Student loan repayments through PAYE and Self Assessment

Student loan repayments are collected as a slice of your income, not as a fixed monthly bill. If you are on Plan 1, Plan 2, Plan 4 or Plan 5, you repay 9% of your income above your plan's threshold¹. If you are on a Postgraduate Loan repayment plan, the rate is 6% of your earnings above the threshold instead². Nothing is taken while your income stays below the threshold.

Repayments normally begin in the April after you leave your course, and only if you are earning above the threshold at that point³. For most people in employment, the money never passes through their hands: it is deducted through the PAYE system, sent to HMRC by the employer, and passed on to the Student Loans Company⁴. Self-employed people repay through their Self Assessment tax return instead.

How the 9% repayment works

The repayment is worked out only on the part of your income above the threshold, not on all of it. If you are on Plan 1, Plan 2, Plan 4 or Plan 5, the amount you repay is 9% of the difference between your actual income and the repayment threshold¹. Official statistics for England confirm the same 9% rate above the income threshold for Plans 1, 2 and 5⁷. So a pay rise does not cause your whole income to be charged at 9%, only the excess above the threshold, and a fall in income below the threshold stops repayments altogether.

The loans that are repaid this way include Tuition Fee Loans, Maintenance Loans for living costs, and postgraduate loans such as a Master's Loan or Doctoral Loan⁸. Repayment starts only when your income is over a certain amount, described as the threshold, for both the Master's Loan and the Doctoral Loan as well as undergraduate loans.

A few points about how the percentage behaves in practice:

• The rate is the same, 9%, on Plans 1, 2, 4 and 5, but the thresholds differ, so the amount taken home from the same salary differs by plan¹.
• Postgraduate Loan borrowers pay 6% of earnings above the threshold, a lower rate on a separate plan².
• Repayments are 9% of everything earned above the threshold, so each extra pound earned above that line costs 9 pence in repayment⁹.
• The Treasury Committee has noted graduates making repayments of 9% of their earnings above £28,470, a figure that reflects the thresholds in force for the plans it examined¹⁰.

Because the repayment is a percentage of income rather than a fixed sum, it rises and falls with your pay. Someone earning just above the threshold pays only a small amount each month; someone well above it pays proportionally more. There is no minimum monthly payment to negotiate and no fixed term in the way a personal loan has: the loan simply continues until it is repaid in full or written off.

When repayments start: the April after you leave your course

Your first repayment becomes due in the April after you leave your course³. This applies whether you graduated, dropped out or finished early: leaving your course early does not remove the obligation to repay⁸. You become liable for repayments from the April after your course ends, although nothing is actually taken until your income goes over the threshold¹¹.

The Student Loans Company usually writes to borrowers ahead of this point. For new-style loans, you are not expected to make repayments until the April after you graduate, and only if you earn over the income threshold¹². Students usually go into repayment the April after they finish their course, but no payments are taken until they earn over the pay period threshold¹³.

Two things follow from this that catch people out. First, repayments are based on when you left the course, not on when you found work: someone who graduates in June and starts a well-paid job in September still does not repay until the following April. Second, the income test is continuous: if you are above the threshold in April but drop below it later, deductions stop until your income rises again.

For students on the newest arrangements, loans from January 2027 onwards, the same pattern applies, with loans written off 40 years after the April you are first due to repay¹⁴. For students who started their course any time from August 2023, any outstanding loan amounts are written off after 40 years⁹.

Repayment thresholds by plan

Each plan has its own annual threshold, with monthly and weekly equivalents that employers use for payroll. The thresholds are updated periodically, and announced thresholds for future years are listed below.

The Plan 2 threshold has a history worth knowing. The government originally said the £21,000 earnings threshold would be uprated annually in line with earnings from 2016, a commitment examined by the Treasury Committee when it was not met¹⁰. Thresholds are set by legislation and can be changed by future governments, something the government has agreed should be made clear to prospective students¹⁸.

Plan 2 also has two interest thresholds, which affect the rate charged rather than the amount repaid. From April 2026 the income threshold and lower interest rate threshold for Plan 2 loans is £29,385, and the higher interest threshold is £52,885¹⁷. The legislation set the higher interest threshold at £49,130 for the repayment threshold years ending 5 April 2024 and 5 April 2025¹⁹.

If you are repaying a combination of Plan 1, 2, 4 or 5 loans, the repayment threshold for the loan with the lowest repayment threshold applies¹⁹. This matters for people who studied as an undergraduate in more than one system, for example a Plan 1 loan followed by a Plan 2 loan: the lower threshold bites first, so repayments start at the earlier point.

