Student loan debt: why it is different
A student loan can be the biggest number you owe and the least urgent. Here is how repayment works and when it does need your attention.
Applies to: UK-wide
What to do now
- Check which plan you are on in your Student Loans Company online account.
- If you earned below the threshold but repayments were taken, ask for a refund.
- Moving abroad for more than three months? Tell the Student Loans Company.
Why it is not a normal debt
For income-contingent loans — the type most people have — repayments are worked out from your income, not from what you owe. If you are employed, your employer takes them through PAYE. If you are self-employed, they are added to your Self Assessment bill. If your income falls below the threshold for your plan, repayments stop automatically. You cannot fall into arrears in the usual way while you are in the UK and your income is reported. That is why a student loan normally comes at the bottom of any debt budget.
Plans and write-off
Loans are grouped into plans (Plan 1, Plan 2, Plan 4 for Scotland, Plan 5 and Postgraduate). Each has its own threshold, repayment rate and write-off date. Thresholds change, so check the current figures on GOV.UK rather than relying on old ones.
Overpayments and refunds
You may be able to get money back if repayments were taken when your income for the year was below the threshold, if you kept repaying after the loan was cleared, or if both your employer and Self Assessment took repayments. Keep your payslips and P60s, and contact the Student Loans Company to claim. If you were paid more student finance than you were entitled to, for example after leaving a course, that overpayment does need repaying.
If you move abroad
Tell the Student Loans Company if you will be outside the UK for more than three months. You will usually have to repay directly, based on your overseas income. If you do not keep your details up to date, arrears can build up and you may be charged at a higher rate.
Older mortgage-style loans
Loans taken out before income-contingent loans were introduced are repaid in fixed monthly instalments. Most of these were sold by the Student Loans Company to Erudio Student Loans. You can apply to defer payments each year if your income is below the threshold. If you fall behind without deferring, the lender can treat the loan as in arrears or in default, may report it to credit reference agencies, and defaulting can remove your right to have the loan cancelled at a set age.
Formal solutions
In England and Wales, student loans — including mortgage-style loans — cannot be included in a DRO or IVA, and they are not written off by bankruptcy. Because income-contingent repayments already adjust to your income, they are usually left out of a debt budget except for what is deducted from your pay.
You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.
Common questions
Do student loans affect my credit score?
Income-contingent student loans do not usually appear on your credit file. Older mortgage-style loans can be reported to credit reference agencies if they fall into arrears or default.
Can student loans be written off in bankruptcy?
No. In England and Wales, student loans are not written off by bankruptcy and cannot be included in a DRO or IVA.
Can I get a refund of student loan repayments?
Possibly, if repayments were taken when your income for the year was below the threshold, or after your loan was fully repaid. Keep your payslips and P60s and contact the Student Loans Company.