How Student Loan Repayments Work in the UK
Everything you need to know about how and when you repay your UK student loan, from PAYE deductions to self-employment and beyond.
The Fundamental Principle: Income-Contingent Repayments
UK student loan repayments work fundamentally differently from conventional debt such as a mortgage or personal loan. There are no fixed monthly payments, no minimum repayment amounts, and no penalties for paying less than the interest. Instead, repayments are income-contingent — you only repay when your income exceeds a specific threshold, and you only repay a set percentage of your income above that threshold.
This means your repayments automatically adjust to your financial circumstances. If you lose your job, take a pay cut, go on maternity leave, or reduce your hours, your repayments drop accordingly. If your income falls below the threshold entirely, you pay absolutely nothing. There are no late fees, no black marks on your credit file, and no debt collectors chasing you for payments you cannot afford.
It is helpful to think of student loan repayments not as traditional debt repayment but as a graduate contribution — a temporary additional tax that applies only while you earn above a certain level and only for a fixed number of years. After the write-off period expires, any remaining balance is cancelled regardless of how much is outstanding.
When Do Repayments Start?
Student loan repayments begin from the April after you leave your course. If you graduate in June 2025, your repayments would start in April 2026 — but only if you are earning above the repayment threshold at that point. The first payment is deducted from your April pay.
If you drop out of your course or leave early, the same rule applies — repayments start from the April after you leave. You do not need to wait until you would have graduated. If you take a gap year or defer, the clock starts from the April after you actually leave or complete the course, not from when you originally enrolled.
During your course, no repayments are due — even if you are working part-time and earning above the threshold. The repayment obligation only begins after you have left higher education. However, interest does accrue on your loan from the day it is paid out, so your balance may have grown by the time repayments start. See our interest rates guide for details.
Repayment Thresholds for 2026/27
Each loan plan has its own repayment threshold. You only repay income above this amount. Below it, you pay nothing. The thresholds are reviewed annually by the government and can change each tax year. The current thresholds are:
| Plan | Annual | Monthly | Weekly | Rate |
|---|---|---|---|---|
| Plan 1 | £26,900 | £2,242 | £517.00 | 9% |
| Plan 2 | £29,385 | £2,449 | £565.00 | 9% |
| Plan 4 | £33,795 | £2,816 | £650.00 | 9% |
| Plan 5 | £25,000 | £2,083 | £481.00 | 9% |
| Postgraduate Loan | £21,000 | £1,750 | £404.00 | 6% |
Not sure which plan you are on? Use our which plan am I on? guide to find out which repayment threshold applies to you.
It is important to understand that the threshold is not the same as a tax-free allowance for your entire salary. The repayment only applies to the slice of income above the threshold. So if you earn £30,000 on Plan 2 (threshold £29,385), you only repay 9% on the £615 above the threshold — not on the full £30,000. This is the most commonly misunderstood aspect of student loan repayments.
The Repayment Calculation — Step by Step
The formula for calculating your annual student loan repayment is straightforward:
- Take your gross annual salary (before tax and deductions)
- Subtract the repayment threshold for your plan
- Multiply by the repayment rate (9% for undergraduate, 6% for postgraduate)
Example 1 — Plan 2, salary of £35,000:
- Income above threshold: £35,000 − £29,385 = £5,615
- Annual repayment: 9% × £5,615 = £505.35
- Monthly repayment: £505.35 ÷ 12 = £42.11
Example 2 — Plan 1, salary of £30,000:
- Income above threshold: £30,000 − £26,900 = £3,100
- Annual repayment: 9% × £3,100 = £279
- Monthly repayment: £279 ÷ 12 = £23.25
Example 3 — Plan 4, salary of £38,000:
- Income above threshold: £38,000 − £33,795 = £4,205
- Annual repayment: 9% × £4,205 = £378.45
- Monthly repayment: £378.45 ÷ 12 = £31.54
Example 4 — Plan 5, salary of £28,000:
- Income above threshold: £28,000 − £25,000 = £3,000
- Annual repayment: 9% × £3,000 = £270
- Monthly repayment: £270 ÷ 12 = £22.50
Example 5 — Postgraduate Loan, salary of £30,000:
- Income above threshold: £30,000 − £21,000 = £9,000
- Annual repayment: 6% × £9,000 = £540
- Monthly repayment: £540 ÷ 12 = £45.00
Want to see your exact repayment? Use our student loan repayment calculator to model your specific salary and plan.
PAYE Employees — How It Works in Practice
If you are employed, your student loan repayment is deducted automatically by your employer through the Pay As You Earn (PAYE) system. It works in exactly the same way as income tax and National Insurance — it comes out of your pay before you receive it. You do not need to make any separate payments or set up direct debits.
Your employer knows to make student loan deductions because HMRC issues them a notification via your tax code or a Start Notice (SL1 form). Each pay period, your employer calculates whether your earnings for that period exceed the monthly (or weekly) threshold. If they do, 9% (or 6%) of the excess is deducted. If not, nothing is deducted. You can see the deduction on your payslip as a separate line item.