Repaying through PAYE: deductions straight from your salary

For employees, repayments are collected through PAYE, the system that also handles income tax and National Insurance. Plan 2 repayments are paid through the PAYE tax system, meaning they are automatically deducted and sent to HMRC before you receive your salary⁴. The deduction appears on your payslip alongside tax and National Insurance, which is where most people first see it.

The route a repayment takes from your salary to your loan balance.

There is a lag in the system worth knowing about. Outstanding balances of student loans are likely to exclude repayments collected via PAYE and Self Assessment during the previous year, because the Student Loans Company is notified of these repayments by HMRC usually within one year of the end of the tax year to which they relate²⁰. So the balance shown in your online account can be behind what you have actually paid, and a loan you have nearly finished may still show a balance for some months.

Your employer works the deduction out using the threshold for your plan, applied to each pay period. Which plan you are on is shown to your employer through the payroll system, and your tax code and PAYE records carry the student loan marker; if your plan type is wrong, deductions can be taken at the wrong threshold, which is one of the common causes of overpayment². The guide to tax codes and PAYE explains how the system works generally.

One payment that can interact with student loan deductions is the teacher reimbursement scheme. Under the scheme for teachers, the payment is treated as pay, which means a student loan deduction may be made from it²¹.

Interest on Plan 2 and Plan 4 loans

Student loans accrue interest from the date they are paid out, up until the date they are repaid in full³. The interest rate usually applies from 1 September to 31 August each year³, and rates are set annually on 1 September using the Retail Price Index (RPI) inflation figure from the previous March⁶.

On Plan 2, the rate you are charged depends on your income, moving between a lower and a higher threshold. For 1 September 2025 to 31 August 2026, Plan 2 rates run from 3.2% to 6.2% on an RPI+3% basis²². For the following year, 1 September 2026 to 31 August 2027, interest rates for Plan 2 loans vary between RPI (4.1%) and RPI +3% (7.1%) depending on your circumstances¹⁶. There is also a cap: the interest rate cap is currently being applied at 6%²². Official statistics put the maximum Plan 2 interest rate at 4.5%⁷, though one official document gives 4.6% for the same measure, and the two figures have not been reconciled; both are official statements of the cap in force when each was published.

The income thresholds that set the Plan 2 interest rate are the lower and higher repayment thresholds: the lower repayment threshold is £29,385 and the higher repayment threshold is £52,885²². As an illustration of how income feeds through, official guidance gives a total interest rate of 4.82% for a borrower with an annual income of £35,000²².

On Plan 4, the Scottish plan, interest is charged from the day the first payment is made to you or to your university or college until the loan is repaid in full or cancelled, and interest is added to your balance each month²³. The rate for 1 September 2025 to 31 August 2026 is 3.2%²³. Plan 4 rates have moved around in recent years: 2.75% for 1 September 2022 to 19 October 2022, 4% for 2 December 2022 to 11 January 2023, and 4.5% for 12 January 2023 to 2 March 2023²³. Before 6 April 2021, all Plan 4 customers made repayments and accrued interest through Plan 1, and the earlier rates in the official table apply to Plan 1 loans²³.

Interest on these loans is linked to inflation rather than to a commercial lending rate, which is why the rates change each September. Interest accrues whether or not you are repaying: it builds up from the day the loan is paid out, including while you are still studying and while your income is below the threshold³.

Voluntary repayments and finishing your loan early

If you took out a student loan in or after 1998 and want to repay it more quickly, you can make voluntary repayments²⁴. Extra repayments can be made in your online account and by card, bank transfer or cheque⁸. If you pay by cheque or postal order, write your customer reference number on the back and send it to the Student Loans Company²⁴.

How an income-contingent loan runs from first payment to final settlement.

One caution before making extra payments: the Student Loans Company does not refund any voluntary payments you have made unless you have finished repaying the loan and these are in fact overpayments²⁴. So money paid in voluntarily is not withdrawable later if your circumstances change.

Whether clearing a loan early makes sense depends on how close you are to the write-off point, because every income-contingent loan is eventually cancelled. The write-off rules by plan and start date are:

• Plan 1: if you took out your first loan during or after the 2006-2007 academic year, any loan not repaid is written off 25 years after you started repayment; if your first loan was during or before the 2005-2006 academic year, the remaining loan is written off when you reach 65¹⁵.
• Plan 2: any loan you still owe 30 years after your repayments were due will be written off¹⁵.
• Plan 4: written off 30 years after the April you were first due to repay if the first loan was paid on or after 1 August 2007, or when you reach 65 if the first loan was paid before 1 August 2007¹.
• Plan 5: any loan you still owe 40 years after your repayments were due will be written off¹⁵.
• Loans from January 2027 onwards: written off 40 years after the April you are first due to repay¹⁴.

