How to repay your student loan

Petr David Josek/PA

While it may not have felt like it as you ordered another round of shots at the union bar, student loans are not free cash and must be paid back.

So you borrowed the money, got the degree and now how do you go about repaying that eye-watering lump sum?

When do repayments start?
You will start repaying your loan in the April following graduation, providing you are earning over the repayment threshold of £15,795 a year or £1,316 a month. So for example, those who graduated in June 2012 will commence repayments in April 2013.

If you go abroad for more than three months, repayments will still be due if you earn above the threshold. You will have to fill in an overseas income assessment from to show how you are funding your time overseas, and if income from work is more than £15,795 the Student Loans Company (SLC) will work out a repayment plan for you.

How much are repayments?
You will make repayments at 9% of your earnings above the repayment threshold. So for example, a graduate earning £1,750 a month (a salary of £21,000) will pay 9% of £434 - which is £39 a month.

How are repayments made?
If you work for an employer and pay tax and National Insurance through 'Pay as you earn' (PAYE), your repayments will be automatically calculated and deducted from your income, based on your earnings each month. This means that repayments will increase in any month that you receive overtime or a bonus.

If you pay tax through self-assessment, any student loan repayments will be due in an annual lump sum and included in your final SA, payable directly to HMRC.

Is there any interest?
Yes and the current rate is 1.5%. The rate of interest is set annually based on whichever is lower – the retail price index (currently 3.6%) or the Bank of England base rate (currently 0.5%) plus 1%.

Can you make overpayments?
Yes, you can choose to pay more than the sum required if you want to clear the debt faster. This can be done by direct debit, debit card or cheque through the SLC repayment website, by phone or post.

Do you get a statement?
The SLC issues regular statements but they often do not display your correct balance. This is because there is often a delay between HMRC collecting payment from your employer and SLC receiving notice of it, so a statement is often out of date by the time you receive it.

The best way to keep track is to keep hold of your pay slips and check your account online at the repayment website.

Can the loan be written off?
Yes, but only if you find yourself permanently unable to work due to illness or disability and are in receipt of disability benefit.

However, if the loan still isn't repaid after 25 years, the remaining balance will be written off.
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