This period-by-period calculation can occasionally lead to slight over-deductions — for example, if you receive a bonus in one month that pushes that month's earnings well above the threshold. Any over-deductions are reconciled at the end of the tax year. If you have been over-deducted, you can apply to the Student Loans Company for a refund.
Self-Employment and Student Loans
If you are self-employed, student loan repayments are calculated and collected as part of your Self Assessment tax return. HMRC calculates 9% (or 6%) of your net self-employment profit above the threshold and adds it to your tax bill.
Unlike PAYE, where deductions are spread across the year, Self Assessment repayments are collected either as a lump sum with your tax bill (by 31 January), or in two payments on account (advance payments based on the previous year's amount, due in January and July). This can create significant cash flow challenges, so it is advisable to set aside money monthly in a separate savings account to cover the eventual bill.
If you have both employment income and self-employment income, your employer handles PAYE deductions on your employed earnings, and HMRC adjusts for the self-employment portion through Self Assessment. The total repayment is based on your combined income from all sources.
Multiple Jobs and Student Loan Repayments
If you have more than one job, each employer independently calculates student loan deductions based on the earnings from that job alone. They do not know about your other jobs. This can create two scenarios:
- Under-repayment: If your combined income exceeds the threshold but neither individual job does, neither employer will make deductions. HMRC will collect the difference through a year-end reconciliation or Self Assessment. You may receive a bill after the tax year ends.
- Over-repayment: If both jobs independently exceed the threshold, both will deduct repayments based on their own earnings. You may be able to claim a refund from the SLC for the over-deduction at the end of the tax year.
If you work multiple part-time jobs that individually fall below the threshold but together exceed it, you will not have any PAYE deductions taken. HMRC reconciles this at year end. Be aware this could result in an unexpected bill.
Bonuses, Overtime, and Variable Pay
Student loan deductions are calculated on a per-pay-period basis. If you receive a bonus or significant overtime in one month, your deductions for that month will be higher because the calculation is based on that month's gross earnings. Conversely, if you have a low-earning month, deductions will be lower or zero.
Over the full tax year, the total should approximate 9% of your annual income above the threshold, but month-to-month payments can vary considerably. A large one-off bonus can result in a noticeably higher deduction for that specific pay period, which sometimes surprises people when they check their payslip.
Maternity, Paternity, and Sick Leave
During maternity leave, paternity leave, or long-term sick leave, your pay is typically reduced to statutory pay levels or whatever your employer offers. If your pay drops below the monthly threshold, student loan deductions stop automatically. They resume when your pay returns above the threshold.
This is one of the key advantages of income-contingent repayments — they adjust automatically to life changes. You do not need to contact the SLC or HMRC to pause your repayments. The system handles it through normal PAYE calculations. Statutory Maternity Pay (SMP) for 2026/27 is £187.18 per week, which is well below the monthly threshold for every plan, so most people on SMP will have zero student loan deductions during their maternity period.
Living or Working Abroad
If you move abroad, you are still legally required to repay your student loan. You must notify the Student Loans Company (SLC) within three months of leaving the UK. The SLC will set fixed monthly repayment amounts based on an equivalent threshold for the country you move to — some countries have lower thresholds (meaning higher repayments) and some have higher.
Failure to keep the SLC updated on your overseas address and income can result in penalties, and your account may be placed in arrears. If you return to the UK, you revert to standard PAYE deductions. The overseas repayment amount is typically reviewed annually, and you will need to provide evidence of your income (such as payslips or tax returns from your country of residence).
The National Insurance Lower Earnings Limit
Student loan repayment thresholds are separate from the National Insurance thresholds. You could earn enough to trigger student loan deductions but not enough to pay NI, or vice versa. The two systems are entirely independent. Your employer calculates each deduction separately based on its own threshold.
When Repayments End
Your student loan repayments end in one of three ways:
- You repay the full balance — once your balance reaches £0, no further deductions are made. Your employer is notified via HMRC to stop deductions.
- The write-off period expires — after 25–40 years depending on plan, the remaining balance is cancelled automatically and tax-free. See our write-off guide for the periods that apply to each plan.
- You become permanently disabled or die — the loan is cancelled in these circumstances without any financial penalty or inheritance implications.
Common Misconceptions
Several myths persist about student loan repayments:
- "I repay 9% of my whole salary" — Wrong. You repay 9% of income above the threshold only. On a £35,000 salary with Plan 2, you repay 9% of £5,615, not 9% of £35,000.
- "My student loan affects my credit score" — Student loans do not appear on your credit file and do not affect your credit score. However, lenders may ask about them on mortgage applications.
- "I should pay it off as quickly as possible" — For most borrowers, overpaying is not recommended. If your loan will be written off, overpayments are money wasted.
- "If I earn just above the threshold, I lose money" — Impossible. You only repay 9% of the excess. Earning £1 above the threshold costs you 9p, not hundreds of pounds.
Calculate Your Repayments
Use our free calculators to see exactly what you will repay each month and over the lifetime of your loan. Each calculator accounts for interest, salary growth, and write-off: