Student Loan Repayment

Feb 09, 2018

Written By Billy Sexton, Editor, AllAboutLaw.co.uk

So you’re off to university to study law, congratulations! We kindly informed you that you can indeed afford to go to university despite tuition fees sky rocketing to £9,000 a year (aren’t we lovely?) by getting a student loan and now you’re super excited to get to university and see what all the hype is about. We’d recommend making the most of your time at university but remain mindful of how you splash the cash as you will have to start repaying your student loan when you graduate and get yourself a job, even if that might feel an age away.

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How does student loan repayment work?

If you started university before 1 September 2012 (basically before the tuition fees went up) and are paying just under £3500 a year for your tuition you will only begin to repay your loan once you earn above one or several of the following:

£333 a week
£1444 a month
£17,335 a year.

The amount you pay back is 9% of the amount you earn above this threshold. Repayments are automatically deducted from your salary with your tax and national insurance, so no need to buy a load of brown envelopes with the Student Loans Company address printed on the front to stuff cash in every month and send off.

If you started studying at university after 1 September 2012 and are paying up to £9000 a year you won’t start repaying until April 2016. Repayments start when you earn £21,000 a year and if your earnings dip below this, repayment will be put on hold. Again, this is automatically deducted from your wages.

How much of my student loan will I pay back?

So when the student loan repayments are being forced from your metaphorical hand, how much are you going to be paying back? It depends on how much you earn and can get quite complicated so listen up.

If you paid just under £3500 for your tuition you will pay 9% of however much you earn over the sums mentioned above. This means that you won’t pay 9% of an £18,000 salary, but rather you will pay 9% of £1090 because that’s how much over £16,910 your salary is. Therefore you would repay £98.10 a year of your student loan. That’s the equivalent of about £1.89 a week. Hardly breaking the bank!

If you paid £9000 a year, you will pay back 9% of any income over £21,000. So if you earn £25,000 you will pay 9% of £4000, which turns out at £360 a year. This is the equivalent of £30 a month.

Student loan interest rates

What? Student loans have interest rates? Yep, we were shocked when we found out too.

For student loans taken out before 2012 (i.e. those who pay just under £3500 a year tuition) the interest rate for student loans is the national rate of interest plus 1%. Therefore it’s currently 1.5%.

For loans taken out after 2012 by students paying up to £9000 a year, interest rate is decided depending on certain factors.

When you’re studying, the rate of inflation plus 3% will apply to your loan
When you’re earning £21,000 or less the rate of inflation will apply to your loan
If you earn anywhere between £21,000 to £41,000 the rate of inflation plus up to 3% will apply to your loan
If you earn over £41,000 the rate of inflation plus 3% will apply to your loan.

At the end of the day, everybody who goes to university is likely to get a student loan and repayment is a very small fraction of your wage or salary that you won’t even notice it being repaid. You may want to check up on your repayment from time to time but it usually sorts itself out and the bailiffs won’t ever come knocking on your door and none of your things will get repossessed. It’s just like tax and gets taken off your wages every month.

University Funding