Student debt and sky-high tuition fees can feel like a huge financial obstacle. With the system in a seemingly constant state of political flux, it is essential to make sure you grasp the basics of what student loans are, how much you can borrow, and how you repay them once you leave university to help you manage your money. To make things more complicated, student loans work differently depending on where in the UK you are from and where you go to university. This article breaks everything you need to know about student loans in the UK down into straightforward, manageable chunks so that you can get to grips with managing your student loan debt and make those monthly repayments a bit less stressful.
What are the different kinds of student loan?
In the UK, there are two different kinds of government loan that higher education students are eligible for:
Tuition fee loan
This is an optional loan that you can borrow from the government in order to cover the cost of your tuition throughout your time in higher education.
Your university or college is responsible for setting the precise cost, but as of 2023, the maximum tuition fee for an undergraduate student living in the UK is £9,250 per academic year. The loan is paid directly from the government to your university or college, so you do not have to worry about orchestrating the payments yourself.
Tuition fees across the UK
The cost of university tuition varies across the UK.
In Wales, fees are capped at £9,000 per year for 2023-2024, though Welsh students studying outside of Wales can be charged the full £9,250. Welsh students studying in England or Wales were previously able to access a tuition fee grant of £4,215 a year. This was cut for new students in 2018, but it may still be available to students who started their course prior to the change and are yet to finish their degree.
For Irish residents studying in Northern Ireland, fees are capped at £4,710 a year.
Scottish universities will charge Scottish residents with settled status in the UK a lower rate of up to £1,820 a year for their first undergraduate degree. Instead of a loan, the Student Awards Agency for Scotland (SAAS) will pay the fees, but students must apply each year to confirm their continuing eligibility.
There are no discounts for English residents studying in the UK, so all students are eligible for the full £9,250 fee.
| Nation | Max 2023-2024 tuition fee for residents | Max 2023-2024 tuition fee for residents of other UK nations |
| Scotland | £1,820 (paid for by the SAAS) | £9,250 |
| Wales | £9,000 | £9,000 |
| Northern Ireland | £4,710 (including residents of Republic of Ireland) | £9,250 |
| England | £9,250 | £9,250 |
Maintenance loan
This is an optional loan which you can borrow from the government in order to cover the cost of day-to-day living throughout your time in higher education.
The government is responsible for setting the amount that you are entitled to. It is calculated using your household income and is paid directly from the government into your personal bank account at the start of each academic term.
The maximum amount of maintenance loan that you can access is different depending on who you live with and where:
| You live in Scotland | You live in Wales | You live in Northern Ireland | You live in England | |
| You are living at home (with parents or a guardian) | Up to £9,000 | Up to £8,950 | Up to £5,250 | Up to £8,400 |
| You are living away from home, outside of London (without parents or a guardian) | Up to £9,000 | Up to £10,720 | Up to £6,776 | Up to £9,978 |
| You are living away from home, inside of London (without parents or a guardian) | Up to £9,000 | Up to £13,635 | Up to £9,492 | Up to £13,022 |
| You are spending one year of your course studying abroad (without parents or a guardian) | Up to £9,000 | Up to £9,667 | Up to £8,078 | Up to £11,427 |
Within each of these subsections, other details of your financial circumstances are also considered when calculating how much maintenance loan you will receive. These factors include if the course you are attending is full or part-time, the annual income of each of your parents or guardian over the past tax year, and whether or not your parents or guardian support you financially.
Using a maintenance loan is also optional, but a large proportion of students prefer to utilise it in order to help them pay for renting accommodation, travel costs, and other regular expenditure.
Students from Scotland, Wales or Northern Ireland may also be able to qualify for bursaries to cover their living costs. This money will not need to be repaid.
When do I have to start repaying my student loan?
The student loan repayment system has been restructured multiple times over recent decades, which means there are currently multiple active repayment plans. You will have to start paying back your student loan once your pre-tax annual income is over the minimum threshold for your repayment plan. If your income is below the level, then you should not have to repay a single penny of your loan.
If you stop receiving an income or your income falls below the minimum threshold at any point, your monthly repayments should stop.
If your income is above the minimum threshold, then the amount of your student loan that you have to repay in each instalment depends on which student loan plan you are on.
How do I know which student loan plan I'm on?
There are five different kinds of student loan plans which cover all UK higher education students, depending on which country you were living in before you began your studies. Plans 1, 2 and 4 apply to undergraduate students, while the postgraduate loan (also known as Plan 3) applies solely to students that have already completed at least one degree-level course in the past.
This table will help you determine which loan plan you are on:
| Where you were living before you started studying | You started university between 1st September 1998 and 30th August 2012 | You started university on or after 1st September 2012 | You started university on or after 1st September 2023 | You studied a postgraduate course before 1st September 2012 | You studied a postgraduate course after 1st September 2012 |
| England | Plan 1 | Plan 2 | Plan 5 | Plan 1 | Plan 3 |
| Wales | Plan 1 | Plan 2 | Plan 2 | Plan 1 | Plan 3 |
| Northern Ireland | Plan 1 | Plan 2 | Plan 2 | Plan 1 | Plan 1 |
| Scotland | Plan 4 | Plan 4 | Plan 4 | Plan 4 | Plan 4 |
How much of my student loan do I have to repay each month?
Assuming your income is above the minimum threshold, the amount of your student loan you repay each month then depends on which loan plan you are on.
You repay:
- 9% of the amount that you earn over the threshold for plans 1, 2, 4 and 5
- 6% of the amount that you earn over the threshold for Plan 3 (the postgraduate loan)
Your student loan repayments are also subject to interest, the rate of which is also different depending on your loan plan.
| Plan 1 | Plan 2 | Plan 3 (Postgraduate Loan) | Plan 4 | Plan 5 | |
| Weekly pre-tax income threshold | £423 | £524 | £403 | £532 | £480 |
| Monthly pre-tax income threshold | £1,834 | £2,274 | £1,750 | £2,305 | £2,083 |
| Annual pre-tax threshold | £22,015 | £27,295 | £21,000 | £27,660 | £25,000 |
| How much you pay in each instalment | 9% of what you earn over the threshold | 9% of what you earn over the threshold | 6% of what you earn over the threshold | 9% of what you earn over the threshold | 9% of what you earn over the threshold |
| Interest rate | RPI or the Bank of England base rate plus 1%, whichever is lower | RPI plus up to an additional 3% | RPI (currently 1.5%) plus an additional 3% | 5.5% (calculated as RPI or the Bank of England base rate plus 1%, whichever is lower) | RPI |
The monthly pre-tax figure in this table is important because that is the number your income will be held against if you earn a regular monthly wage. The effect of this is that any bonus or overtime payments will be treated as if you have had a permanent pay rise. For example, if your base salary is under the annual threshold, but an end-of-year bonus pushes your December pay over the monthly threshold, you will see a student loan deduction on that payslip. If you think you have paid too much in student loan repayments this year, or any previous year, contact your nation's student loan provider.
Here are some more examples of how student loan repayments work under the different plans.
Example of repayment if you are on Plan 1:
- Your annual income is £27,000 and you are paid a regular monthly wage.
- This means that each month your income is £2,250 (£27,000 divided by 12).
- This is over the Plan 1 monthly threshold of £1,834.
- Your income is £416 over the threshold (£2,250 minus £1,834).
- You will pay back £37.44 (9% of £416) each month.
Example of repayment if you are on Plan 2:
- Your annual income is £28,800 and you are paid a regular monthly wage.
- This means that each month your income is £2,400 (£28,800 divided by 12).
- This is over the Plan 2 monthly threshold of £2,274.
- Your income is £126 over the threshold (£2,400 minus £2,274).
- You will pay back £11 (9% of £126) each month.
Example of repayment if you are on Plan 3 (the Postgraduate Loan plan):
- Your annual income is £28,800 and you are paid a regular monthly wage.
- This means that each month your income is £2,400 (£28,800 divided by 12).
- This is over the Postgraduate Loan monthly threshold of £1,750.
