¹. Overseas earnings thresholds are set each year¹. No further dated steps have been reported.