Have a read of our blogs on the Tuition Fee Loan & the Maintenance Loan – then come back to this post to read about repayments.
Repaying those Loans
So – if you’ve read the posts above, you should know what you’re eligible to, and you should know the ways you can afford university. That’s all well and good – but what about paying it all back?
At the end of your time at university, your Tuition Fee Loan and your Maintenance Loan is bundled together this is called your Student Debt/Loan. Don’t let the word debt scare you. Your Student Debt is essentially how much money you owe back to the Student Loans Company. Remember, any statement you receive is not a bill, it is just for reference. There is a set repayment plan for each person and you should read through the information on the Student Finance England web page thoroughly.
When do I start repaying?
You will start to repay your Student Debt back when you’ve finished your degree or left university. Repayments normally begin in the April after you’ve left university. You will only start to make repayments when you are in employment and you’re earning over the threshold.
What is the threshold?
The threshold currently stands at £26,575 per year. This is the salary you need to be earning before you will pay back your Student Loan.
So how much will I pay?
You pay a percentage of whatever you earn over the threshold. Currently, that percentage is 9%. So you will pay back 9% of whatever you earn over £26,575. Stay with me.
If you earn £27,000 in a year, you earn £425 over the threshold. The rest of your money is protected. So you will pay 9% of £275 over the year. This comes to £24.75 per year in repayments. So you’ll still have an income of £25,975.25 for the year. (Before tax & deductions etc).
For context, a newly qualified teacher starting wage begins at £24,373 – so you’d pay nothing back until you earn over the threshold. Again, a newly qualified physiotherapist can expect a starting salary of at least £24,214 – so you’d pay nothing back until you earn over the threshold. (Prospects.com) Both of these jobs have high earning potential, these are simply starting wages, you normally get paid more with the more experience you have so your wage will increase year by year.
How do I repay?
If you are self employed, you will need to work out how much you owe and manually deduct this from your salary. https://www.gov.uk/repaying-your-student-loan/how-you-repay
If you work for an employer – you simply tick the box on your contract which says you have a student loan, and deductions will be taken away automatically if you are eligible. It comes off your wage, so you don’t need to worry about paying it. As long as you keep Student Finance England up to date about your place of work, and tick the right box, it should be automatic.
What if I start earning less?
If you’re earning over the threshold, and you take a new job, or get a pay cut, and you start earning under the threshold, repayments will stop.
What happens if I don’t pay my debt off?
Martin Lewis from the Money Saving Expert doesn’t like the term ‘Student Debt’ because it gives the wrong impression. It works like a tax, simply deducted off your income if you earn enough to qualify to pay it back.
You will never be asked to pay off more, you can choose to, but this isn’t mandatory. If you don’t pay your debt off, after 30 years, the debt is wiped. It ceases to exist – gone! Vanished!
Will having student debt affect me in the future?
It won’t go against your credit score, it won’t stop you being able to get a car on finance, it won’t stop you being able to get a mortgage. It doesn’t act like a normal debt, hence why so many people don’t like the phrase. You need to be honest about having a student loan/debt, but it shouldn’t stand in the way of you getting credit in the future. (I’ve just bought a house, they asked if I had student debt, but they said it’s just a tick box, and that no judgement is made based on it or the outstanding figure!) From time to time Student Loans Company may send you a letter with your outstanding figure or to ask you to update your profile, but this is the only thing that you should be worried about.
What happens if I never earn over the threshold?
You never pay back a penny. Free degree, not bad right? The idea is, going to university should mean you are able to get a higher paying job. This is sometimes called the ‘degree premium’ or ‘degree benefit’. If you don’t get the benefit (higher paying job) from your degree, you don’t pay for it. Again, after 30 years the debt is wiped, and it won’t affect your credit score or eligibility to borrow money in the future.
I asked some of my fellow graduates a few questions about life with student debt.
Lou:
When did you graduate? 2017, but then did a Masters degree so graduated again in 2019.
Do you pay back your student loan? I pay back my Masters degree because the threshold is lower, but I don’t pay back my Undergraduate degree.
How much do you pay back a month? I don’t really know – I’ve never checked. Probably like £10 a month!
Do you worry about your student loan/debt? Not really, it all happens in the background. It’s good to be aware of it, but it doesn’t affect my life. I’ve just bought a house, and it didn’t affect my ability to get a mortgage. I’ve also taken out credit cards (sensibly) and it didn’t affect my ability to get credit. So I mostly just forget about it!