- Your income is £650 over the threshold (£2,400 minus £1,750).
- You will pay back £39 (6% of £650) each month.
If your postgraduate debt is in addition to undergraduate debt, you will repay the loans separately. This means you could be on a Plan 3 and Plan 2 repayment plan at the same time, for example.
Example of repayment if you are on Plan 4:
- Your annual income is £33,000 and you are paid a regular monthly wage.
- This means that each month your income is £2,750 (£33,000 divided by 12).
- This is over the Plan 4 monthly threshold of £2,305.
- Your income is £445 over the threshold (£2,750 minus £2,305).
- You will pay back £40.05 (9% of £445) each month.
Example of repayment if you are on Plan 5:
- Your annual income is £28,800 and you are paid a regular monthly wage.
- This means that each month your income is £2,400 (£28,800 divided by 12).
- This is over the Plan 5 monthly threshold of £2,083.
- Your income is £317 over the threshold (£2,400 minus £2,083).
- You will pay back £28.53 (9% of £317) each month.
When is student loan debt written off?
Under the current system, student debt does not last forever. How long your loan lasts before it is written off will depend on which plan you are on. Once the maximum term for your plan ends, your debt is written off.
| Plan | Plan 1 | Plan 2 | Plan 3 (Postgraduate Loan) | Plan 4 | Plan 5 |
| Maximum term | 25 years (if you took out your loan on or after 1 September 2006)
Once you reach 65 years old (if you took out the loan before 1 September 2006) |
30 years (from the April you were first due to repay) | 30 years (from the April you were first due to repay) | 30 years (if you took out your loan on or after 1 September 2007)
Once you reach 65 years old (if you took out the loan before 1 September 2007) |
40 years (from the April you were first due to repay) |
How has repaying a student loan changed in 2023?
Students starting university in September 2023 will repay their debt as a Plan 5 loan. If you started university between 1 September 2012 and 1 September 2023, you will be on a Plan 2 loan.
According to the government, the changes should make clearing the debt before it is written off more likely. It will also make paying for university more expensive for most students.
Government estimates suggest that the majority of people repaying a student loan taken out since September 2012 are not expected to repay the full sum by the time the debt is written off. To counter this, one major difference between Plan 2 and Plan 5 is the increase in the maximum term. Graduates on a Plan 2 loan will see their debt written off 30 years on from the April after they complete their course. This will be hiked to 40 years for those on a Plan 5 loan.
The point at which you start paying the loan back will also change. A Plan 2 loan will requires 9% of pre-tax income above the threshold of £27,295. The threshold will drop to £25,000 for Plan 5.
Another change is to the interest rate paid on the loan. The annual rate of interest on the Plan 2 loan is capped at the RPI inflation figure, plus 3%. Plan 5 loans will not charge the extra 3%, so the interest rate will be the same as the RPI figure.
Will student loan repayments change?
Most major changes to the student loan system have not been applied retrospectively. New plans, such as Plan 5 in 2023, have been introduced rather than drastically restructuring existing plans. However, while major changes have been avoided, significant tweaks have been made. When Plan 2 was introduced in 2012, it was with the commitment to raising the threshold as wages grew. In practice, the Plan 2 threshold was been frozen in 2015 and 2021.
As the specific terms of student loans are not enshrined in law, the government can essentially make any changes it deems to be politically viable. Unlike with a commercial loan, the government are not restricted by regulation. This means it could cut a plan's repayment threshold, increase the percentage paid back or extend the maximum loan period. Alternatively, a future government could choose to write off student debt, replace repayments with a tax or bring in an entirely new system.
Student loans are still a better way to pay for university than any commercial loan because if you do not earn any money, you do not need to make any repayments. However, if wages and inflation grow and repayment thresholds stagnate, paying for university becomes more expensive.
Further information for higher education students
For more advice on how to manage your finances as a student, check out our article 'Student finance advice for those heading to university' or listen to Damien's podcast episode 191.
For an up-to-date insight on the best student bank accounts in 2021, read our article.