Someone close to a write-off date gains little from paying voluntarily, since the remaining balance would be cancelled anyway; someone on a high income with many years to run may clear the loan sooner and pay less interest. That is a matter of circumstance, not of a single right answer.

Refunds when too much has been taken

Overpayments happen, and they happen in large numbers. In the 2023-24 tax year nearly 60,000 people had repayments taken after their loan was fully paid⁶, and around £21.9m was refunded in relation to 2022-23⁴. Common causes include deductions continuing after a loan is cleared, repayments taken in a year when income was below the threshold, and the wrong plan threshold being applied.

How to get money back:

1. Check your payslips and P60. Keep them for your records, as you will need them if you want to get a refund⁸.
2. Sign in to your SLC online account and select 'request a refund'. Provide your bank details and email address, or update them if necessary¹¹.
3. For below-threshold repayments, request a refund via your Student Loans Company online account⁶.
4. If deductions continue after the loan is repaid, write to the Student Loans Company enclosing your wage slips to show the extra deductions; any overpayments will be refunded to you with interest²⁴.

For other scenarios, you can complete a Student Loans Company refund form online to claim back the money⁴. Where repayments were made in a year when you were not liable, you can apply to the Student Loans Company for a refund of all repayments made in that year, or simply the overpayments²⁴.

Two related rules are worth knowing. If you receive more of any type of student finance than you are entitled to, you will have to repay the overpayment⁸. And under the teacher reimbursement scheme, you can only claim back your student loan repayments once in each academic year²¹. If you leave or suspend your course, how much you repay and when depends on what type of student finance you have, when in the academic year you leave, and whether you plan to return⁸.

Working or moving abroad: repaying through the Student Loans Company

You need to tell the Student Loans Company if you are moving abroad, to make sure you pay the right amount²⁵. Once you are outside the UK tax system, the payroll route is no longer available: you will have to repay the Student Loans Company directly¹². The same applies if you are outside the England and Wales tax system¹⁵.

What changes in practice:

• Employees abroad: repayments go directly to the Student Loans Company rather than through an employer¹².
• The self-employed: if you are self-employed, you repay your loan through your Self Assessment tax returns¹². The guide to Self Assessment covers how the return works.
• Payment methods: repayments can be made through your online account or by International Bank Transfer (IBAN)⁴.
• Proof of low income: you will be expected to keep repaying your loan unless you can give proof, for example a recent bank statement, that your overseas income is below the threshold⁸.

The threshold test does not disappear at the border. Someone earning below the threshold abroad owes nothing, but the onus is on them to evidence it; otherwise the Student Loans Company will expect repayments to continue. Contact details for repayments from abroad: the Student Loans Company can be reached on 0141 306 2000 for loan repayments²⁷.

Complaints, scams and what happens to a loan when someone dies

Scams. Students and borrowers are targeted around the times when student loan payments are made, in September, January and April²⁸. Scammers send convincing text messages, emails or phone calls claiming a payment is at risk, has been blocked, that bank details need updating, or that an account will be closed unless the recipient acts immediately²⁸. The Student Loans Company will never ask you to confirm your personal or bank details by text or email²⁹, and it will never ask students to provide or confirm personal or financial information by email, text message or any social media platform²⁸. SLC and Student Finance England do not provide services through WhatsApp and will not initiate contact through social media to discuss an application or entitlement²⁸.

Complaints and contact. For loan repayments, the Student Loans Company can be reached on 0141 306 2000²⁷. For loan and grant information and applications, Student Finance England, run by the Student Loans Company, is on 0300 100 0607²⁷. Student Finance England is a service provided by the Student Loans Company, providing financial support on behalf of the UK Government to students from England. Free, impartial money guidance is available from the debt advice charities that publish guidance on student loan repayments, and the debt guide covers where to get help with problem debts.

When a borrower dies. A student loan is cancelled when the borrower dies, and the estate is not pursued for it. You can call or write to the Student Loans Company to tell them about someone who has died³⁰. You will need to tell them the Customer Reference Number of the person who has died and send one of the following: the original death certificate, the original coroner's interim certificate, a copy of the coroner's certificate stamped by the coroner, or a copy of a foreign death certificate³⁰. The Tell Us Once service, which reports a death to government departments in one go, also directs people to contact the Student Loans Company if the person was repaying student loans to them³¹.

Terms can change. The terms of student loans are governed by legislation and can be amended by future governments, and the government has agreed that the application process will now clearly set this out¹⁸. It has also agreed to share more information to help people understand how different life and career choices can affect their repayments¹⁸. Thresholds, interest rates and write-off periods are all set this way, which is why the figures on this page carry the years they apply to.